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Hutchinson Farms Vancouver Island, British Columbia
Samantha Moore, Tristan Moore
HutchisonFarms@HF.com
Nov-23, 2023
Executive Summary
Hutchinson Farms, located on the east side of Vancouver Island, British Columbia, embodies a legacy of agricultural value. Founded by Thomas Moore, the farm has flourished under the stewardship of his children, Samantha and Tristan, who now operate the company. The farm’s diversified operations encompass egg production, pullet nurturing, and forage cultivation. With a history of nurturing the land and raising livestock, Hutchinson Farms has expanded its footprint since the mid-2000s. in 2022, the farm has shown profitability and diversified into eggs, pullets, broiler chickens, and forage production. Samantha and Tristan, armed with formal education and practical knowledge, took the guides from their father, plotting a course toward strategic growth for the business. The pivotal question facing them is whether to leverage idle egg grading equipment inherited from a defunct competitor. This equipment presents an opportunity to expand operations into grading, packaging, and marketing eggs – an untapped avenue. Market dynamics reveal a competitive landscape dominated by Northern Dairies, Hutchinson’s egg-grading partner. However, strategic analysis suggests room for Hutchinson Farms to carve its niche. The potential for increased efficiency, fresher produce, and enhanced marketing strategies sets the stage for differentiation in a market where price has been the primary selling point. While the decision to integrate egg grading operations entails risks, competition from established players, and the need for additional resources, it also promises expanded revenue streams and independence from external partners. Marketwise, Hutchinson targets wholesalers, retailers, and local markets for egg distribution. Their differentiation strategy, focusing on quality and freshness, aims to capture consumers, intending to penetrate both the Vancouver Island and potentially broader British Columbian markets. The farm’s current economic standing, however, presents certain challenges. While boasting a higher-than-average profit margin, Hutchinson Farms grapples with lower acid-test ratio, inventory turnover, and ROA ratio than the industry norm. These metrics signal potential financial constraints and inefficiencies in resource management. The company stands at a crossroads, evaluating strategies to optimize operations, manage debts, and enhance profitability. The decisions made in the coming phase will redefine Hutchinson Farms’ trajectory in the competitive agricultural landscape of British Columbia.
Industry Analysis
The agricultural industry has always been in demand in all years. It provides nourishment to the local community and is a must-have in grocery stores. The egg industry in British Columbia targets wholesalers, retailers, and potentially local consumers to gain a broader distribution of their products. However, eggs’ fragility and specific storage requirements pose challenges during transportation and distribution, impacting sales. As a result, price becomes a crucial competitive factor for egg sales in the market. The government regulations mandate egg grading before public sale, making it a necessary process for producers. On the West Coast, there is only one company that incorporates the egg grading operation, Northern Dairies. larger egg producers sell eggs at a discount to Northern Dairies to handle grading, packaging, and distribution for various producers in the region. While many smaller egg producers exist in the southern half of the island, the major competition lies with the Northern. Based on the information provided, Northern Dairies does not prioritize marketing eggs, presenting an opportunity for Hutchinson Farms to differentiate itself through proactive marketing strategies.
Company Description
Hutchinson Farms is an agricultural company founded by Thomas Moore. The company has a broad revenue stream such as broiler chickens, forage crops, and specifically eggs. Thomas gained minimum knowledge of farming from his neighbors when he was a kid and started the Hutchinson Farms business. The farm is a family-centric business with Thomas and his children, Samantha and Tristan. Samantha and Tristan have been heavily involved in the business since their youth, and they gained practical knowledge
and formal education on the farm’s operations. In 2019, Hutchinson Farms seized an opportunity to expand its capabilities by acquiring grading equipment from a defunct competitor. Although Thomas Moore intended to integrate egg grading into their business operations, time constraints led to the equipment being idle. Samantha and Tristan are currently debating whether to incorporate the egg grading equipment into operations or sell the equipment. Either way, the company will continue to experience success in the industry. However, the egg grading operation has the potential to capitalize on the egg grading equipment expanding the company’s revenue streams, and achieving independence from the only competitor, Northern Dairies by no longer needing the grading operation. However, the egg grading equipment can also bring additional costs to operate the business. Regardless, Hutchinson Farms can continue to make considerably good profits from its current operations.
New Market Analysis
Hutchinson Farms’ egg products are mainly targeted at wholesalers, retailers, and potentially small local stores. Eggs are must-haves in grocery stores and thus, customers can easily access its products at familiar retails, making it convenient for them to purchase Hutchinson Farms’ products regularly and enabling Hutchinson Farms to tap into a wider consumer base. Distribution through retailers and wholesalers potentially boosts sales volume, which leads to revenue growth. However, egg production may have seasonal constraints that could have a negative impact on mass production. For example, the reproductive systems of laying hens are very sensitive to light exposure, especially the number of hours
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of light in a day. Hens perform best when they receive 14-16 hours of light per day. In the winter months,
there are only 9-10 hours of light due to the days getting shorter [1]
.
So, the profits may fluctuate over the year. Thus, additional strategy and maintenance costs may be required to stabilize egg production throughout the year minimizing the seasonal fluctuations that can be observed in egg production. Economics of the Business
This section should give a brief breakdown of how Hutchinson Farms is earning any profits from its business. Based on the information provided, Hutchinson Farms obtained the egg grading equipment back in 2019 when its old competitor permanently shut down and sold its egg grading equipment to Hutchinson Farms for a cheaper price than the ones out in the market. So, Hutchinson Farms already had
sustainable business opportunities that could lead to a potential growth in revenue to begin with. However, based on the data provided from financial information for Hutchinson Farms, in 2024 the current ratio is projected to be at 1.19 and the industry norm is at 1.28. This indicates that Hutchinson Farms may struggle to pay what it owes soon or manage its money effectively in the short term. However, In 2026, the current ratio increases up to 1.26 by the end of the year meaning that Hutchinson Farms can recover its ability to pay its short-term bills. Hutchinson Farms has huge operational costs to run the business and that causes a struggle to pay back its liabilities, and this can be determined by looking at its acid-test ratio and debt ratio. In 2024, the acid-test ratio is at 0.51 and the debt ratio is at 55%. Looking at the industry norm, its acid ratio is at 0.75 and debt ratio at 50% respectively. This signifies that Hutchinson Farms is financed through debt and the company needs effective financial management to overcome this problem. However, as the year passes by, the debt ratio and acid-test ratio lean towards a positive number which indicates that the company is making good financial progress
and will make profits in the future. This can be noticed by looking at the profit margin ratio of the company. The profit margin is projected to surpass the industry norm by 0.5%. This means that Hutchinson Farms is efficient in generating profits despite potential liquidity challenges. This could also mean that the company operations are cost-effective and yield better profitability. For even better profitability, Hutchinson needs to improve its management of inventory and utilizing assets. The inventory turnover ratio has always been lower than the industry norm and is projected to go lower over
the years. In 2024, it is at 23.3, and in 2026, it is at 22.4. This means that the company is selling its inventory at a slower pace compared to the industry which ties up funds in unsold inventory. These metrics signal potential financial constraints in the future and inefficiencies in resource management, requiring a need for strategic adjustments for the company.
Marketing Plan
Samantha and Tristan aim to compete with industry standards by offering competitive prices for their eggs, intending to sell approximately 554,840 dozen eggs annually to wholesalers. They plan to set graded egg prices slightly lower than Northern’s, ranging from $1.64 to $2.51 per dozen depending on the grade. Hutchinson also plans to have the farm name on the carton of eggs to promote the freshness and better quality that was achieved by the new operation with the egg grading equipment. When it comes to packaging. Leveraging their business history with Northern, Samantha, and Tristan believe they
can operate more efficiently, ensuring fresher eggs with reduced breakage. They propose more frequent deliveries compared to Northern’s to lower storage needs at grocery stores.
Operations Plan
Eggs are proposed to be graded approximately 13 days a month for 5 hours a day. Hutchinson plans to hire four additional employees for labor work at $16.50 per hour in order to successfully handle the grading of the 554,840 dozen eggs sold annually. They plan to increase delivery frequency to twice a week to minimize storage requirements for retailers. This operational change aims to enhance the efficiency of distribution and reduce potential storage costs for retail partners. The use of the company trucks for deliveries twice a week would cost approximately $720 per month in direct costs. The cost of electricity would increase to support the equipment. The equipment would require maintenance and repairs. Management Team and Company Structure
Thomas Moore’s children, Samantha and Tristan, are currently managing Hutchinson Farms’ finance and operations. Samantha and Tristan grew up watching their father manage the business and so, they possess extensive hands-on experience and deep-rooted knowledge of farming operations. Their complementary skills – Samantha’s proficiency in agricultural production and Tristan’s business administration knowledge gained from formal education. Hutchinson Farms is a family-run business. Samantha and Tristan hold ownership of Hutchinson Farms after their father passed the business down to them. The company has two main departments which are egg production and forage operations. Egg production involves managing layer hens, overlooking egg collection, and maintaining the pullet operation for future egg production. Forage operation includes hay and silage growth and harvesting, Demanding large plots of land. Samantha takes a role in handling the forage segment, leveraging her expertise in production aspects. Tristan, with his business administration background, contributes to strategic decision-making and business development. This duo jointly decides on strategic initiatives like expanding egg production, new markets, and potentially incorporating egg grading equipment into operations.