The article referenced in there about Lamb Weston and MvCain foods and goes into a lot of detail about how prices get determined in this market.
The “behave themselves” comment was certainly juicy, but the entire multi thousand word article is about how these companies are in an intense competition in a low margin industry. Here’s an example:
> Former VP of International at Lamb Weston
Well, McCain came in at a better incentives than Lamb Weston, and Lamb Weston maybe felt complacent and said, no, we're going to keep this account, and they lost it. That was a blow to their ego. They lost the Wendy's business. They lost the majority of their Wendy's sales to Cavendish Farms, which was 200 million pounds plus. So they've lost some major accounts.
Tegus Client
Because they refused to concede on the price mostly?
Former VP of International at Lamb Weston
That's correct. They could have kept the business if they conceded on the price. But there's a cost to conceding on the price as well. I mean there's a cost, but there's also cost to not to concede. I'm not sure when they're going to get the Aramark's business back or if they ever get it back. They've got to pay us to get Aramark's business again. They're going to have to do exactly what McCain did, try to maintain it.
Tegus Client
Right now, this sounds more like a good competitive market. So how does this tie back to just Lamb being silent on the price increase and McCain like leading again?
Former VP of International at Lamb Weston
Well, they felt that they're not going to give McCain Foods the price increase. The price increase never happened. Even though it did get announced, it never did happen. So this is one of those battles that may be short-lived, but it could be long-lived. It could be a couple of years because McCain, a privately held company, they're not subject to the stock market or the analysts asking them difficult questions, even though most of them don't ask difficult questions to Lamb Weston.
So they're independent. They can do what they want to do. The 2 major shareholders are the second generation, Scott and Mark McCain. Their EBITDA exceeds $1 billion a year, not bad for 2 young men that inherited the business.
So they're not really in any hurry to concede to Lamb Weston or to say, okay, I'm just going to forget this. It could be tit for tat down the road, could be. Or they may just say, let's not go there, let's just try to raise the price.
If Lamb tries to raise their price in September, you asked the reason why would they raise prices if they had a cost reduction on potatoes, they're going to raise prices because inefficiencies in the plant, COVID costs, they're going to mention that. They're going to talk about ingredients, oil consumption, cardboard up and all. So their COGS have increased even though potato prices would have been reduced.
The “behave themselves” comment was certainly juicy, but the entire multi thousand word article is about how these companies are in an intense competition in a low margin industry. Here’s an example:
> Former VP of International at Lamb Weston Well, McCain came in at a better incentives than Lamb Weston, and Lamb Weston maybe felt complacent and said, no, we're going to keep this account, and they lost it. That was a blow to their ego. They lost the Wendy's business. They lost the majority of their Wendy's sales to Cavendish Farms, which was 200 million pounds plus. So they've lost some major accounts. Tegus Client Because they refused to concede on the price mostly? Former VP of International at Lamb Weston That's correct. They could have kept the business if they conceded on the price. But there's a cost to conceding on the price as well. I mean there's a cost, but there's also cost to not to concede. I'm not sure when they're going to get the Aramark's business back or if they ever get it back. They've got to pay us to get Aramark's business again. They're going to have to do exactly what McCain did, try to maintain it. Tegus Client Right now, this sounds more like a good competitive market. So how does this tie back to just Lamb being silent on the price increase and McCain like leading again? Former VP of International at Lamb Weston Well, they felt that they're not going to give McCain Foods the price increase. The price increase never happened. Even though it did get announced, it never did happen. So this is one of those battles that may be short-lived, but it could be long-lived. It could be a couple of years because McCain, a privately held company, they're not subject to the stock market or the analysts asking them difficult questions, even though most of them don't ask difficult questions to Lamb Weston. So they're independent. They can do what they want to do. The 2 major shareholders are the second generation, Scott and Mark McCain. Their EBITDA exceeds $1 billion a year, not bad for 2 young men that inherited the business. So they're not really in any hurry to concede to Lamb Weston or to say, okay, I'm just going to forget this. It could be tit for tat down the road, could be. Or they may just say, let's not go there, let's just try to raise the price. If Lamb tries to raise their price in September, you asked the reason why would they raise prices if they had a cost reduction on potatoes, they're going to raise prices because inefficiencies in the plant, COVID costs, they're going to mention that. They're going to talk about ingredients, oil consumption, cardboard up and all. So their COGS have increased even though potato prices would have been reduced.
https://app.tegus.co/guest/document/view/67Hf3DiMGQ944SkfpRh...