Business development report online: 24 Catering

Executive Summary

24 Catering is a high-end, catering business, which has been in business in Nanaimo, Canada for over fourteen years.  For six of those years, it has operated in tandem with Carrot on the Run Gourmet Deli headed by Melissa Hamilton.  The commercial kitchen at the deli serves both the catering menus and the deli menus.  The business has five to six full-time employees plus four wait staff on call and a bartender is hired as needed.  They also produce, package and sell an energy bar that is sold through the deli and additional outlets.  For this strategic management analysis, we will be focusing on the catering.

The firm caters to a wide variety of events from small private affairs, to businesses, to large functions with up to 700 guests.  The menus offered include platters, lunches, a variety of wedding choices, and holiday meals.  Delivering a custom experience to clients, with an emphasis on service, is the firm’s forté.  To quote the 24 Carrot Catering website:  “Our focus is on creatively incorporating global cuisine into dishes to produce a unique west-coast style experience.”  (24 Carrot Catering, 2012)  There is even a pastry chef available to create custom wedding cakes.  Business is good with annual revenue of approximately $600,000, though there has been an estimated decrease of 10-15% from last year attributed to the economic business cycle downturn (Teare, 2012).  Catering events are currently partially booked up to three months in advance.

The main competitors for such an established catering company are similarly experienced firms and large grocery store chains that offer a ‘do-it-yourself’ concept to catering by providing large orders through delis.  The edge 24 Carrot Catering has, is its ability to customize food service from an Indian wedding near a lake to a small business lunch.

Environmental Analysis

Demographic Analysis

Studies have shown that since 2000 there has been a steady increase in the number of working aged families moving to Nanaimo (Economic Development Office of Nanaimo, 2012, p.11).  According to Statistics Canada (Economic Development Office of Nanaimo, 2012, p.14), of the total population of Nanaimo, about 60% lie between the age group of 30-79 and also that 31% were single and about 47% married.  Therefore, with more and more people moving and settling here, there are more chances of catering events such as parties, get-togethers, retirements, reunions, marriages, and re-marriages.  The population of the city of Nanaimo was 82,000 in 2006; and is expected to grow to 116,000 by 2031.  Of this 34,000 increase, the fastest growth will be in the population over the age of 65, which will increase by 22,000 (City of Nanaimo, 2006).  Local businesses will need to adapt to meet senior`s needs in the future.

Socio-Cultural Issues

The cultural shift towards greater concern about health and fitness has created opportunities in the food service industry to develop and serve low calorie foods, organic foods, non-genetically modified foods, vegetarian and vegan meals and dishes that cater to food aversions and allergies.  Trends towards vegetarianism has increased within the country, influenced  in part by immigration from countries like China, India, and other Asian countries where some religious practices include a vegetarian diet (Beranek, 2007).  Concerns about climate change, has led to movements such as the 100 Mile Diet and the slow food movement (100 Mile Diet, 2012).  Ethical food practices have also become a concern.  Alongside these trends, the increased desire for “leisure time” and work has resulted in a demand for convenience food products and services in which ready-to-eat meals and frozen foods can be quickly prepared using a microwave oven (Tutor2u, 2012).  Heavy work schedules also increase the demand for convenience foods.  These ongoing changes have had an effect on menus and on the variety of customers using the food service industry.

Economic Analysis

With an annualized inflation rate hit 2.4 per cent, there was an increase in the prices of food, shelter, and clothing while gasoline prices rose by 27% (Inflation Lower in B.C. than Nationally, 2005).  Nanaimo’s rate of unemployment in 2009 was the same as the provincial rate at 7.6% (Economic Development Office, 2012, p.39).  With inflation ongoing, prices for general amenities rise, which has an impact on the overall cost of production for catering, which includes cost of shipping, cost of equipment, maintenance costs etc.  These trends change the overall business cycle.  The economic business cycle downturn has resulted in fewer customers in the food service industry but this has also resulted in a lower turnover of employees because of fewer choices for alternate employment.  Catering is a discretionary expense rather than one of necessity so it is vulnerable to economic changes.  For example, if a publicly funded organization is trying to cut costs, it may refrain from travelling as much as in the past and no longer have catered work lunches.

Technological Analysis

Bookkeeping, managing files, stocks and having an inventory system by acquiring catering business software has made life easy.  The Point-of-Sale system helps track the sales and purchases that the business has made.  The event management software keeps track of all the upcoming events for your catering business (Lee, 2012).  The use of a company website makes it easy for clients to choose their menu, place orders, book events and the catering companies can have an easy access to their suppliers.  Social networking is used by business as part of a promotion strategy involving word-of-mouth marketing (Jarvis, 2012).  Members of the food service industry offer recipes, cooking shows, food service advice and restaurant reviews through their websites.  One example of a mainstream cooking and food related website in popular culture is http://www.jamieoliver.com/ (Jamie Oliver, 2012).

Political-Legal Issues

There are many political-legal issues for the food service industry.  “Eating establishments” must pass a building inspection (City of Nanaimo, 2012).  There are labour laws worker safety (Worksafe BC, 2012) and laws regarding the Canada Pension Plan and Employment Insurance (Service Canada, 2012), which employers must follow (Ministry of Labour, 2012).  Taxation, from income tax to the HST has an influence on cost and profit.  The BC Government’s Liquor Control and Licensing Branch (City of Nanaimo, 2012) issues liquor licenses.  There are legal responsibilities to serving alcohol and under certain circumstances; staff are required to possess a Serving It Right certificate to show they have received training (Liquor Licensing and Control Branch, 2012).  Recent changes to drinking and driving laws are expected to cause a decrease in how much alcohol customers will purchase (Restaurant Central, 2012).  Foodsafety certificates, indicating training in the prevention of the transmission of food borne illnesses, are required by at least one employee on duty for food preparation and service (Foodsafe, 2012).

Opportunities and Threats

Though the food service industry is especially vulnerable to the threat of downturns in economic cycles and has to contend with many political-legal issues it is an attractive industry.  There are many opportunities available over a wide range of areas.  Some of these particular opportunities are to cater to an aging population, offer ready-to-eat or microwavable meals for busy families, tailor menus to health and developing food trends, have a strong online presence to serve lifestyle questions, and serve local products to avoid some global issues.

Industry Environment Analysis

The information in this section of the report comes from the interview with Alexandra Teare.

Threat of New Entrants

The entry barrier in the catering business is very low.  It is easy for any firm to enter the market since the initial costs of setting up a catering business are very low.  Depending on your pocket size, you can either start small or very big.  For someone who wants to enter the market and does not have too much money, he / she can enter the catering business and start working out of the kitchen in their private home.  Or else, they can rent kitchens in a nearby restaurant on days they have a catering event.  For additional help, one can hire on-call or part-time employees for when an event is booked.  Overall, the costs of entering the catering business are quite low and hence there is a very high threat of new entrants in this industry (Teare, 2012).

Power of Suppliers

Being located in Vancouver Island gives the catering industry here very little control over the suppliers.  This is because Vancouver Island has a limited choice of suppliers as trucks bring supplies over from Vancouver.  In order to purchase products from the major suppliers, the catering companies also need to place minimum quantity orders.  This gives the suppliers major control.  In addition, although there are small suppliers available here, they cannot compete with the big ones- neither in terms of price nor in terms of quantity or quality for the catering companies.  The catering companies also need to have their supplies delivered on time, which is a feature that the big suppliers provide more reliably than small ones (Teare, 2012).

Power of Buyers

Buyers have power in this industry.  They are in total control of the events as they are the ones who decide everything from location, to menus, to decorations for an event, based on their personal tastes and expectations.  The catering companies have to adjust to the needs of their buyers and arrange things according to their tastes thus giving them complete control (Teare, 2012).

Threat of Substitutes

The threat of substitutes is high in this industry.  This is because you can easily get the combo meals available at numerous grocery stores these days and cater an event.  For example, Thrifty foods provide combo meals that include dishes with various kinds of pasta, beef, and Indian options.  This is a big threat to the catering business since people can choose to pick these combo meals for their catering events since it is not only convenient to do so but also much cheaper (Teare, 2012).

Rivalry among Competitors

There is high industry rivalry in the catering business.  Because it is an easy to enter industry, there is a lot of competition.  Due to catering being one of the fastest growing segments of the foodservice industry, there is high industry rivalry here (Duecy, 2012).

Country Analysis

Table 1 – SWOT-Analysis

 Spice of LifeThrifty Foods

 StrengthsReputation, experience, advanced culinary skills, quality serviceExperience, recent awards , online promotion, quality serviceStrong brand, island retailer’s chain,  diversified income channels, variety of services, relatively low costWeaknessesWeb-site in transition, relatively expensive deliSpecific type of menuStandardized food, no catering serviceOpportunitiesEnergy bar, choice menus for clients specific needs, deliKitchen equipment rental, cake decorating lessons, eco-friendly attitudeOnline services including a “Cooking & Lifestyle” centreThreatsLegislation, high competitionLegislation, high competition, reliance on pastry skillsLegislation, limited custom experience for clients

 Table 2 – Competitive Advantage Chart

 Placement, kitchen, deli, staff, reputation, experience, clientele, supply channels

Placement, kitchen, staff, reputation, experience, clientele, online resources

Grocery stores chain, staff, reputation, experience, own supply channels

Capabilities

 Catering, cakes, deli, energy bar production

Catering, cakes

Delivery, Plates service, deli store

Competencies

 Catering service, quality service, popular energy bar, corporate dinners

Catering, good customer service

Wide range of deli and plates, online services, grocery store, recipes

Core Competencies

 Catering

Catering

Grocery

Competitive Advantage

 Quality food, customer responsiveness

Wedding cakes, customer service

Superior price, locations

Sustainable Competitive Advantage

 Recipes, flexibility, clientele

Wedding cakes

Locations, distribution channels

For Sustainable Competitive Advantage, Table 3, we applied the VRIO Analysis to determine if 24 Carrot Catering’s advantages are sustainable.  We have determined that the competitive advantage factors are partly sustainable but cannot guarantee leadership in this market in the long run.

Table 3 – VRIO Analysis

menus, flexibility, clientele

Thrifty Foods:

locations, distribution channels

Competitive Analysis

24 Carrot is one of the major companies in the catering business in Nanaimo.  It is well known in the region and it has good reputation among people living in Nanaimo.  It has operated for over 14 years and has gained a repeat clientele and positive testimonials.  Its main competitive advantages are quality food and customer responsiveness.  The founder and a director of the company differentiate with a high level of flexibility, which means she is open to change.  Most of the general environmental trends are having a positive effect on the business such as the trend for healthy, ready-to-eat meals.  24 Carrot Catering and Carrot on the Run Gourmet Deli produce a healthy energy bar that is well recognized by local sport communities.

Business Level Strategies

Deli-centric

As part of the strategy, we feel that the deli should have consistent dishes every week for walk-in customers and local lunch hour customers.  This is keeping in mind the location of the deli.  Having exquisite dishes at the deli counter for everyday walk-in customers may deter the new customer because of the size of the dishes, as well as the prices.  The risks of having a set menu would mean less flexibility and more division when preparing foods for both the deli and events simultaneously.

Target Market Segment: Seniors

24 Carrot should continue with their Christmas / holiday dinners in addition to take-outs and frozen foods.  However, we strongly recommend developing a delivery service for ready-to-eat meals particularly for the growing target market of seniors in Nanaimo who may be unable to arrange for pick-up.  In order to reach this segment in the population – we suggest using promotion and advertising aimed at them via magazines, newspapers, and by radio.  Images of food can be featured, along with a list of some of the company’s most popular meals with prices including delivery.

Food Online

The 24 Carrot Catering website is currently being improved and streamlined.  An easy to navigate, well-designed website will add to the firm’s image.  Services beyond what is offered by the catering or the deli alone can be online such as a recipe of the week and food preparation and cooking advice.

Strategy Alternative

Another way to attract health conscious customers would be to have the deli go organic and use primarily local produce and meat.  However, the deli is tied to the catering and organic food for events would drive the cost per plate from an estimated $19.99 up to $25.99 (Teare, 2012).  This is not cost effective at this time.

Conclusion

24 Carrot Catering and Carrot on the Run Gourmet Deli are strongly interconnected.  The implementation of the strategies proposed may require that the two units blend even further in order to brand the company as a whole and develop the product lines using the strengths of both the catering and the deli.

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