The President and CEO of Stonewall Kitchen, Jonathan King, set goal targets for the company to reach $100 million dollars in sales. This case study provides students the opportunity to look into product and market factors that might affect a company's growth. It also looks into the possible impact of taking in new partners from outside of the company.
Myra M. Hart; Kristin J. Lieb; Victoria W. Winston; Kenna Baudin
Harvard Business Review (805006-PDF-ENG)
January 19, 2005
Case questions answered:
- Provide the forecast through the growth rate of the business.
- What strategy was used by the Stonewall Kitchen?
- What factors were considered by the business to fund the growth of the business?
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Case answers for Stonewall Kitchen
This case solution includes an Excel file with calculations.
Introduction – Stonewall Kitchen
The Stonewall Kitchen business based in York was formally established in 1991 by Jonathan King and Stone when they were selling jams and jellies. But by 2003, the business had grown to a huge firm, which was generating $25 million in revenues and its total net income at the time of $183,700.
The business was basically of specialty food items, but now King, the Present and CEO of Stonewall Kitchen, had set goal targets, both aggressive and fast. In these goal targets, he wants to see the business reach 100 million dollars in sales.
Also, this has raised some critical questions as regards the ways on how to grow the business. How should the company generate the funds? And how it will affect the organizational culture of the business?
Past Performance of Stonewall Kitchen as a company
At this time, the company’s revenue compounded an annual growth rate (CAGR) for the last five years of 22%, its EBITDA has a CAGR of 27% and CGAR for its net income for the same period remains at 5.5%.
On average, Stonewall Kitchen’s major proportion of sales comes from its wholesale SWK, which is 52%. The company’s gross margin has improved over the last five years, where its current year gross margin is 63%, and the average for the last five years is 62%.
As the specialty food industry is becoming saturated, as in 2003, 2200 firms were operating in the market compared to 400 in 1976, so Stonewall Kitchen should use its available resources to grow.
As King once said, the simple reason to grow is we had the ability to grow. Also, as both King and Stone had market knowledge and expertise in the field, they should increase their business impact.
Money is not always the motive for growth. It is necessary to increase the impact of the business on the welfare of society. Hence, growth is necessary, Stonewall Kitchen’s CEO stated.
As per our analysis of the growth options, to achieve future growth, Stonewall Kitchen should…