Page 1: Introduction
McCain Foods is the world's largest producer of frozen chips. It opened its first processing factory in New Brunswick, Canada in 1957 turning out cartons of frozen french fries. Owned and managed by the McCain family, the company grew rapidly and entered the UK market in the 1960s. Today, around 45% of all frozen potatoes sold in the UK are McCain frozen potato products. This makes McCain Foods the clear market leader.
McCain Foods emphasises continuous innovation to enable the brand to deliver both variety and quality. This gives McCain real competitive advantage. By investing in new technologies, it can produce products on a huge scale. This enables the company to meet customer demand and keep down costs.
Business is about adding value. McCain transforms raw materials such as potatoes into products that customers value and are willing to buy. The resulting sales generate revenue. There is an outflow of costs at every stage of production. McCain Foods' Whittlesey plant in Cambridgeshire turns potatoes into bags of McCain”s chips. The company must meet the costs of:
- materials, such as potatoes, cooking oil
- people to run and manage the plant
- the building
- energy to run the equipment
Some of these are variable costs. This means that the amount that McCain spends will depend on how much raw materials and other inputs are used. The volume of potatoes used each day and the wages of employees are examples of variable costs.
Other cost items are fixed. For example, McCain's office and marketing costs do not change with the level of production. They must be paid regardless of output. Fixed costs are also known as overheads. All figures shown in this case study are for illustration only.
As a major user of energy for its production process, McCain is seeking to reduce how much gas and electricity it uses. McCain has invested in two major projects to set up renewable sources of energy for its Whittlesey production plant. These alternative energy sources are also more environmentally-friendly.
The company has built a wind turbine system and a new wastewater treatment system. The wastewater system is a covered lagoon. This is a huge tank where the water from the production process is stored and treated to produce methane gas which is trapped beneath the covers.
These systems will provide renewable energy to run the plant. This work also fits with McCain Foods' corporate social responsibility programme (CSR). This case study explores how McCain evaluated the benefits of its financial investment in these projects.