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Case 89: Potato Best Products

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Case 89: Potato Best Products Introduction: Karl Maynard, is a third-generation potato farmer, who operated one of the largest and most successful farms in Northern Maine. As a well-respected and a ... ctive community leader, Karl looked into possibilities of vegetable dehydration technology, which could diversify the local economy. Karl visited an Oregon farm with similar plant technology and returned with very fruitful information to help establish a new operation. In 1991, the hard work and dedication of three hundred growers in Maine and Canada purchased shares of the newly formed Potato Best Products Co-Op, PBP. PBP hired Tommy Foster, a former Oregon plant manager to run operations and within two years they opened a $35 million production facility. Although no profits were expected for the first three years, the plant exceeded expectations earning $1 million in profits at the end of the second year. The company manufactures top grade dehydrated potatoes offered in eight different dinner supplements and all made with different sauces. High quality products allowed PBT to expand their consumer base to include government, restaurant, and food service operation. As demands continuously increased, the manufacturing plant was running at full capacity. Due to expansion and high demand, PBP began having trouble filling in orders in timely manner. As a result, several large customers indicated a possible switch to suppliers. To avoid losing customers, Foster suggested purchasing a second production machine. If the machine is purchased, the company will need another warehouse to manufacture products. Although the company has space in the existing facility, it is currently rented out; generating $125,000 per year in rent. Another concern occurred with packaging and the labeling machine. There is a high number of defective boxes that requires repackaging, thus replacing it became inevitable. As the company began facing serious issues concerning production, a special shareholders meeting was called to discuss problems and solutions of the current crisis. For this meeting, Foster hired a financial consultant to address the issues and provide financial and production expertise to find solutions [Show More]

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