143287747 Unifine Richardson Case
Issue:
The core issue Unifine Richardson (UR) faces is their sole honey supplier, Harrington Honey (HH), will run out of Chinese honey in a little over a month because the Canadian Food Inspection Agency (CFIA) recently found traces of chloramphenicol (a banned antibiotic associated with causing a sometimes-fatal blood disorder) and rejected the contaminated honey. Until China finds a way to detect contaminated honey, Unifine Richardson cannot sell any of its current Chinese-Canadian blend. Because of the CFIA’s findings, the global supply of honey will decrease by 20%, thus causing an increase in price. Harrington Honey will not be able to maintain the honey stream.
The price of honey, globally, has already been on a steady incline (Exhibit 2) and the shortage will further intensify this trend. Another issue UR is facing is that there is also an uneven relationship between the two companies. Harrington Honey is well aware of this and is using this to its advantage by not offering better choices to UR. Additionally, 80% of UR’s honey operations are tied to one major customer, and this customer has tough standards. As stated earlier, Unifine Richardson has approximately one month of honey inventory left and it has to make a decision based on the available options presented by Harrington Honey.
Analysis:
Unifine Richardson buys about one million pounds of honey annually. The world supply of honey has decreased by about 20%. Currently, the company pays $1.08 per pound for the Chinese-Canadian blend honey. Harrington Honey provided UR with three alternative sources of honey:
1. Canadian-Argentinean blend
a. Cost: $1.42 million (a 31% cost increase).
b. Customers may reject because flavor is significantly different from current honey blend.
c. Argentina is world’s third-largest honey supplier.
2. 100% Canadian honey
a. Cost: $1.75 million (a 62% cost increase).
3. 100% American honey
a. Cost: $1.79 million (a 66% cost increase).
b. World’s second-largest honey
The core issue Unifine Richardson (UR) faces is their sole honey supplier, Harrington Honey (HH), will run out of Chinese honey in a little over a month because the Canadian Food Inspection Agency (CFIA) recently found traces of chloramphenicol (a banned antibiotic associated with causing a sometimes-fatal blood disorder) and rejected the contaminated honey. Until China finds a way to detect contaminated honey, Unifine Richardson cannot sell any of its current Chinese-Canadian blend. Because of the CFIA’s findings, the global supply of honey will decrease by 20%, thus causing an increase in price. Harrington Honey will not be able to maintain the honey stream.
The price of honey, globally, has already been on a steady incline (Exhibit 2) and the shortage will further intensify this trend. Another issue UR is facing is that there is also an uneven relationship between the two companies. Harrington Honey is well aware of this and is using this to its advantage by not offering better choices to UR. Additionally, 80% of UR’s honey operations are tied to one major customer, and this customer has tough standards. As stated earlier, Unifine Richardson has approximately one month of honey inventory left and it has to make a decision based on the available options presented by Harrington Honey.
Analysis:
Unifine Richardson buys about one million pounds of honey annually. The world supply of honey has decreased by about 20%. Currently, the company pays $1.08 per pound for the Chinese-Canadian blend honey. Harrington Honey provided UR with three alternative sources of honey:
1. Canadian-Argentinean blend
a. Cost: $1.42 million (a 31% cost increase).
b. Customers may reject because flavor is significantly different from current honey blend.
c. Argentina is world’s third-largest honey supplier.
2. 100% Canadian honey
a. Cost: $1.75 million (a 62% cost increase).
3. 100% American honey
a. Cost: $1.79 million (a 66% cost increase).
b. World’s second-largest honey