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908N19

ADEPT CHEMICAL INC.

Lindsay Brock wrote this case under the supervision of Elizabeth M.A. Grasby solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
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Copyright © 2008, Ivey Management Services

Version: (A) 2009-04-28

In February 2008, Mike Brock, chief executive officer (CEO) of Adept Chemical, Inc. (Adept), a regional
supplier of cleaning and hygiene products and services, was preparing a bid worth $3 million in new
business from CargillFoods. Cargill was Adept’s largest customer and had recently named Adept as a
preferred supplier. The new business, i.e., supplying sanitation products for nine meat-processing plants,
starting July 1, 2008, would be a huge opportunity to grow Adept’s sales and profitability. Qualitatively
and quantitatively, Brock wanted to make the bid as attractive as possible. Brock wondered how tostructure the deal, and, if Adept was successful in winning the contract, whether he should bring on his
youngest son, Adam, as a new sales and service employee.
THE INDUSTRY
Food and Beverage Manufacturing

On average, the Canadian food and beverage manufacturing industry generated $82 billion in domestic
retail and foodservice sales1 and was the third largest employer in Canada.2 It wassubdivided into 17
sectors (see Exhibit 1), of which Adept participated significantly in three: meat-processing, poultryprocessing and brewing (see Exhibit 2 for Adept’s customer list). Bakery products made up the majority
of the food and beverage manufacturing industry in Toronto (see Exhibit 3).
The industry experienced modest sales growth of three to four per cent from 2006 to 2007; however, it hadone of Canada’s lowest average pre-tax profit margins (4.3 per cent in 2006). Despite low profit margins,
investments were still being aggressively undertaken in new plants, while current plants were under
expansion. Modernization projects and upgrades were being put into place.
George Weston Limited (Weston) founded in 1882, was one of the largest companies in the North
American foodprocessing and distribution industry. Weston operated Weston Foods and Loblaw
1
2

www.agriculture.gov.sk.ca/Statistics-Processing, June 24, 2008.
www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=A1ARTA0002883, May 13, 2008.

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Companies Limited (Loblaw). Weston Foods was involved primarily in the baked goods and dairy
manufacturing industries, while Loblaw wasCanada’s largest food distributor and a leading provider of
general merchandise, drugstore and financial products and services.3 Other significant industry players
included McCain Foods Limited (the world’s largest producer of frozen potato products), Olymel
(Canada’s largest pork and poultry processor), General Mills, Kraft and Coca-Cola.

Regulations
To protect the health and safety of Canadianconsumers, the food and beverage manufacturing industry
was heavily regulated by the Canadian Food Inspection Agency and by Health Canada. These government
agencies regulated and enforced strict processing, handling, packaging and labeling laws. For example,
food processing areas had to be sanitized every four hours of production time, and nutritional content had
to be displayed on all...