Red Hen Case Study
Red Hen Baking Company
Red Hen Baking Company
Case Study
Company profile
Randy George established Red Hen Baking Company in 1999. Red Hen Baking Company specializes in artisan bread and their mission is “to produce premium quality breads and pastries with traditional methods and carefully selected high quality ingredients. To do this while striving to minimize our impact on the environment, to support the growers and producers of our ingredients, and to provide the finest baked goods and service to our customers” (Our Mission). Red Hen Baking Company is able to achieve their mission by marketing their baked goods within 100 miles of the bakery and by delivering every day to stores and restaurants in the delivery area.
Problem & Opportunities
Red Hen Baking Company is currently located in a building that is not suited for a bakery and the space is very limited. The building has low ceilings and it is too small to design an efficient production process. The current bakery only has a capacity limit of 2200 loaves of bread a day. In 2006 Randy George began to realize that he would soon need a larger location in order to keep up with the demand of his current customers. RHB’s business is seasonal. Holiday weekends see increased sales, often reaching their daily limit of 2200 loaves. The sales in the first half of 2007 are already 35% higher than sales during this same period in 2006 and days where production cannot meet demand are expected to increase in number.
George would like to house the bakery in a new location that has high ceilings and is about twice the size of the Duxbury location. He would then be able to install a more efficient oven and design a more efficient production process. He would also be able to produce 3300 loaves on a daily basis, giving him ample room for growth. George also wants a location where he can sell breads and pastries directly to retail customers. If he adds pastries to his menu, George knows that he will have to
Red Hen Baking Company
Case Study
Company profile
Randy George established Red Hen Baking Company in 1999. Red Hen Baking Company specializes in artisan bread and their mission is “to produce premium quality breads and pastries with traditional methods and carefully selected high quality ingredients. To do this while striving to minimize our impact on the environment, to support the growers and producers of our ingredients, and to provide the finest baked goods and service to our customers” (Our Mission). Red Hen Baking Company is able to achieve their mission by marketing their baked goods within 100 miles of the bakery and by delivering every day to stores and restaurants in the delivery area.
Problem & Opportunities
Red Hen Baking Company is currently located in a building that is not suited for a bakery and the space is very limited. The building has low ceilings and it is too small to design an efficient production process. The current bakery only has a capacity limit of 2200 loaves of bread a day. In 2006 Randy George began to realize that he would soon need a larger location in order to keep up with the demand of his current customers. RHB’s business is seasonal. Holiday weekends see increased sales, often reaching their daily limit of 2200 loaves. The sales in the first half of 2007 are already 35% higher than sales during this same period in 2006 and days where production cannot meet demand are expected to increase in number.
George would like to house the bakery in a new location that has high ceilings and is about twice the size of the Duxbury location. He would then be able to install a more efficient oven and design a more efficient production process. He would also be able to produce 3300 loaves on a daily basis, giving him ample room for growth. George also wants a location where he can sell breads and pastries directly to retail customers. If he adds pastries to his menu, George knows that he will have to
Cited: Our Mission. (2011). Retrieved from http://www.redhenbaking.com/ Preve, Lorenzo and Virginia Sarria-Allende. Working Capital Management. New York: Oxford University Press, 2010. Return on Invested Capital. Retrieved November 3, 2011 from http://news.morningstar.com/classroom2/course.asp?docId=145095&page=9&CN=COM -------------------------------------------- [ 1 ]. See spreadsheet and note cell formula in formula bar. Oven is estimated to last seven years and building twenty. For simplicity, no salvage value was considered. [ 2 ]. Rent expense was expected to increase by $58,000 a year. Half of that amount has been added to the $12,000 they would have paid at the Duxbury location. Interest expense came from amortization tables.