Working Capital Management

CASE 5 Quacker Cracker

QUINCY CYNSKY began the Quacker Cracker Company (QC) in St. Louis, MO, 65 years ago after he came home from World War II. He created a tasty, fancy cracker aimed at a party and restaurant audience who liked to entertain, and right from the outset paid special attention to quality.

“We only make crackers and fancy breads, but we make them in various flavors with the finest flour and other ingredients,” Quincy was fond of saying. Because fancy foods were in scarce supply during the war and military personnel received most of the available U.S. production, the company was an immediate success with civilians and with former military.

Specialty food is among the fastest-growing industries in the United States, with sales increasing by 22.1 percent between 2010 and 2012. The industry's revenue grew 14.3 percent in 2012, with total specialty food sales topping $85.87 billion. Much of the industry operates through such small companies as Annie's (Annie's Homegrown), a publicly traded company with $185 million in sales, and MOM Brands ($500 million in sales and privately owned). Large food companies contain specialty food segments, including Ralcorp ($4 billion in sales), a subsidiary of ConAgra Foods, and Smucker's, with sales of $6 billion.

THE ATTITUDE TOWARD DEBT

QC expects strong growth this year (assume that it is now January 2012) and Dianne McCabe, the chief financial officer (CFO), hopes she can make a case for borrowing to finance the company's expansion. ...