Riverford Farm Organic Farm shop expansion report - selecting the best location.

University Degree Business and Administrative studies

Troy Abraham 0914724

Riverford Farm expansion report

Introduction

The growth for ethically friendly products in the UK has risen dramatically since the early 20th century, this is also the case for the organic food market. British shoppers have embarked upon their love with organic food, sending sales soaring. In 2008 organic food sales had grown by over 70% since 2002(.co.uk, 2008). Despite the recent blip due to the recent recession, organic food is finally finding its feet, with sales soaring once again.

Riverford farm (located primarily in the south west of England) was established in the 1950s and was converted successfully into an organic food retailer in the mid 80s(southwestbusiness.co.uk, 2010). The transformation was astonishing, Guy Watson started by delivering 30 vegetable boxes to his friends, today Riverford Farm delivers over 45,500 per year to customers all over the UK (southwestbusiness.co.uk, 2010). This dramatic rise in sales has led to great success for Riverford, helping them reach the sunday times fast track 100 in 2007. Sales were up 62% per annum, from £5.4m in 2004 to £23.1m in 2007, having over 87,000 customers across the UK (fasttrack.co.uk, 2007).

Riverford target consumers are the pro organics, easy organics and un-committed organics. Their most targeted consumer are the easy organics, these are more likely to be female, aged 35-44 primarily living in the south west. (Mintel, 2010).

Executive summary

Because of this recent success Riverford are looking to expand, the aim of this project is to compare two potential locations for Riverford to expand, also providing the layout for the store in which they are looking to expand.

The report will present the potential for locating in Exeter situated in Devon (South West England) and Glastonbury as two new potential locations for riverford farms expansion.

The most efficient location will then be recommended to Riverford for future expansion plans.

Relevant factors influencing our decision

Labour Costs

The costs of employing people with particular skills can vary between different areas (Slack et al, 2001). Glastonbury provides a more attractive area in terms of labour cost for Riverford, after doing some research it is clear that wages are lower than in Exeter. A retail store manager in Exeter on average gets paid £19,262 per annum (Payscale.com, 2011a) whereas in Glastonbury the equivalent will be paid on average £16,985 (Payscale.com, 2011b), making it a more attractive proposition in terms of employment costs.

Land costs

Acquiring the site itself can play a major role in deciding where to locate, as land and rental costs can vary between Country and City. In this case we have seen a clear indication that land costs are cheaper in Glastonbury (country) compared with that of Exeter and the surrounding country (Near city centre). I have found comparisons which suggest 13 acres of land in Glastonbury can be purchased for £40,000(land-deals.co.uk,2011), whereas in Exeter for a similar price of £35,000 they would only be able to acquire 6 acres (, 2011). This boosts the attraction of potential investment in Glastonbury because for a farm shop land is extremely important for expansion is always a consideration and further land may be needed for future farming operations.

Energy Costs

Farming organizations are unlikely to use this as a decisive factor when choosing a new location because energy costs are never usually that high. Riverford is an environmentally friendly company which does not use much energy throughout its operations.

Transportation Costs

This is one of the most relevant areas in terms of selecting a new location. When locating in a new area there will always be new costs, whether it is transporting goods from source to site or goods from the site to the customers (Slack et al, 2001). By locating in Exeter this offers quick and cheap transport of goods from source to site, because it is sourced only 27 miles from its HQ in Dartington (). Riverford have recently successfully opened a farm store on the outskirts of Plymouth, which is 25 miles away from ...

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Transportation Costs

Glastonbury offers a slightly more complicated issue, being situated 85 miles away from HQ. It may be an issue transporting goods to the site in large loads, because it will involve higher fuel costs, possibly new vans and wages. By moving to Glastonbury offers further integration across the UK, using this location as a new hub for their box scheme, helping improve efficiency of their distribution across the UK.

Speed of access

Speed of access will be the critical factor and roads into Glastonbury are trunk and motorway. Exeter and surrounds have poor roads that are prone to traffic jams. By using Glastonbury as a hub for their box scheme, this will save time and money in terms of transporting the vegetable boxes to individual customers in this area. Using chilled vans will offer them protection over sensitive products when transporting to the Glastonbury store.

Supporting farm (Glastonbury)

Riverford may support their new farm shop by extending farming operations to Glastonbury. This would retain the high quality of their products and help them expand further. Riverford may be sole owner of the farm or partnership with an existing farmer in the area. Large start up costs for a new farm could be a downside, but other benefits may accrue and outweigh this.

Community Factors

These factors have an influence on an operation's cost and derive from the social, political and environmental side(). If locating an organic farm shop in Exeter, it is unlikely that Riverford will gain any government financial and planning assistance. However a venture in Glastonbury if they were to open a farm shop with supporting farming operations, is eligible for a grant from the European Agricultural Guidance and Guarantee Fund (ec.europa.eu,2002) which finances farmers looking to diversify production and activities and development of social and economic activity of rural areas, which Riverford also looks to promote. Financially, this is an incentive for their expansion and services to new consumers.

Local Attitudes to internal investment

Exeter is a city, so it is likely to offer a neutral attitude towards Riverford’s expansion. This is a major issue because Riverford looks to move into areas likely to promote healthy living and ethical responsibility. Glastonbury offers a more compatible culture, already offering an environmental awareness. For example, Veggies a vegan restaurant in Glastonbury gained a number of awards through their ethical standards, which has helped it succeed in this environmentally friendly area (veggies.org.uk,2010). Organizations like Veggies offer great potential for Riverford, because they will be interested in the fresh, vibrant and quality products they offer. That such organizations are succeeding in the area suggests that Riverford will have a place in the market here, and a potential customer base to back this up

Demand-side influences

Suitability of site

Exeter provides a much larger population however the people interested in the organic products produced by the farm are going to be hard to market to. Providing an out of city farm shop on the outskirts of a city has been a success in Plymouth , however Exeter may provide further issues. The congestion/traffic coming in and out of the city in the early mornings, at weekends and also early evenings may provide a big problem in terms of ability to trade and their ability to transport goods to the site. However, we see a positive side for surrounding villagers’ accessibility to the out-of-town store.

Glastonbury provides a pleasanter situation , the culture here offers greater potential with the customer base more likely to be interested in the fresh organic products. Cheaper land is a plus here. Farms need lots of land so this provides an incentive to locate here. Tourist attractions such as Glastonbury Festival (which has previously been a success for Riverford stalls), will offer new business prospects.

Image of the location

Glastonbury’s humble hippy culture gives Riverford a great stepping stone for expansion. Customers associate Glastonbury with an environmentally and ethically friendly environment. Customers will expect to find an organization of Riverford’s calibre here. This positive image rubs off well for Riverford and could really help in capturing new areas when expanding. Compared to Exeter this is a complete contrast. Exeter is an urban area, offering no signs of an ethically or environmentally friendly area. This organization will not enhance the positive image it seeks by locating outside of Exeter.

Customer convenience

Farm shops do not offer great convenience as they are situated in the country, the two locations selected are situated only a couple of miles outside densely populated areas. However locating a farm shop out of town is what people want to see as it offers rural authenticity. Locating in Exeter offers a less convenient location because it is outside the city, people will have to get out of the city in order to purchase products. This may in turn cause problems because of traffic and congestion. The Glastonbury store is also located in a rural area out of the main town, however customer in this area expect to travel for good quality products to fulfil their needs.

Community factors.

Design and describe the layout that is most suitable for your new premises

Our proposal uses a process layout and involves locating processes with similar needs in the same area of the store. This offers convenience to Riverford's operations because they will be grouped together (Slack et al, 2001). This method means that when customers, products and information flow through the operation, they will take a route from process to process according to their individual needs (different customers will take different routes). This kind of layout is very flexible. It can cope with a wide variety of different processing requirements. However, it is complex to manage with flows crossing each other and moving on irregular and intermittent paths (slack et al, 2004).

The layout has been chosen through volume and variety characteristics, this influenced the decision of the layout and in turn the flow of transformed resources because of the low-medium variety and the medium-high level of variety of products offered by Riverford.

When designing the layout, constraints in terms of the shape of the new store became apparent.

The proposed layout

Flow of one customer

Justification why the process layout is useful.

Entrance is near the car park, and baskets are situated on the right hand side to try keep the flow on this side.
Fresh fruit and vegetables are similar in nature and offer a vibrant feel when entering the store. They are also attractive for customers to look at and the organic fruit and vegetables symbolise the origins of Riverford farm
Fresh meat and poultry is separated out of the vision from the vegetable area, just in case customers are primarily shopping for fruit and vegetables.
Fresh snack counter (produced in store) is situated at the far end of the store. This offers a smell which is used to entice intrigued customers to flow further through the process.
Fridges and freezers offer similar technology to support frozen and refrigerated goods, so they are situated in a similar area.
Aisles with snacks and drinks.
Freezer with ice cream towards the end of the flow to entice an impulse purchase
Large Checkout reducing queues and keeping customers to the right hand side to avoid collision while new customers are entering the store.

The layout is aimed at offering a farm store feel, very open planned and vibrant in its design.

Storage is in a completely different building meaning it is not a noisy nuisance for employees or customers. Still offers easy access to supply shelves through back door.

Staff comfort

Employee rest room is in a completely separate building also to allow them to avoid noise nuisance.

Doors located throughout the store to allow employees to leave the flow of customers and gain a quick route to either the rest room, or storage (supplies) area.

Accessibility

Different road for suppliers and customers, means there will never be a collision between these two

Meat preparation is done out of the view of customers, because some may find this disturbing.

Safety

The Layout is clearly channelled for customers to flow coherently through the process, offering inherent safety in its layout, with lots of floor space. The clarity of the flow is quite straight forward and is easy to follow for both customers and staff

Flexibility

In the long run there is space behind the checkout area for expansion, there would also be the possibility to expand through into the car park shifting this further up. (NEW LAND AROUND)

Advantages

This layout offers an easy option for supervision as management staff can monitor everything thats going on.

The layout aims to emphasize maximizing revenue rather than the idea of minimizing costs.

If there are any disruptions because of this layout it is unlikely to be to dramatic in terms of the process continually flowing.

We see lower capital costs in terms of having to purchase any new equipment

It offers employees the ability to operate a number of different tasks, for example riverford employees could load shelves, control stock levels, use the till or even cook the fresh food, this would in turn be easy to control for management.

Disadvantages

It is a complex process and a small premises. Customers are able to go through the process in any direction, this may pose a problem if the flow is not narrowly defined through the layout.

It may offer some confusion for employees as a constant change in schedule and routines may make juggling the process difficult.

Accounting, purchasing and inventory controls are very difficult to control.

Conclusion +Justification

Glastonbury is highly desirable location it offers the qualities needed to sustain healthy growth levels. Located outside a busy town area, with great connections through roads and rail to other areas of the country(connexions-somerset.org.uk,2010). The old fashioned iconic town, welcomes thousand of tourists every year(glastonburytic.co.uk,2010), not to mention the 100ds of thousands of tourists that turn up for glastonbury festival. This is a positive for Riverford and offers a new market for us to target.

Our competitive review suggests that there is only one major competitor (mole valley farm) within a 10m radios of our location (molevalleyfarmers.com,2011), however it does not provide the high quality organic products that our company has to offer.

As comprehensive analysis of the market indicates the organic food market is strong and robust in the UK, with growth levels still soaring, this offers us great potential within this market. By focusing on the high quality organic products offered by Riverford, and the continuous expansion across the UK, our company is projecting to increase sales revenue beyond £40m by 2014 maintaining a high gross profit margin.

Locating in glastonbury provides a great advantage for Riverford, with a customer base that is interested in the high ethical standards and products offered by our company. The 13 acre location offers huge potential for the company with a major possibility for the purchase of surrounding land in order to look to expand farming operations further.

References

Hickman, M. (2008). Organic industry unable to cope with demand.Available: http://www.independent.co.uk/life-style/food-and-drink/news/organic-industry-unable-to-cope-with-demand-773865.html. Last accessed 15 Mar 2011.

Mintel (2010) Organic

NAME OF ISSUING BODY (Year) Title, date if available. Edition (if available) Place of

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South West Business. (2010). Riverford boxing clever with new grow range. Available: http://www.southwestbusiness.co.uk/news/Riverford-boxing-clever-new-grow-range/article-2345873-detail/article.html. Last accessed 15 Mar 2011.

Fast Track. (2007). Rank: 92 Riverford Organic Vegetables. Available: http://www.fasttrack.co.uk/fasttrack/leagues/dbDetails.asp?siteID=1&compID=2266&yr=2007. Last accessed 15 Mar 2011.

Slack, N. Chambers, S. Johnson, R (2001). Operations Management. 3rd ed. Essex: Edinburgh Gate. P161-166.

Slack, N. Chambers, S. Johnson, R (2004). Operations Management. 4th ed. Essex: Edinburgh Gate. p161-166.

Pay Scale. (2011a). Salary for City: Exeter, England: Devon . Available: http://www.payscale.com/research/UK/Location=Exeter-England%3A-Devon/Salary. Last accessed 15 Mar 2011.

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UK Land Directory. (2011). Land for Sale in Combe Martin - 101, Devon. Available: http://www.uklanddirectory.org.uk/land-for-sale.asp?id=14015. Last accessed 15 Mar 2011.

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Glastonbury tourist information. (2010). Glastonbury Town History.Available: http://www.glastonburytic.co.uk/index.php?q=townhistory.html. Last accessed 17 Mar 2011.

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