Snacking Away at the Corporate Giants

September 10, 2020
Snacking Away at the Corporate Giants

 

Our waist lines are trying to keep up with the snack industry! Or is it the other way around?

Utz, a family-owned potato chip maker, is growing fast and going public for even faster growth. Over the past few years, acquisitions have proved valuable for the company, but what seems to be an aggressive, offensive strategy may actually be a defensive one. Small, unique brands build a loyal following and eventually get bought up by large corporations. Utz’s CEO is betting that becoming a giant is the best way to keep the company independent and thriving.

 


Video Spotlight: Utz Goes Public for Faster Growth


This post is based on the Forbes article, Exclusive: Utz CEO Talks Family and the 99-Year-Old Company’s Plan to Go Public on Monday, by C. Sorvino, August 28, 2020, and the YouTube video, Pretzel-Maker Utz CEO on Going Public After Nearly 100 Years as a Private Company, by CNBC Television, August 31, 2020. Image source: Â© McGraw-Hill Education.

Discussion Questions:

1. Have snack habits changed during the pandemic? If so, how? Based on your findings, do you think that Utz’s acquisition of other snack companies matches current demand trends?

Guidance: To answer these questions, the two following articles may prove helpful: Consumer Snacking Habits Shift as Unprecedented Summer ApproachesState of the Industry 2020: Meeting Snack Market Demands. With COVID-19, people retreated to their homes and ate more snacks. They also tried new snacks and stocked up. Demand for a variety of snacks fitting different occasions and nutritional needs has also trended up. Nutritious snacks and those promoting well-being are especially popular. Given the demand changes both in terms of volume and variety, Utz’s move to scale up and add more brands to its portfolio makes sense. As people go back to work, demand shifts among products may occur, making it imperative for the company to emphasize innovativeness and agility.

2. Does the proliferation of new products create challenges for production planning?

Guidance: In the medium term, the demand forecasts are typically for families of snacks. Accordingly, aggregate plans also establish output rates and capacity needs for product families. If the number of product families increases, new forecasts and plans will have to be generated. However, in acquiring other firms, Utz is buying their staff’s expertise and ability to develop capacity plans for specific families and update them as needed. A major challenge is to develop economies of scale by consolidating material purchases and reorganizing dispersed production capacity for maximum efficiency. Furthermore, disaggregating the aggregate plans into master production schedules will be more complex and require a tight coordination of customer orders, inventory levels, and production levels for a much larger number of products.

3. How can an injection of capital through public trading benefit operations?

Guidance: The extra capital will help Utz pay down its debt and invest in new production technologies such as robotics. It will also give the company the ability to develop and expand new product lines as well as building the production capacity required to attract large customers such as Walmart.

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