Lite House

Litehouse Foods:

Is glass at breaking point?

Samuel Barclay, Alex Davidson

1108598, 1108203

Lincoln University

MKTG 323

Dr. Eldrede Kahiya

iSamuel Barclay, Alex Davidson 1108598, 1108203

Litehouse Foods: Is glass at breaking point?

Executive Summary:

This report provides an analysis and evaluation on the decision process undertaken by Litehouse Foods on whether to continue with glass packaging or switch to a plastic alternative.

Despite the obvious cost savings created by the switch, the decision is not as straightforward as it may seem. In this report we completed research on the company situation, industry analysis, market situational analysis and address the issues of supply chain power. A detailed supply chain map (for both domestic and international markets) is also completed with strategy and value also discussed.

From the analysis undertaken during the creation of the following report we made five core recommendations:

• Litehouse continues with glass

• The jar size is reduced, from 13oz to 12oz.

• Product development continues to evolve with market trends

• Trucks be contracted to carry goods on return journeys

• Glass provider acquires responsibility for full delivery to Litehouse facilities

We believe that these recommendations will allow Litehouse to continue to grow globally, while still retaining profit and customer value. These recommendations are in line with the businesses core principles and will give Litehouse increased future flexibility.

iiSamuel Barclay, Alex Davidson 1108598, 1108203


Contents:Introduction:...............................................................................................................................1

Situational Analysis...................................................................................................................1

Major Markets........................................................................................................................1

Refrigerated Salad Dressing Products....................................................................................2

Refrigerated Salad Dressing Life Cycle.................................................................................2

Implications on Supply Chain Design....................................................................................3

The Refrigerated Salad Dressing Industry.................................................................................4

Bargaining Power of Buyers..................................................................................................5

Bargaining Power of Suppliers...............................................................................................5

New Entrants..........................................................................................................................5

Substitutes...............................................................................................................................5

Rivalry....................................................................................................................................6

How the PLC and Industry Analysis Influence the decision.....................................................6

Supply Chain Mapping..............................................................................................................7

General Supply Chain Information:.......................................................................................7

Supply Chain Map..................................................................................................................7

Inbound operations.............................................................................................................8

Outbound operations..........................................................................................................8

Supply Chain Strategy and Value Propositions.........................................................................9

Strategy...................................................................................................................................9

Value.......................................................................................................................................9

Conclusion................................................................................................................................10

Recommendations....................................................................................................................10

References................................................................................................................................12

Appendix 1...............................................................................................................................14

Appendix 2...............................................................................................................................15

Appendix 3...............................................................................................................................16

iiiSamuel Barclay, Alex Davidson 1108598, 1108203


Introduction: Litehouse Foods (Litehouse), the American Company best known for its premium refrigerated

salad dressings, is facing a dilemma, glass or plastic. After its aggressive growth strategy in 2010, the

company has reduced its short-term profitability and is now short on cash. Two competitors recently

switched to plastic jars and, as a result, now have a 15% price advantage over Litehouse. Litehouse’s

larger value-packs changed to plastic containers only a few years ago. Its smaller, 13oz glass jars,

central to the brands identity, are now being pressured towards the same fate (Lawrence, Mishra &

Pengilly, 2014).

According to Lawrence et al. (2014) and Grant (2004), it all started in 1958 with a single

recipe from Washington chef, Ed Hawkins Sr. His creamy blue cheese dressing became a favourite at

his Hope, Idaho restaurant. It was so popular that he and his sons decided to start their own

refrigerated dressing business in 1963 (Lawrence et al., 2014; Grant, 2004). In 1997, Litehouse

merged with Chadalee Farms, a Michigan-based food service company with a strong foundation in the

Midwest markets of the United States of America (U.S.). Today, Litehouse produce not only a variety

of different dressings, but also dips, sauces, marinades, cheeses, herbs and apple cider (Litehouse,

n.d.c). However, its refrigerated salad dressings are what customers love the most. This is perhaps

unsurprising, given that it won dressing of the year in 2009, 2011 and 2012 (Lawrence et al., 2014).

Litehouse employs over 500 staff across three U.S. production facilities in Sandpoint, Idaho,

Lowell, Michigan, and Hurricane, Utah (Sandpoint Videos, 2011; Lawrence et al., 2014). Company

headquarters are located at the Sandpoint facility. Litehouse is currently 70% owned by the Hawkins

brothers and Wendall Christoff (ex-owner of Chadelee Farms), and employees own the remaining

30%. Current CEO and president, Jim Frank, has consistently led the company through double figure

sales growth since 2010 when he was appointed.

Business development manager Doug Hawkins Jr. (Grandson of Ed Hawkins Sr.) needs to

provide the executive team with an analysis and recommendation as to the appropriate decision

between glass and plastic. The following report discusses the company’s situation, industry and supply

chain. Through this information Kinetrix will be able to provide comprehensive recommendations to

Litehouse that will enable them to make the appropriate decision between glass and plastic.

Situational Analysis

Major Markets

Litehouse’s refrigerated salad dressings target the well-educated, middle-upper class consumer

looking for healthy, quality products that are good for the environment. The dressings are sold to

1Samuel Barclay, Alex Davidson 1108598, 1108203


warehouse clubs, grocery chains and food-service businesses throughout the U.S., Canada and Mexico

(Guilfoil, 2012; Canadean, 2014). Consumers can find Litehouse dressings in over 126 stores across

the world, with notable shelf presence at big retailers like Wal-Mart, Costco and Albertson’s

(Litehouse, n.d.a). In the U.S., Litehouse is in every state, but it’s most successful market is in the

Northwest region of the country where it is the market leader. In Canada, Litehouse has a presence in

every province and has the second highest market share in refrigerated dressings (Lawrence et al.,

2014; Sandpoint Videos, 2011). Its dressings have recently entered Mexico and Litehouse is looking to

expand into new areas, such as Asia, Latin America, and Europe (Lawrence et al., 2014).

Refrigerated Salad Dressing Products

Litehouse’s refrigerated salad dressings make up 60% of its revenue. (Lawrence et al., 2014).

Therefore, the decisions made in this product category have wide ranging implications for the

company’s overall success. Litehouse (n.d.c) illustrate that its salad dressings can be split up into three

types based on size: value-size, single-serving size and standard size. Value-sized dressings are sold in

gallon-sized, 32oz, 25oz and 20oz plastic containers (Litehouse, n.d.c). The three larger sizes are sold

to food service businesses and warehouse clubs like Costco. The 20oz-sized bottles are sold to grocery

stores, such as Albertsons (Lawrence et al., 2014). Single-sized servings come in 1oz, 1.5oz and 2oz

sizes. These are made exclusively for food service businesses. The standard sized bottles include 12oz

pourable dressings and 13oz creamy spoonable dressings all sold in glass jars through warehouse and

grocery retailers (Litehouse, n.d.c). The 13oz-sized creamy spoonable dressings are what customers

associate the Litehouse brand with due to the product’s longevity and signature taste. There are 32

different flavours ranging from new gourmet, such as the feta dill Greek yoghurt dressing, to more

standard favourites, like Chunky Bleu Cheese (Litehouse, n.d.b). It is a premium product made fresh

with 100% canola oil, low carbohydrates, and no MSG, preservatives, or additives, thus catering for

the educated, upper-middle class, health-conscious consumer – Litehouse’s target market (Lawrence et

al., 2014). This 13oz dressing was the one in question. Should it remain as a 13oz jar bottle or should

it change to a 12oz plastic bottle – the industry standard that could narrow the price advantages

between it and its competitors.

Refrigerated Salad Dressing Life Cycle

Refrigerated salad dressings, as a product category, have come a long way for Litehouse. In

considering the category’s overall product life cycle (PLC), the product development stage

commenced when Ed Hawkins created the famous bleu cheese dressing at the restaurant he and his

wife bought in 1958; it was the first product under the Litehouse brand (Adams & Armstrong, 2009;

Grant, 2004). By 1963, Ed and his son finally decided to sell the bleu cheese and newly created

thousand island dressings to its first store in Sandpoint, Idaho (Lawrence et al., 2014). This was when

the category entered the introduction stage of its life cycle (Adams & Armstrong, 2009). In 1975, the



category entered the growth stage of its life cycle after Litehouse secured accounts in Albertson’s

grocery chain (Adams & Armstrong, 2009; Guilfoil, 2012). Several other accounts were secured over

the following years, including Safeway’s grocery chain in 1977. Salad dressing sales reached

$100,000 in 1974 and grew to $6 million by 1984 (Guilfoil, 2012). Growth then remained relatively

stagnant from 1984 to 1989. This was due to the company’s heavy focus on retail dressings within the

produce sections of grocery stores (Guilfoil, 2012). As sales growth steadied, the category entered its

maturity stage (Adams & Armstrong, 2009). However, through strategic market and product

modifications, Litehouse’s refrigerated salad dressing category has continued with positive growth that

has enabled it to compete strongly in the industry. This cycle is shown in appendix one. Note that this

diagram is not to scale.

Since 1984, Litehouse has demonstrated these modifications by introducing a robust range of

dressing flavours and targeting new markets. For example, in 1989, the company recognised a

growing market in member-store and food service businesses, and thus began selling its value and

single serve sized dressings to these new customers. Five years later the company’s sales hit

$20million (Guilfoil, 2012). Another example was in 2004, when Litehouse offered ‘one carb plus’, a

dressing low in carbohydrates that targeted a growing market of health conscious consumers (Keller,

n.d.). Modifications like these spur, what Vendetti (2012) refers to as revival stages, which creates

growth in an entire mature category. This is illustrated in appendix one where the maturity stage of the

graph shows small revival stages that increase overall growth for Litehouse’s refrigerated salad

dressing category. The effects of the 1989 market modification are shown by the revival stage from

1989 to 1994 (Revival Stage 1). In addition to modifications, salad dressings are considered a normal

good in many households, so the chance of any significant sales decline in the future is somewhat

unlikely. This makes the life cycle of salad dressings relatively long.

Implications on Supply Chain Design

New products will bring different ingredients or materials through the supply chain. The key

to this change, especially given the perishable nature of refrigerated salad dressings, is time to market.

If Litehouse can enter the market early, it can set its own prices and start building customer relations

before its competitors. This speed is linked to a supply chain designed to reduce complexity. For

example, sourcing from current suppliers wherever possible and standardising materials will speed up

the process. Many other changes, from factory machinery to new distribution channels, may also be

needed. Integrated supplier and customer relationships aid this process. According to CDC Software

(2006), Litehouse use its Ross ERP system, Ross SCM system, and Ross EPM Sales to achieve

internal and external integration, and systems thinking. This software provides all decision makers

with timely and actionable information related to product profitability, inventory reductions, on-time

delivery, production streamlining, stock-outs and sales performance. The exchange of this information

links all players in the supply chain, enhances visibility, and ultimately allows Litehouse “to



understand, attract and keep valuable customers” (CDC Software, 2006). Due to this product

category’s long life cycle, Litehouse will also be looking for long-term relationships, particularly with

suppliers of its core product ingredients (e.g. glass and buttermilk) and its big distributors (e.g.

Walmart). These relationships also drive collaborative thinking making it easier to discover market

niches and develop new innovative products.

The Refrigerated Salad Dressing Industry

In 2011, the retail salad dressing industry was worth $3 billion and had a 95% household

penetration rate. Litehouse is a player in the refrigerated salad dressing segment, which made up 15%

of this industry in 2011 (Lawrence et al., 2014). Refrigerated salad dressings need to be kept fresh and

reach the customer quickly to avoid expiring. This means products are transported in refrigerated

trucks with relatively short lead times. Through its integrated software systems Litehouse has achieved

this by having a 97% on-time delivery rate and 95% order fill rate (Consumer Goods Technology,

2006). Dressings are packaged in not only plastic, but also glass. This means that glass packaged

dressings need to be handled carefully, both in production and transit.

Over the last few years the surge in healthy, quality food has created new niche markets that

well-known salad dressing brands, like Litehouse, have capitalised on. According to Early, Holcomb,

Willoughby and Brooks (n.d.), the health trend has increased the growth of salads, which has thus

increased the growth of salad dressings. Mandatory nutrition labelling and better-educated consumers

have seen sales for high-fat dressings fall, whilst low-carb, ‘lite’ options have grown. This is a trend

that is expected to continue. Diets like Atkins and South Beach have brought significant growth in pre-

packaged salad mixes, and thus low-carb salad dressings in smaller serving sizes. There has also been

a growing market for all-natural, organic and gluten-free dressings, and research has shown that

consumers are willing to pay a premium for this added quality. The freshness and taste of refrigerated

salad dressings have become more popular in restaurants and fast food outlets, which have grown

significantly due to consumers searching for greater convenience. In recent years, consumers have

demanded robust flavours that incorporate gourmet ingredients, such as bacon and dill. Traditional

flavours, such as ranch, have also been strengthened with garlic or sweet onion (Early et al., n.d.).

There is also a large trend towards culturally inspired tastes (e.g. Litehouse’s OPA Greek yoghurt

dressings), with particular growth expected in Latin American and Mexican fast food stores that

require these robust flavoured dressings (Transparency Market Research, 2013). Despite all these

trends, businesses will need to make sure quality taste and texture (that matches customer demand)

stays at the heart of what they do. After all, dressings are merely used as flavour enhancers for other

foods.



Bargaining Power of Buyers

Buyer power is determined by the concentration of buyers, the ease at which buyers can

switch between different suppliers, and the importance of the good to the buyer’s output or customer’s

lifestyle (Ahlstrom & Bruton, 2010). Litehouse’s buyers – its end customers and retailers (grocery

chains, warehouse clubs and food-service businesses) – have high market power. In 2013, 91% of U.S.

food sales came from grocery stores and nearly 40% of these sales came from its four leading grocery

retailers, Wal-Mart, Kroger, Safeway and Publix (USDA, 2013). Litehouse have secured shelf space

with Wal-Mart, Safeway and Albertson’s, and Wal-Mart provides the distribution networks into new

countries like Mexico (Lawrence et al., 2014). Buyers have insignificant switching costs because

refrigerated dressings are not high expense items relative to income. Industry retailers typically sell

hundreds of other products, so dressings have little impact on sales. Although this is a standard

household item, it is not a critical one, thus the need to purchase it is not significant either.

Bargaining Power of Suppliers

Supplier power is based on the demand for supplier products and how differentiated the inputs

are (Ahlstrom & Bruton, 2010). Ingredients like oils, eggs and dairy products, and packaging materials

like glass and plastic, are common across many different industries, which means suppliers are not

usually difficult to find. Most of the inputs received are relatively standard; it is the way companies

put them together that creates the differentiated product. However, the emergence of organic dressings

will make sourcing organic ingredients more difficult. This overall lack of supplier power makes it

relatively easy to secure supply channels. However, suppliers will still need to meet Litehouse’s

requirements in terms of delivery and quality, and, if what they supply is significant to its quality and

output (e.g. glass or buttermilk), these relationships can be built and sustained for the long run.

New Entrants

The threat of new entrants is small. The automated machinery, numerous flavours and

ingredients, quick delivery time and need to produce in large volumes to attain economies of scale

makes the whole process very costly and complicated for a new entrant. In addition, securing

distribution channels will be difficult due to limited shelf-space. Developing unique product flavours

that capture the attention of customers loyal to competitor brands that have been around for decades

also presents a problem. All these challenges make it very difficult to enter the market. Only entrants

with highly differentiated dressings and access to capital and distribution channels will succeed,

assuming they attain sufficient customer demand.

Substitutes

Substitute products are “products that perform a similar function, but are not considered to be

in the same product category” (Ahlstrom & Bruton, 2010). Substitutes for this category include shelf

stable salad dressings, sauces, and dips. However, these substitutes often don’t compare to the



freshness and quality of relatively healthier refrigerated salad dressings. They are also more likely to

be in plastic packaging, which is typically perceived as poorer quality. Overall, the strength of

substitutes in this market is low, which means supply chains are more likely to serve loyal consumers

for longer periods.

Rivalry

According to Ahlstrom and Bruton (2010), the key factor that reduces rivalry among

competing firms is differentiation. Litehouse only has three significant competitors in this market, in

the U.S., Marie’s and Marzetti, and in Canada, Renée’s (Lawrence et al., 2014). All three differentiate

their dressings as premium, healthier products similarly to Litehouse. However, they do have small

differences. Marie’s claim to capture a unique homemade flavour, Marzetti emphasizes that it is

gluten-free, and Renée’s focuses on social and environmental responsibility (Marie’s, 2015; Marzetti,

2015). Although there is some differentiation, the lack of competing firms makes rivalry a moderately

strong force.

How the PLC and Industry Analysis Influence the decision

The PLC and industry analysis highlight the importance of the end customer and that

integration and differentiation are key. The strength of buyers in the industry drives this need for

differentiation. Fawcett, Ellram & Ogden (2007) explain that companies differentiate themselves in

the minds of consumers by looking at the five areas of customer value: quality, cost, flexibility,

delivery and innovation. Quality and cost are key in this decision.

Selecting plastic could harm four of the eight factors that comprise quality: aesthetics,

perceived quality, reliability and performance. Aesthetics refer to “perceptions of fit or finish”

(Fawcett et al. 2007). Plastic packaging may make a product look and feel cheaper than glass.

Similarly it will affect perceived quality – overall product or brand perception – when consumers

relate plastic to thoughts of chemicals leaching into food, polluted waterways, and burning fossil fuels.

Reliability and performance could fall if consumers discover that chemicals had leached into the

dressings. Also, the taste of the product, critical to its success, may change due to the permeability of

plastic.

Staying with glass harms the area of cost the most. According to Lawrence et al. (2014), the

company could save $1.5million per year by switching to a 12oz plastic jar. Only a third of these

savings come from the plastic packaging, the rest comes from the fewer ingredients in the smaller jar.

The specific savings from plastic packaging come from less breakage, lower fuel consumption (due to

lighter packaging), and less stoppage time associated with the lid seals. However, it would initially

cost Litehouse close to $1.5million to implement all the necessary changes (Lawrence et al., 2014).



Litehouse’s target market is prepared to pay a premium for better quality. Glass is the “gold

standard in packaging” and market research shows that customers tend to agree (Lawrence et al.,

2014). Plastic packaging creates cost savings, but Litehouse’s target market value quality over costs.

In this case, something that eliminates cost may eliminate overall value, and, for today’s supply

chains, value orientation is more competitive that cost orientation (Novicevic, Buckley & Harvey,

2000). If Litehouse changed its core product to plastic we may see fewer revival stages and a steadier

maturity curve that could plateau and perhaps decline altogether. However, by not changing, the

competitors still have a 15% price advantage (the highest it has ever been), and the challenge to

improve short-term funds and profitability still remains. Therefore, Litehouse will need to look for

other ways to add value to the end customer without harming the value it already adds.

Supply Chain Mapping

General Supply Chain Information:

Litehouse operates a push based supply chain model (Lawrence et al., 2014). This requires

Litehouse to predict the end consumer behaviour and couple it with the behaviour of the retailers.

Fortunately, due to the product’s perishable nature, the supply chain cannot stockpile. This also

reduces the bullwhip effect.

Litehouse operates a partial vertically integrated supply chain. It operates a fleet of fifty

refrigerated trucks, which haul half its product. The remaining half is hauled by a common carrier.

Litehouse also uses its fleet to haul other company loads back to areas near its facility (Lawrence et

al., 2014). By operating with this ‘never an empty truck’ style philosophy, Litehouse ensure they are

saving costs and reducing waste.

Another key aspect of the Litehouse supply chain is its producer visibility. Litehouse’s use of

its Ross ERP system (implemented in 2002) allows it to better track its manufacturing process (CDC

Software, 2006). As a result, Litehouse can manage and record exactly which ingredients entered

which products, making the perishable final product safer from contamination.

Supply Chain Map

Most products in the supply chain remain unmodified until they reach Litehouse’s

factories where the dressings are made. Major product transformation occurs here (U.S.) because these

locations are closest to its largest customer base. This means product can be delivered to customers

faster, thus maximising shelf life.

As with any supply chain there are some crucial relationships that exist. The core suppliers

(e.g. of glass, buttermilk and labels) are critical to the Litehouse set up. By maintaining a strong

relationship with these suppliers, Litehouse is able to ensure that it is getting the best quality at the

right time. Another group of key relationships exists between Litehouse and the large-scale retailers.



Wal-Mart, Sam’s Club and other national retailers play a critical role for the Litehouse supply chain.

By maintaining strong relationships with these brands, Litehouse is able to gain international brand

exposure and gain access to a greater customer base. Large retailers also have the power (through

economies of scale) to force suppliers into unbeneficial situations. By maintaining a strong

relationship with these brands, Litehouse is able to ensure its future in the industry.

Inbound operations

Of the inbound materials, the glass jars are the only products Litehouse accept ownership of

prior to its arrival at the factory door (Lawrence, 2014). Although this is only a minor detail, it has a

significant impact on the supply chain and inventory levels. The jars are purchased from a supplier in

Taiwan then shipped to the American port of Seattle, where Litehouse or third party haulers pick them

up. The acceptance of ownership means that Litehouse is liable for damage during the five and a half

hour trip to Sandpoint. While this may seem insignificant it is actually very important and potentially

costly. Glass is brittle and fragile (compared to plastic) and more prone to breakage (0.25% of jars

break on average for Litehouse), which creates unnecessary waste. Another downside of receiving the

jars at the port was that Litehouse’s refrigerated trucks might need to carry them. Litehouse use a

mixture of self-hauling and contractors (they also contract their fleet out), but the use of refrigerated

trucks to carry glass may save costs but also reduce profits.

Plastic containers would have a huge impact on the inbound logistics. The first key impact is

that Litehouse could receive the product at the factory, limiting liability and reducing transport costs,

as returning trucks can be used to carry other goods. If plastic is sourced within the U.S., the distance

travelled would be significantly less than the glass from Taiwan.

Inbound produce and ingredients are signed in and allocated codes upon arrival, using the

ROSS system. This allows Litehouse to fully track and monitor ingredients movements through the

system (CDC Software, 2006). The ingredients become property of Litehouse once it is signed in.

Therefore, all transport and security is the responsibility of the provider, limiting the risk to Litehouse.

Outbound operations

Once the finished product is ready for transport it is loaded into a refrigerated truck, owned

either by Litehouse or a contractor. Litehouse operates three main facilities all with varying levels of

distribution to the areas of North America. This is visible on Appendix 2 & 3.

In this process glass has a noticeable impact. Glass jars are heavier and require more space

(mostly because of the increased weight pushing haulers to regulation weight limits sooner), this

limiting the amount of product per truck. In contrast, plastic containers would allow for increased

truckloads as well as lower associated costs (fuel and tyre wear). Glass also continues to carry the

higher breakage costs over plastic.



Supply Chain Strategy and Value Propositions

Strategy

Because Litehouse produces a perishable product, it most likely uses a logistics postponement

strategy. Pagh & Cooper (1998) explain that this involves speculative manufacturing, which is

inventory initiated, postponed logistics, which is customer initiated, and a customer order point, which

would be made at a Litehouse facility. Litehouse has been producing and selling for over 50 years and

subsequently will have an abundance of historical order data to formulate predictions for speculative

manufacturing. By offering multiple products with similar ingredients, Litehouse is able to reallocate

resources immediately if they under speculate while still maintaining enough until an increased stock

order is made, allowing flexibility through the supply chain. The product range Litehouse has

developed is crucial to allowing such a beneficial supply chain strategy. The flexible lean design

achieved through postponing logistics helps to reduce the waste caused by operating a full speculative

strategy. This is because the logistics postponement is in line with customer demand. Overall, this

strategy increases on-time deliveries, reduces lead times and enables a faster introduction of new

products (Pagh & Cooper, 1998). Together, these characteristics are critical for Litehouse, given the

need for freshness and continual modifications that match customer value.

Value

In addition to the earlier discussion on what customers value, another value added dimension

of the Litehouse supply chain is its technology management. Litehouse was an early adaptor to ROSS

and other integrated operations software developments. This allows Litehouse to track every item in

the system all the way through to the end consumer. When a product enters the system all its

information is entered and that information follows the item all the way to the store shelf. This adds

value to consumers because it allows them to feel safe when consuming the product. In the past, food

supply chains have been heavily impacted by contamination at the early stages of production.

However, with this system Litehouse can recall only the products affected with minimal disruption.

The supply chains micro-agility is also a key value adding competitive dimension. The

diversity of the Litehouse product range gives the supply chain the ability to react to internal issues

with speed. Another factor that helps this is that the company is employee owned. This means that the

organisation has the ability to meet staff and shareholder needs at the same time. This ownership also

gives managers a better overall perspective when reacting to near term changes. This adds value

because it speeds the decision making process affecting both costs and revenue.



Conclusion

Since its humble beginnings, Litehouse Foods has consistently produced dressings that

consumers love. Through its dedication to quality and taste, Litehouse has become a leader in the

industry. However, Litehouse are now faced with a decision that will impact this position, for better or

worse. For this reason, it needs to be carefully considered with respect to the product life cycle, the

industry’s forces, and the supply chain and its strategy.

In the past, Litehouse has used carefully selected product and market modifications in line

with growing market trends and demands to increase the revival stages that sustain its growth.

Integrated relationships with key suppliers and retailers (through Litehouse’s Ross systems) enhance

the effectiveness and responsiveness of such changes. Any modifications must always link to the

customer, given their strength in the industry. Buyers want products that meet or exceed their

understanding of value. We have also discussed the importance of risks, relationships, technology, and

the logistic postponement strategy to Litehouse’s supply chain.

Together, this analysis has provided Kinetrix with comprehensive recommendations that will

allow Litehouse to make effective decisions that improve short-term profitability and the supply

chains overall competitiveness.

Recommendations

Kinetrix believe that Litehouse should continue to produce these particular dressings in glass

jars that are one ounce smaller. The decision to stick with glass is based on the fact that a greater

degree of customer value resides with product quality over product costs. Two-thirds of the cost

savings associated with this decision are from the smaller 12oz size. These cost savings come from

fewer ingredients and better capacity utilisation on trucks and shelves. The trend towards diets and

smaller serving sizes also make this smaller jar a positive change that matches demand. Overall, this

will allow Litehouse to increase its short-term profitability and funds, and narrow the price advantage

between it and its competitors without destroying significant customer value.

However, the decision between glass and plastic arose because of short-term profitability and

cash concerns. Therefore, Kinetrix has also looked at other areas of the supply chain to improve this.

Looking at the market trends, Litehouse should continue with culturally inspired dressings, like its

OPA Greek Yoghurt Dressings. The expected surge in Latin American and Mexican flavours should

spur new product innovation in this direction. Also, as consumers look for greater convenience foods,

Litehouse should continue to establish relationships with healthy fast food chains, as these are

expected to grow. Organic and gluten-free dressings are also another growing trend that should be

considered more seriously if Litehouse wants to continue to meet the demands of its target market.



Lastly, the glass jars are shipped into Seattle where Litehouse trucks or contractors collect

them on the return route; this is a wasteful process. Because Litehouse operates refrigerated trucks,

there is more benefit from contracting them to haul other perishables on the return journey. By doing

this, Litehouse has the ability to profit from the return route. To supplement this, we recommend that

Litehouse looks for a supplier closer to its facilities. If Litehouse were to get a South American

supplier at approximately the same price the logistics of glass jar delivery would be simplified.



References

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Appendix 1


1994

Revival Stage 1

Years

FIGURE 1 - LIFE CYCLE OF LITEHOUSE FOODS’ REFRIGERATED SALAD DRESSING CATEGORY

19891958 19751963 1984

PRODUCT DEVELOPMENT

2015

GROWTH

MATURITYGROWTHINTRODUCTION


Appendix 2Litehouse Domestic Supply Chain Map



Appendix 3

Litehouse International Supply Chain Map




Documents

Lite House