Green Giant and the Move to Mexico

The Minnesota Valley Canning Company started in 1903, and was one of the first companies to be recognized through their advertising personality, “The Jolly Green Giant.” As consumers became familiar with the marketing character, the Minnesota Valley Canning Company soon changed their name to The Green Giant Company. The company became a well-known canned and frozen vegetable foods vendor. To lengthen the growing season, the company expanded from Minnesota into California during the 1950’s and 60’s. Along with the expansion came the construction of a freezing vegetable facility located in Salina, California.

In 1978 Pillsbury, a company that specialized in baking goods acquired the Green Giant Company to expand their market and product lines. Nine years later, Grand Metropolitan Company of Great Britain, a producer of alcoholic beverages, acquired Pillsbury and The Green Giant Company through a hostile takeover for $5.6 billion.

Following the takeover, Green Giant executives were told to increase their profits significantly to help service the large amount of debt that resulted from the acquisition. This left the executives of the Green Giant Company with some difficult decisions to make. They knew Grand Metropolitan Company expected positive results quickly. After all, Grand Metropolitan’s reputation was characterized as “a light but firm hand upon the throat”. Green Giant executives knew if their attempts failed, it could result in their careers.

Although Green Giant held 14 percent of the market share in their industry, it would be difficult to increase market penetration because many considered frozen and canned vegetable goods as commodities. The growth in this industry had slowed to an all time low level. Executives at Green Giant realized that the options to meet Grand Metropolitan’s expectations meant they had to realize a significant decrease in operating costs, possibly by moving the plant operations to Irapuato, Mexico.

Since 1984, the Green Giant Company had been running a modest size freezing operation in Irapuato, Mexico. The warm location helped produced exceptional crops all year round. The people of Irapuato welcomed the industrial development by Green Giant to their city. However, with such a large amount of industrial growth, there would be environmental impacts upon the area. The area of Irapuato had a low supply of water. Green Giant had drilled deep wells to get the water supply needed to wash and blanch the vegetables. The increased production would put even more of a demand on the wells, and could possibly dry up the city’s shallower wells, which would force the local people to get their water from the river. There were mixed views on this because the United States law said the river water could not be used for processing vegetables that were to be exported to the U.S., but it was supposed to be good enough for the citizens of Irapuato to use regularly. Another concern in Irapuato was that less land would be used to produce the corn and beans for the local economy, resulting in a price increase for these goods (Meadows).

Moving the growing, processing, and packaging of frozen vegetables from California to Mexico would mean a slash in growing, processing and packaging expenses. Payroll would account for the biggest decrease in expenses, due to the disparity in wages between Mexico and the United States. Even with the added transportation costs, Green Giant could possible save an estimated $13,200 per worker per year by moving the plant to Mexico.

However, the Salinas area in California was small, with most of the residents’ dependent upon the agricultural industry. At the time of the Grand Metropolitan takeover, 1,400 people were employed by Green Giant. A move in the Green Giant operations would result in devastation to the local Salinas economy. Most of the jobs that would remain in the area were considered to be too hard of labor for most of the employees who had worked in the processing plant for Green Giant. There would be few job opportunities for the laid-off plant workers in the area.

The first tier stakeholders in this case are the Green Giant employees and management, Salinas area residents, and residents around Irapuato, Mexico. The second tier stakeholders consist of: Grand Metropolitan Company, the local business owners in both areas, consumers of Green Giant’s products, and Green Giant’s competitors.

Problem Statement

Grand Metropolitan has told Green Giant executives that failure to significantly increase profits quickly may lead to “severe career implications.” The decision maker in this case, the president and senior managers of Green Giant Company, needs to make the decision whether to move operations over to Mexico to reduce cost. Moving the company to Mexico will mean significant