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Birds Eye Frozen Foods

Case Study Analysis

Submitted By:
Sneha Chopra
Akash Chaudhary
Vivek Dole
Aarti Bansal

Reasons for Vertical Integration


During the 1950s and 60s the tonnage sales were increasing at a
rapid rate of 40% per annum.
It made sense for vertical integration so as to secure the raw
Rapid
materials, ramp up distribution and production capacities in
Growth
order to keep up with the demand.
The products sold by Birds Eye had to be high quality because of the
additional overhead of freezing and timing to justify premium.
Quality of This requirement of the industry required producers to have control
over all aspects of production.
Product

Prevent
new
competiti
on

The entire value chain meant that, entering into this market would
become significantly difficult for new entrants due to high capital
needs

Reasons for Vertical


Integration (Contd..)
The two main competitors of Birds Eye during 50s and 60s Ross and Findus
were also following the vertical integration strategy.
Industry industry structure and maturity around this time forced the businesses to
Structure vertically integrate as they had no other choice.
The frozen food market during 50s and 60s was in its infancy with
suppliers and retail stores relatively unsophisticated.
Undevelo The infrastructure needed was not fully developed. In such scenario, it made
ped Infra sense to both forward and backward integrate as it had the both the
capabilities and resources to manage the supply chain.
Structure
Birds Eye entered the broiler chicken in 1958 and the entered the fishing
industry in 1965 in order to secure its raw material supplies.
Securing With vegetables they were able to closely able to integrate with farmers and
Raw
were able to closely simulate vertical integration environment.
Materials

Strategy Analysis
Advantages

Control over the supply chain:A


vertically integrated producer
enjoyed control over the entire
supply chain leading to faster
reaction to increased demand.

Quality of products: Since a


vertically integrated producer has
much better control over the quality
at several points in the supply chain,
they can ensure a better quality
finished product.

Capturing the profit margins


across the value chain:Vertically
integrated producers were able to

Disadvanta
ges

Increased overhead
costs:The specialized suppliers
enjoyed lower overhead costs as
they were specialized in single
product, which did not involve
any changeover costs. On the
other side vertically integrated
suppliers had multiple product
lines, which led to inefficiencies.

Exit Barriers:The significant


infrastructure capital
investments by vertically
integrated producers when the
market was not mature
prevented them exiting less