Topic > Business Analysis of Azalea Seafood Gumbo Shoppe - 1342

Azalea Seafood Gumbo Shoppe is in the seafood packaging business. In this sector, companies take raw fish materials and package them to sell to supermarkets, grocery stores and restaurants. While Azalea makes direct sales through catering, the majority of its revenue comes from wholesaling its food products (Appendix A). Larger companies in the industry typically work through a food intermediary who arranges sales to supermarkets or grocery stores. One of the main advantages of using food intermediaries is that you can arrange your preferred shelf placement, which helps with sales. For smaller companies in the sector, like Azalea, it is difficult to gain access to food intermediaries because they do not process high enough volumes. Azalea originally found its niche in the market by having access to seafood from the Gulf of Mexico and selling in Mobile, Alabama, where seafood was a staple of the diet. The company has grown in both sales and profits in each of the last 4 years, until the most recent year in which sales fell 15% resulting in a profit decline of 18% (Appendix A). The challenge for Azalea's future is to develop a strategy that allows them to grow profits consistently. The key success factors in this industry include on-time delivery, quality product and brand recognition. Supermarkets and restaurants cannot afford to have empty shelves even for a moment. For a company in this industry to be successful, it must have a model that allows for on-time deliveries. This must be countered by the cost of maintaining high stock levels and the risk of wasting stock that is no longer fresh enough to sell. Forecasting product demand is critical for any business in this industry to have sufficient inventory to supply, without creating profits by eating with... half of paper... for markets and grocery stores. This latter revenue stream could be reduced with more people eating out. The consolidation of supermarkets and grocery stores will lead these stores to have greater bargaining power and more demanding needs. The azalea may not be able to meet these needs without additional growth. In addition to supermarket and grocery store consolidation, consolidation among competitors could also negatively impact growth opportunities. When companies like Nestlé and Kraft Foods acquired smaller companies, they created a more concentrated sellers' market. The increased concentration of both buyers and sellers in the industry will require economies of scale to succeed. Azalea will have difficulty expanding enough in its current situation to realize the economies of scale needed to continue to be successful in the industry.