Hero Dog Treats

Executive summary

Hero Dog Treat is a craft and manufacturing company for processing and packaging of organic dog food. Leendert Bolle started the company four years ago as a result of a market opportunity to provide Canadian organic dog food at an affordable price for consumers.  He started as a true entrepreneur having no experience or background in the pet food industry.  Bolle worked in the military for over 15 years before starting his own company. The company offers all natural and healthy dehydrated dog threats. Hero Dog Treats operates in St. Catharines, ON employing six people and has $1,000.000 in annual sales.  His intention is to increase annual sales by 40% by the end of next year.

The market is so competitive because of the increased sales in Canadian pet food market, thus, Hero Dog Treats main distributor customers, want new types of products at a competitive price and quality on the market.

Leendert decided to import from China and Thailand to cut the prices but there was global supply chain risk associated to this action including sourcing , importing commercial transaction ,foreign exchange swap process negotiate payments.

Leendert has two options, the first option is to import raw materials and the second option is to import finished products.

There are pros and cons with each option but my recommendation considering market growth and company target is a combination of two options.

Leendert should look ahead to develop a strong collaborative relationship with supplier in 5 years.

Table of contents

Issue identification ……………………………………………………………………………...

Environmental issues ……………………………………………………………………..…...

Root Cause analysis………………………………...……………………………………..…...

Alternatives and/or options…………………………………………….………………………7

Recommendation(s)………………………………………………….………………….……..9

Implementation Plan………………………………………………………….…….……...….10

Monitor and control………………………………………………………….………………..11

Exhibit…………………………………………………………………………………………12

Issue identification

Canadian dog food sales increased by over 3% in value from 2010 to 2011, rising to over $900 million, while volume sales grew by 0.9%, reaching over 300,000 tonnes. The market is so competitive because of the increased sales in Canadian pet food market, thus, Hero Dog Treats main distributor customers, want new types of products at a competitive price and quality on the market.

Leendert wanted to create a pricing leverage by purchase raw materials, package globally to sustain his competitive advantage in the market.

Tactical issues /Short term:

Leendert was in dilemma over whether to appeal to an intermediary company specializing in importing raw materials for organic food and packaging, or to lead the global acquisition process himself. In addition, Leendert need to answer following questions prior to make a decision:

• How he could manage the foreign exchange swap process applicable to his commercial transactions?
• How he could manage his business and negotiate payments with overseas suppliers? Because he has no prior experience negotiating with foreign companies.  
• Would it be helpful to use letters of credit?
• What strategy should apply to reduce procurement and financial risk?
• Would he be able to manage the overseas cultural differences and language barrier?

Strategic issues /Long term:

Leendert intention is to drive down by at least 20 % the production cost while, at the same time, to offer a wider range of types of organic food for dogs, packed in packages of various sizes.

In the other side Hero Dog Treats has $1,000.000 in annual sales and Leendert intention is to increase annual sales by 40% by the end of next year.

Environmental issues

The global pet industry is growing by %4 per year and is predicted to top $100 billion in 2014, with pet food and pet care accounting for %77 and %23 of revenue, respectively. The top five companies hold more than %60 of the global pet food market, of which Mars 20% and Nestlé Purina %20. Pet products are more fragmented. The top five companies hold nearly a %20 share.

The U.S. is the largest pet care market at nearly $30 billion in pet product sales, including over $20 billion in pet food according to Euromonitor estimates.

The preferred sub-category in pet food industry are:

1. Dog Snacks and Treats
2. Dry Dog Food
3. Wet Dog Food
4. Dry Cat Food
5. Wet Cat Food

Dog snacks and treats was the most popular sub-category for new products launched on the Canadian market, between January 2006 and December 2011. Of the total 701,321 new dog snacks and treats were brought on the market, of which approximately 30% had a "no additives/preservatives" claim.

Hero Dog Treats mainly sells three types of dehydrated threats for dogs:

1. Dog Treats from beef, lamb, chicken and rabbit meat;
2. Bully Sticks, a 100% natural product, and
3. Antler Chews, from 100% naturally shed antlers of animals raised on government inspected farms.

Hero Dog Treats sells its products through Canadian pet food distribution channels and has three main distributors. The company also has online sales with Amazon.  

The company launched its greatest product Jerky Treat for Dog in a convenient packaging formula. Solid Gold Turkey Jerky Formula Jerky Treat for Dogs is a product that can be consumed by both puppies and older dogs. It is made with real turkey and claims to be a useful product in training and show-dog competitions. This product was first time introduced in April 2011, produced in a 238 g flexible stand-up pouch, and sold for $12.50.