Perdue, in the case, seems to have the biggest dilemma: to enter or to not enter the industry of chicken hot dogs.
But even within that dilemma, Perdue is faced with even more petty dilemmas should they decide to get into chicken hot dogs or not. In this paper, I do not intend to give a summary of the case and will not beat around the bush by giving my analysis and recommendations spot on. Judging from the facts and figures provided for by the case, I strongly believe that Perdue should get into chicken hot dogs.
Why chicken hot dogs
The first reason why I believe that Perdue should enter the scene is due to the fact that Perdue has a very good brand perception. From the case, when Poole blind tested consumers, Perdue proved to be an even better brand than the leader, Oscar Mayer. The fact that Perdue hasn’t really gone serious into hot dogs and was still the more preferred, gives us an idea that the brand itself is very crucial or would somewhat suffice when it comes to marketing.
Perdue is a brand that is trusted by consumers, only, the brand hasn’t risked much to meet that valuable trust halfway. Another reason why they should venture into the hot dog industry is the stark difference of Perdue from other competitors: everyone has gone to processing foods. Perdue is still tagging behind, heavily dependent on its superb yellow chicken that is not even prepackaged. While they are at an advantage for now because processed meat products would need the supply of raw meat, Perdue should also take into serious consideration that the competitors will soon have to acquire, and they will, their own supply of chickens through hatcheries.
The high demand of processed food will push the competitors to buy out supply to sustain the business. This trend in the industry must be thought over by the Perdue management. They cannot be a brand that is resistant to change, even if they claim to be a very strong one. With that, Perdue has since been at the backburner. Their supply of chickens for the franks is not even enough simply because they are not into the hot dogs business. Competitors will soon gain their own hatcheries and will unseat Perdue in no time. In connection to that, Perdue lacks the facilities for growth. They cannot pack chickens like other poultry companies do for grocers and they do not have the capacity to process the meat into franks. This very much limits Perdue. They have been forever an old provider of fresh chicken and that is all they are about.
While it is not entirely wrong, I just think that Perdue should use its good brand image to take chances and without having to necessarily tarnish their good image which they have acquired over a long time. Next, venturing into chicken hot dog does not mean that they have to face the same problems they are having with their current business. Distribution would be not constricting anymore. They can go institutional because that’s the way it’s supposed to be. Lastly, Perdue is competing in a market wherein they have always been stagnantly leading and growing. To think about it, Perdue is stagnating as a company. It has been stuck with the same business for long, as if that is what they can only do with chickens. They are only at retail level, again emphasizing the fact that they are very dependent on this type of business.
The reason why they do not do institutional is the fact that they have no means to. But with the chicken franks, they can venture into that segment because they would have to sell the processed meat in places where people usually buy them from: supermarkets. The expansion or growth problem can be solved then. (See The 4P’s on page 6) But Perdue hesitates. They cannot be always like this because a good company accepts change, else it will die out. Perdue, I strongly predict will soon die out. Not all brands can be successful and still be rebellious of some kind, refusing to conform to the industry trends. Entering into the Chicken hot dog industry
Even with the strong contentions, I see where the Perdue management is coming from. They’re not experts in the hot dog industry and even after having formulated the best chicken hot dog, dubbed as in the case as “better than Oscar Mayer”, the smaller dilemmas still prove to be risky to be uncertain of the answers for. So here goes my proposition for Perdue when entering into the chicken hot dog industry.
First, I think that rather than leasing two facilities to make the franks, they should just buy their own plants. If Perdue cares so much about their image, how can they risk still leasing out facilities which in turn produce franks different from the desired prototype? Isn’t that an even bigger risk? Destroying the trust and in turn the relationship with the consumers will fatalize Perdue’s very good brand image. If I were a Perdue fan, I would be sad to know that they do not make their own hot dogs and thus, nullifying all the good things I associate them with. Frank Perdue’s three requirements for the would-be hot dog should be followed, after all, father knows best. The franks should be better and costs will definitely be covered by the revenues (as a complete product recall is so much more expensive in the long run than acquiring equipments).
I think this is what they have to consider first and foremost. Moreover, judging from the industry and its players which Poole described as terrible or companies that didn’t do much advertising but still made a hit in the industry, the chicken hot dog industry has minimal entry barriers. Longacre and Weaver should be their example. If it was easy for such unknown firms to flourish, how much more for an established brand like Perdue? Another reason why they should have plants is because their competitors do and in the long run, Perdue will lose out in this game of processing costs. More importantly, it has been reiterated in the case that even the supply will need to catch up with the demand. With those projections, production is of utmost importance. Hence, all the more reason to have their own equipments or plants.
With that, they have more control over production and of the quality, of course. A very good reason why they are better off entering the chicken hot dog market with their own equipments or plants is that they can tailor-fit their production according to their franks’ needs. Cockrel meat is necessary for the formulated frank, but it is hard to process and needs a stronger machine or else, production costs will increase due to excess capacity, second shifts and will be burdensome due to the very high demand. So that in the case, Moriarty or Perdue need not compromise on the prototype in order to solve other less important issues than product quality.
Defy the odds
MDM is 85% of the Perdue frank. However, as how this was pointed out in the case, MDM can spell a big difference because it might destroy the brand image Perdue has and of course, it might lessen their power to demand for a premium. But according to studies and official food and drug authorities, MDM is actually safe. There were really just some few extreme cases where negligence gave it all the negative impact. If MDM standards were followed by all, coupled with an extra effort to really not put the consumers to harm by not including meat that cannot be used anymore (because it is worse than scrap already), then people wouldn’t care as much. We all have to know that we eat mostly processed food and not really organic. Even strawberries are dangerous to eat, even more dangerous to eat than a hotdog. The market is very quick to judge that a slight mistake will be detrimental to the industry. Yet they fail to recognize the fact that even the supposedly healthy foods we strive to eat every day have their own impurities.
In this case, I think Perdue should push through with their tested prototype. If the taste is better, the people will buy it. Moreover, this is not in the business of supplying fresh chicken meat anymore, this is in the processed meat industry already. And processing meat has to have some impurities but Perdue should limit it to MDM. I think the Perdue management have some erroneous thinking about this case. They automatically equate using MDM as destroying their customer’s loyal base. MDM does not mean that Perdue put some hormones in their chicken. It does not also mean that they changed them in every bit of way. The franks will still be 100% Perdue meat! MDM is just a matter of getting the meat, a processing that anyone in the industry should strategically do.
But because there are some stubborn consumer groups who know better than to mind the “healthy” foods they are eating, Perdue has to counter this possible dulling of brand image too. But this is where Perdue should put its good brand image to use and for marketing sake. The Perdue chicken hot dog
The Perdue chicken frank should be processed very sternly, following all the necessary rules and restrictions and should be 100% Perdue meat. The frank should also have nutrients present in chicken and in bone marrows such as iron and the recommended doses of calcium. The frank also has to be exactly the same as the tested prototype because it is supposed to be made of 100% Perdue chicken, and Perdue chicken is the best-tasting, so the frank should be the best in taste too. (see The 4P’s on page 6) Marketing
Product * Exactly the same as the prototype * Not devoid of natural nutrients of the chicken and bone (iron and calcium) * 100% Perdue chicken * Cannot be compromised (the ingredients) so as to minimize costs * No second-class of the product to retain Perdue’s good brand image| Place * Distribution (include concessionary) can be expanded because this is entirely a different industry already: processed meat * Not just in the current market of Perdue, but in all other places as where the competitors are (supermarkets)| Price * The recommended price for them to profit at $1.23 per pound| Promotion * Should be promoted by showing off the frank’s attributes not found in the competitors’ * Should emphasize the fact that it is “carefully processed”, even if it contains MDM meat
The marketing will be driven in such a way that Perdue’s stand on having the best chickens is utilized in a different manner: this time the best in quality for chicken hot dogs. Perdue should do a lot of reassuring. Perdue can even make a story just to set the mood: that hot dogs are unhealthy, but cheap and easy to cook that’s why people love them. But Perdue cannot bear the fact that its consumers are not eating healthy or are being cheated on. Hence, the Perdue chicken frank!
Perdue can maintain and even expand its horizons by getting into chicken hot dog. They just have to use the right words in their packaging such as “100% Perdue chicken” and “passed all processing codes” and they can even go so far as employing a research institute to assure consumers, particularly loyal customers that Perdue hot dog is actually different from the rest. Think of Safeguard with PAMET and other shampoo brands each to their own hair gurus. The marketing should be aggressive and should focus more on how these chicken franks is a product of Perdue so that one will only expect the best from it.
Perdue can also have Mr. Perdue to be in an ad, the same way that got their loyal customers hooked. Since Perdue had the highest advertising-to-sales ratio, I think that Perdue’s ads are very critical to this project’s success. Instead of focusing on the quality of chickens for the ad, this time, Mr. Perdue can say about how Perdue thanks its loyal customers for their ever strong support and that the company is expanding by doing different products, such as this chicken frank. He can also go on to say that in Perdue, everything that they make is of superior taste and quality, just like the chickens they sell. I also propose the tagline: “Only the best chickens make great franks. Only Perdue can.”
So the crucial question is whether this new chicken frank should be positioned as an entirely new product or as an alternative to conventional meat hot dogs. I think that Perdue should position it as the latter.
Poultry is far healthier than pork and beef, and chicken franks are not that main stream yet. So, Perdue’s goal of reaching out to the light-users and non-users who are wary of hot dog nutritional content will be realized through this. They should position the Perdue frank like this because I believe this is in line with Perdue’s motto of providing only fresh quality chickens. This will help them maintain if not better their brand image while expanding to this other business of chicken hot dog.
Positioning it as a new product is futile in a way because there are companies that have been selling chicken franks. So putting it as new is much more challenging and does not really bring about substantial benefits to the company. Perdue is not known for innovating things, it is known for its superior quality of chickens and it is in line with this that they should propose a favorite food, a frank, that is very much attached to their philosophy as a company.
The real chicken is Perdue
Perdue risks its growth by thinking too much on maintaining their brand image and their finances in the wrong way. They are afraid to move forward, fearing that they may not be ready for such a launch but also failing to realize that staying under the shadows will make the brand lacklustre. They prefer to risk growth for conventional wisdom that is obsolete. While Perdue can remain to be as it is, competitors will soon become like them and even much more with the franks. It is a no-brainer that the competitors will do some backward and vertical integration too.
[ 2 ]. Johnson, Mark H. “Perdue Farms, Incorporated.” Diss. Darden Graduate School of Business Administration, University of Virginia, 1978. University of Virginia Darden School Foundation. p.19