Sadly, Raymond Rathlé lost focus. He makes money selling specialty foods, not producing them. He should have started looking for a contract food manufacturer in a more stable area immediately. With a contractor in place, he could concentrate on selling to his current clients and finding new ones in fast-growth markets such as Baton Rouge. Cajun food has become much more mainstream, making it attractive for wider distribution.
National accounts manager
Say goodbye--for now
From a valuation perspective, selling Carnival Brands at this point would be disastrous. Without sales, Rathlé is selling customers, goodwill, and a building. He certainly would not recover his 10 years of sweat equity. Instead, he should rent out his building--giving it time to increase in value as New Orleans recovers--and use the income to lease a new facility farther inland. He should ask his former clients for new contracts and continue to live in New Orleans to make sure they see him there. Then, in 18 months, he should look at property prices and reevaluate whether he should sell his building. He will be making a lot of trips between his beloved city and a new location, but it will pay off.
CEO, Pegasus Commercial Mortgage
Move and merge
The case study about Carnival Brands focused heavily on what Rathlé has lost. But he needs to focus on what he still has: the ability to expand a product line and manage people. To leverage that ability, he should rent out his building and merge with a food company in the Southeast that doesn't have Katrina-related problems with insurance and labor. He should look for a company that has a few good products but needs someone like him to jump-start growth. If he makes a go of it in, say, Atlanta or Orlando, he can return to New Orleans when the problems settle down. So I say move and merge!
President, JP Systems
Hang in there
Rathlé has another good alternative: He can rent his New Orleans facility to another food processing company and subcontract Carnival's manufacturing to the tenant through a co-pack arrangement. Margins would be tighter, but the strategy would allow Rathlé to focus on building sales volume to a point where he can think about self-manufacturing again. He might even consider making the short-term solution a long-term strategy.
Anthony Dal Porto
Advanced Process Systems
Rathlé must pick up his business and go elsewhere. He is competing against other companies in his industry that have not had huge increases in labor and insurance costs. Since he cannot change those dynamics while remaining in New Orleans, he must move to a more stable region. Granted, his transportation expenses will increase if his clients are based mostly in southern Louisiana, but those costs are likely to be considerably smaller than the overhead he'll have in New Orleans. On the positive side, he has a loyal consumer and distribution base that, with time (and promotion), will probably return to his products.
Market president, Frost Bank