Eco 561 Week 6 Team Deliverable

Kudler Fine Foods Business Analysis

ECO561

Kudler Fine Foods Business Analysis

Kudler Fine Foods is a gourmet food specialty shop specializing in bakery, meats, produce, cheese and dairy and wine (University of Phoenix, 2012). There are currently three stores in operation with one planned to open in the future.

Business Analysis

Kudler Fine Foods specialty shop has few competitors; however, many of the products offered in the store can also be found at local grocery and health food stores. Gourmet and organic foods are higher priced than typical grocery store food. If the economy goes into a recession cash flow of consumers could lessen causing them to purchase less gourmet foods. Based on this information, the market is monopolistic and has a high elasticity for pricing although gourmet foods tend to be more inelastic than normal grocery store food.

An analysis of the mix of variable to fixed costs is based on the 2003 Income Statement. Variable costs account for 65% of net sales. Fixed costs are 23% of net sales. Kudler Fine Foods has a positive cash flow with October through December being months of peak cash flows. Currently there is minimal competition and the stores have been located in performing markets with the exception of one store that has been under-performing. However competition that does exist consists of local grocery stores that carry many of the same products, a few specialty shops in the area, and online stores. Since there are substitute locations for the many of the same products, the market is monopolistic.

The primary challenge with pricing relates to ordering patterns and dealing with perishable goods. Currently, all ordering has been done manually by one person and sales volumes have fluctuated when the company has under or over-estimated needed inventory during certain times of the year. When sales are less than expected the company will perform promotional activity to generate and move inventory. The store also...