"Wow, Australians really love their meat pies," Anna Amphlett said to Andrew Ferris as they sat at the Melbourne Cricket Ground watching the Australian Football League (AFL) Grand Final between the Sydney Swans and the West Coast Eagles. "I've seen people eat three meat pies straight, then wash them down with a full liter of Fosters Lager," she said as she looked across to see Sydncy win the 2005 Premiership with a score of 58-54. According to observers, "Sydney has ended the longest premiership drought in AFL history in the most emotional and heart-stopping fashion imaginable by beating the West Coast Eagles by four points in the most exciting and closest grand final for nearly 40 years." "But it's not just at footy matches," Ferris noted, "they eat them all the time, just like we eat hamburgers and hotdogs back in the States." Ferris thought about the number of pies eaten by the 100,000 people attending the AFL Grand Final. Amphlett and Ferris lived in Seattle, Washington, but were on a vacation to Australia to visit the Great Barrier Reef and attend the Grand Final in Melbourne. "I wonder if Americans might develop a following for the Aussie meat pie," he said to Anna... "perhaps there's a business opportunity back home." Australian Meat Pies The meat pie, a hand-sized pot pie made with pastry and filled with minced (ground) beef and gravy, is consumed as a takeaway food snack in Australia (see Exhibit 1 for an illustration of a meat pic). According to some observers, it is iconic in Australian culture and has been described by former New South Wales Premier Bob Carr as Australia's "national dish." The average Australian will consume an average of 45 meat pies per year, and the popular brand Four'N Twenty Pie produces 50,000 pies per hour. The meat pie is heavily associated with Australian Rules football, rugby league, and other sports as one of the most popular consumables while watching a game. 5 The meat pie is about four inches in diameter and traditionally eaten in the hands with tomato sauce (aka tomato ketchup) and is usually accompanied by a cold beer." The pie has a short crust bottom and flaky pastry top (see Exhibit 2 for a meat pie recipe). Business Opportunity On returning to Seattle, Amphlett and Ferris continued working at their corporate jobs, but during their off-hours they would meet for beers at the Roanoke Tavern where they talked about launching the new meat pie business. They even registered the trade name, Aussie Pie, in case they later decided to introduce the concept of the Australian meat pie to American consumers. Amphlett was a regional manager of Starbucks, while Ferris was an assistant controller for Tully's Coffee Corporation. Amphlett started at Starbucks five years earlier after completing a history degree at AFL. Web site: afl.com.au. 2 From Wikipedia. 3 Ibid. ' http://swengelsk.com/COOKING/AustralianFood.htm. Copyright 02006 Thunderbind. The Garvin School of Intermational Management. All rights roserwed. This case uws prepared by Profesor Gnteme Rankine for the purpose of chssroom discussion onty, and not to indicate cither effective or incfective management. This document is avithorized for use only by Suzanne Amdt in 2021. the University of Washington. Her job provided excellent experience in a broad range of activities including personnel, supply chain, production, and business development. After graduating from the University of Washington with an accounting and finance degree, Ferris began a two-year stint at PricewaterhouseCoopers (PWC) in the audit group. PWC's Seattle office had a large retail practice, so Ferris developed considerable retail experience by working on several large retail dients, including Nordstrom and REI. After two years at PWC. Ferris moved to the controller's office in the Seattle headquarters of Tully's Coffee Corporation. Establishing the Business Amphlett and Ferris used the kitchen in their home to develop more than 100 variations of the meat pie recipe, which they tested on friends and family. Finally, they hit upon a recipe which maintained the flavor of the authentic meat pie but contained less fat and sodium. Based on commercial prices, they estimated that the ingredients for the pie pastry and the filling such as ground beef, onions, flour, butter, and sauces, etc., would cost $1.20 per pie. Based on the production research in their home kitchen, they estimated that the amount of utilities consumed in making the pies would cost about $0.03 per pic. After conducting extensive surveys of passing customer traffic at Pike Place Market, they agreed that a reasonable initial sales price was $3.25 per pie, comparable to other fast foods such as burgers and hotdogs, which competed for customers' fast food dollars. Based on quotes from an industrial supplier, they estimated that it would cost $0.02 per pie for each pie box used for customer packaging at the point of sale. The entrepreneurial team felt that the ideal location in Seattle was a destination frequented by tourists who would be more likely to try new exotic foods. Market research suggested that Seatrle's Pike Place Market on the Seattle waterfront close to Puget Sound ferries had excellent tourist traffic, particularly among the younger visitors. Discussions with commercial property managers prominent in Pike Place Market revealed that a large store of 4,000 square feet and the capacity to produce and sell 30,000 pies per month could be rented for $11,900 per month. Renting cooking equipment and fixtures would cost $8,000 per month and $5,000 per month, respectively. Amphlett and Ferris came up with a design for each store in which the meat pies would be made at the back of the store with a glass wall panel separating the front section so that customers could see the spotlessly clean facilities in which the pies were made. They felt that this would enhance the customers' perception that Aussie Pies was a premium product using high quality ingredients and produced under impeccably sanitary conditions. Making meat pies at the store would require two full-time chefs at \$1,800 per month. Only one full-time sales assistant would be needed at a monthly salary of $1,200 per month. Utility costs for lighting the store during business hours were estimated to be $300 per month. Business Decisions The business data Amphlett and Ferris had gathered was quite unsettling as they began to realize that it alone would not provide the answers they needed. They would soon have to make some important decisions that would have far-reaching consequences for the success of their business. Exhibit 2 . Australian Micat I'ie Recipe I-1/2 - 2kg chuck steak, trimmed and chopped into small cubes 3 bacon tashers (optional), chopped 2 onions, pecled and chopped 2 cups water 1/2 teaspown black peppet 1/2-1 teasooon salt 1/2 teapoon dried thyme (optional) I stick oelcry, fincly choppcd (optional) 3 tableupoons plain flour I batch shoet-crust pastry (sec below) Fry the bacon and onion over a low heat until the onion is soft. Add the chopped steak. Touar in the water and season with the salt, pepper, and thyme. Then add the celery. Cover, and simmer for about I-1/2 hours, Mix the flour with a lizgle water to a moorh, funny mixrure (rous), then s this inte the meat mixtufe. Siir until the mixtufe thickens. Pour inco a decp pie dish. If you are making small pies, then line small pc dishes with the pastry and fill them with the meat mixrure. Wet the rim of the pie with milk or beaten ckg. Place a layer of pastry on top of the pie to form a lid. Trim the Fid to the shape and sire of the pie dish. Press the edges together with a fork to seal. Make some steam boles in the top and glaze with beaten tig ar malk. Bake in a bot oven for 3040 manutes (maybe less for the smaller onca). 3/4 cup plain flour 3/4 cup self-raising flour Winch of salr 100gm cooking margarine or butter 3 tablespoons of cold water 1 reasporon of lemon juice The abcve ingredicnes make one batch of the short-crust pasery for the meat pies. You may nced to make more than one batch to complete the small pies. Mace the flours and ult into a mixing bowl, rub in the margarine of butter with your fingermips, and mix into dough with the water and lemon juice. Turn out onto a lightly floured surface and lencad leghtly with a little flour. Let it fest for abour 20 minutes before rolling it out inte a shect feady for the pie crast. Source: heip,l/swingetuk-com/COOKING/Ausaraliantood.hem. Case Analysis Questions Statement of Cash Flows Ratios Aussie Pies, Inc. Statement of Cash Flows For the Year Ending December 31 Cash flow from operating activities 200720082009 Net income Depreciation (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in accounts payable Cash flow from operations \begin{tabular}{l|l|l|l|l|} 0 & 0 & & 0 \\ \hline \end{tabular} Cash flow from investing activities Purchases of property and equipment Cash flow from investing \begin{tabular}{l|l|l|l|l|} 0 & 0 & & 0 \\ \hline \end{tabular} Cash flow from financing activities Issuance (retirement) of short-term borrowing Issuance (retirement) of long-term borrowing Issuance (repurchase) of common stock Payment of dividend Cash flow from financing Net change in cash and cash equivalents Beginning cash and cash equivalents Ending cash and cash equivalents \begin{tabular}{l|l|l|l|l|} \hline 0 & & 0 & & 0 \\ \hline \end{tabular} Check figures for ending cash \begin{tabular}{r|r|r|r|} \hline 0 & 0 & 0 \\ \hline \hline & & & \\ \hline 230 & 276 & 345 \\ \hline \end{tabular}