Red Brand

Case Study 3 – Red Brand Canners

RED BRAND CANNERS

On Monday, September 13, 1999, Mitchell Gordon, vice president of operations at Red Brand Canners, asked the Controller, the sales manager, and the production manager to meet with him to discuss the amount of tomato products to pack that season. The tomato crop, which had been purchased at planting, was beginning to arrive at the cannery, and packing operations would have to be started by the following Monday. Red Brand Canners is a medium-sized company that cans and distributes a variety of fruit and vegetable products under private brands in the western states.

William Cooper, the controller, and Charles Myers, the sales manager, were the first to arrive in Gordon's office. Dan Tucker, the production manager, came in a few minutes later and said that he had picked up Produce Inspection's latest estimate of the quality of the incoming tomatoes. According to the report, about 20% of the crop was grade A quality and the remaining portion of the 3-million-pound crop was Grade B.

Gordon asked Myers about the demand for tomato products for the coming year. Myers replied that they could sell all of the whole canned tomatoes they could produce. The expected demand for tomato juice and tomato paste, on the other hand, was limited. The sales manager then passed around the latest demand forecast, which is shown in Table 8.6. He reminded the group that the selling prices had been set in light of the long-term marketing strategy of the company and that the potential sales had been forecasted at these prices.

Table 8.6 Demand Forecasts

Product | Selling PricePer Case | Demand Forecast (Cases) |

24-2½ whole tomatoes | $4.00 | 800,000 |

24-2½ Choice peach halves | $5.40 | 10,000 |

24-2½ Peach nectar | $4.60 | 5,000 |

24-2½ Tomato juice | $4.50 | 50,000 |

24-2½ Cooking apples | $4.90 | 15,000 |

24-2½ Tomato paste | $3.80 | 80,000 |

Bill Cooper, after looking at Myers' estimates of demand, said that it...