Transcript Imagination Farms, LLC

Imagination Farms, LLC
Julie Conn
Aiko Therese Landerito
Bonifacio Sessa
July 27, 2008
Company Facts
“To increase the consumption of fruits and vegetables
among children”
• Committed to:
– Health
– Quality
– Safety
• Licensees:
– Innovation
– Integrity
– Sell and ship product
• Expenses:
– Outside marketing support
– Licensing fees
– Quality control measures
• Role:
– Support Disney’s social corporate responsibility
Brand Strength
• Consumers identify branded products excelling in:
– Quality and reliability
– Design
– Prestige
• Disney Brand
– Parents perceive brand as
magical, high quality, and trust-worthy
– Kids perceive brand as
fun and popular among peers
Competition can’t match this brand image
Industry Assessment
Fresh Produce
•
•
•
•
Projected 2008 per capita consumption: 244.99 lbs
19% of produce was branded in 2002
Major Fruits: Berries, Apples, Grapes in 2006
Major Vegetables: Tomatoes, Potatoes, Onions in 2006
Market Retail Share
3%
46%
51%
Vegetable
Fruits
Other
Children’s Health Challenge
• Challenge:
–
–
–
–
1/3 of American children are obese or at risk to obesity
Cost of obesity related disease: $117 billion
50% of children’s calories are from fat and added sugar
Top three countries with childhood obesity: U.S., Mexico,
United Kingdom
• Marketing:
– Food, beverage, and candy industry annually spends $7.3
billion on direct media advertising
– Less than 2% of food advertising promotes fruits and vegetables
• Response:
– 5 A Day Campaign
– More MattersTM
There is still a lack of consumer awareness
Awareness increasing but not enough action… need more convenience.
Marketing Food to Children
Marketing Categories by Population Sizes
Group
Age Range
Population Size
Infants and Toddlers
0-2 year
11,416,676
Children
3-8 years
24,041,307
Average Consumption
Vegetables
Fruits
a
0.9 – 3.5
(combined consumption)
0.9 – 3.3a
Tweens
9-12 years
16, 732, 311
(combined consumption)
2.6a
1.9a
Teens
13-19 years
28, 282, 971
3.6a
1.9a
a – mean servings
Approximately 11 servings
each day not being met
Sales volume potential: 10.8 billion lbs
Cases per year: 271.5 million
Sales per year: $4.1 billion
License fee at 5%: $205 million
Marketing Food to Children (cont’d)
“There was a gap between the foods children requested and
the foods their mothers were willing to buy for them”
• Dual Marketing Strategy
– Children: Attractive packaging
Desirable taste
Fun
– Parent: Convenience
Nutritional value
Competitively priced
Product requested by children
Opportunity to engage more aggressively in retail “pull” strategy
vs. co-packer “push” strategy
Company Challenges
Internal
External
• Limited Resources
• Market competition
• Contract renewal and short
term performance focus
• Complacent consumer & copackers
• Small market share
• Inherent variation in
commodity quality
• Food safety
• Retailer-supplier Relationship
• Lack of product visibility and
commercial advertising
Position Summary
• Strength – Disney brand & increased concern for
child nutrition
• Weakness – Lack of product visibility & commercial
advertising
• Opportunities – Product differentiation & placement
along with potential school access
• Threats – Contract renewal & competition with other
firms and brands
Strategic Recommendation
1.) School / Parent Program
– Education packets
– Kids Food Calendar / stickers
– Parent Shopping list
• Implementation
– Contact school boards about purchasing the packets
– Find government grants for product placement in schools
– Single serve packaging for school lunches (convenience
and peer concept)
Pre-packaged & pre-portioned
Strategic Recommendation
2.) Expand Across Disney Company
– Provide fresh produce to Parks and Resorts
• Have Disney Garden cases available at restaurants
– Advertising of Disney Garden products to park visitors
• Implementation
– Utilize relationship with Disney for continued support of
Disney Garden
Strategic Recommendation
3.) Retail Strategy
– Cross-promotional selling
– Promote spoilage and labor savings
10% ↓ spoilage = 1.3 to 1.5% ↑ in sales
– Price and product differentiation
– Widespread product availability
– Frequent buyer coupons and contests
1852-773-9002
• Implementation
– Use PLU stickers as a coupon for another Disney product (value
added to fresh)
– Focus the main product line on staple products and differentiate
the seasonal products
– Create a customer rewards card
– I-Farms, co-packers should work in conjunction with test stores to
identify spoilage and labor cost savings (consumer and retailer)
Projected Inventory Sales using the 80-20 Concept
Product
Tomatoes
Apples
Berries
Grapes
Bananas
Potatoes
Lettuce
Carrots
Oranges
Broccoli
Avocados
Cherries
Pineapple
Nectarines
Grapefruit
Limes
Spinach
Greens
Eggplant
Totals
A = 35% of sales
B = 56% of sales
C = 9% of sales
Rank
1
2
3
4
5
6
9
10
11
12
13
15
20
23
26
27
32
33
34
Projected Sales
($millions)
23.28
17.94
14.25
11.60
9.62
8.11
5.23
4.60
4.08
3.65
3.28
2.69
1.76
1.42
1.17
1.10
0.83
0.79
0.75
$156.50
ABC $M
A
$67.07
B
$72.11
C
$17.32
Source: Produce Marketing Association
Future Recommendations
• Product placement in Disney shows
– E.T. and the Reeses Pieces phenomena
• Food Quality Technology
– Packaging
– RFID
Strategic Summary
1) Educational based School/Parent Program
emphasizing nutrition and convenience
2) Growth into Disney Parks & Resorts
3) Pull Retail Strategy to increase sales volume
4) Consider future recommendations for advertising
and consistent quality assurance
Thank you!
Questions, Comments
Strategic Recommendation
3.) Retail Strategy
– Cross-promotional selling
– Promote spoilage and labor savings
10% ↓ (5 – 7%) &
8% = 1.3 to 1.5% ↑
– Price and product differentiation
– Widespread product availability
– Frequent buyer coupons and contests
• Implementation
– Use PLU stickers as a coupon for another Disney product (value
added to fresh)
– Focus the main product line on staple products and differentiate
the seasonal products
– Create a customer rewards card in conjunction with test stores to
identify spoilage and labor cost savings (consumer and retailer)
The 80-20 Curve with the Fresh Produce Industry Sales, Sept 2007
100%
Total Sales (%)
80%
60%
40%
20%
0%
0%
20%
40%
60%
Total Items %
80%
100%
Projected Inventory Sales using the 80-20 Concept
Product
Tomatoes
Apples
Berries
Grapes
Bananas
Potatoes
Melons
Lettuce
Carrots
Oranges
Broccoli
Avocados
Cherries
Pineapple
Nectarines
Grapefruit
Limes
Spinach
Greens
Eggplant
Parsnip
Totals
Rank
1
2
3
4
5
6
7
9
10
11
12
13
15
20
23
26
27
32
33
34
45
Cumulative % of
Total Sales
10.27%
18.96%
27.58%
35.56%
42.97%
50.24%
56.26%
65.78%
69.46%
72.88%
75.10%
77.31%
81.02%
88.40%
91.90%
94.43%
95.22%
97.61%
97.96%
98.23%
100.00%
Cumulative % of Total
Items
2.22%
4.44%
6.67%
8.89%
11.11%
13.33%
15.56%
20.00%
22.22%
24.44%
26.67%
28.89%
33.33%
44.44%
51.11%
57.78%
60.00%
71.11%
73.33%
75.56%
100.00%
Cumulative Sales
($million)
23.276
41.219
55.474
67.071
76.691
84.799
91.726
102.938
107.539
111.620
115.266
118.542
124.190
134.612
139.182
142.914
144.011
148.645
149.431
150.180
156.500
Projected Sales
($millions) ABC $M
23.28
A
17.94
14.25
11.60 $ 67.07
9.62
B
8.11
6.93
5.23
4.60
4.08
3.65
3.28
2.69
1.76
1.42 $ 72.11
1.17
C
1.10
0.83
0.79
0.75
0.46 $ 17.32
$ 156.5
RFID
• RFID – Radio Frequency Identification
–
–
–
–
–
Collects readings indicating pH, humidity, and temperature
Monitors food quality throughout supply chain
Helps reduce waste
Large retailers require tags for main suppliers
Retailers testing potential to improve distribution of fresh
produce (Publix and Del Monte along with the University of
Flordida)
– Could help differentiate product through cutting edge
technology and aid in food quality measures
• 80-20 Mathematical Computation
• Y = [(1 + A) X]/ [(A + X)] (eq.1)
Where:
Y= cumulative fraction of sales
X=cumulative fraction of items
A= a constant to be determined by manipulating (eq. 1):
A = [(1 - Y) X]/ [(Y - X)] (eq. 2)
• For fresh fruits, 19% of the items (X= 19.05 %) results in
56% of the sales (Y=56.7%)
A = [(1 – 0.56) 19]/ [(0.56 – 0.19)] = 0.219
• If annual sales of I-farm shipment sales volume are expected to
be $ 156.5 millions in 2010, how much inventory investment
should be expected from I-farms co-packers?
• Applying the 80-20 concept on the Retail Fresh Produce
Industry Sales of Sept 2007 for fresh produce items licensed by
I-farms:
• 20% of the items accounts for approximately 65% of the total
sales.
• A= 0.1495
• The sale for the first item (Tomatoes) would be found
multiplying equation 1 to $ 156.5 million: Y = [(1 + 0.1495)
0.0222]/ [(0.1495 + 0.0222)] * (156.5 million) = $ 23.25 million,
AND given turn over ratios average inventories can be
obtained for each product category by dividing the projected
sales by the turn over value.
Internal
• Relationship specific investment between I-Farms and
co-packers
• Define tactics to achieve competitive advantage
– Reducing transaction and operating cost
– Product differentiation with supply-chain base through
technology and innovation
• Focus on strategic performance measures
– Total Cost Acquisition
– Market Growth
• Geographical decentralization of product placement
• Recall response implementation strategy
– Advantage of traceability with branding
External
• Product differentiation
– Price and quantity
• Building good reputation between the supplier and the
retailer
• Long-term commitments
– Visible
– Understandable
– Credible
• Information Sharing
Fresh Fruit and Vegetable Price Differentiation
Fruits
Red
Cherries
Wal-Mart
Disney Garden ($/lb)
3.68
Harps
No Brand ($/lb)
4.99
IGA
No Brand ($/lb)
5.49
Pineapple
(whole)
Del-Monte (Each)
3.93
Coast Tropical (Each)
5.99
Cost Tropical (Each)
2.49
Grape
Del-Monte (1-pint)
3 Generations (1-pint)
3 Generations (1-pint)
Tomatoes
1.98
3.99
3.49
Banana
Dole ($/lb)
0.64
Dole ($/lb)
0.65
Dole ($/lb)
0.69
Vegetables
Celery
(Heart)
Tanimura & Antle (16 oz)
1.96
Ocean Mist (16 oz)
2.49
Ocean Mist (16 oz)
2.99
Spinach
Fresh Express (6oz)
2.88
Dole (6oz)
2.89
Dole (6oz)
2.99
Baby GGF (160z)
1.69
Bolthouse Farms (16 oz)
1.89
Carrots
Source: Fayetteville, AR
• Quantity Volume Approach
–
–
–
–
Low price to increase the volumes of sales
Cooperation in order to meet consumers preferences
Use of cost cutting tactics through the supply chain
Competitive advantage through cost reduction and by
internalize social responsibility – values and environmental
issues
• Strategy Implementation
– 80-20 concept:
Vegetable as Percentage of Total Vegetable Ads
(July 18, 2008)
Potatoes, russet, 1%
Sweet potatoes, 0%
Peppers, bell red, 3%
tomatoes
, 3%
Squash, zucchini, 9%
Peppers, bell green, 3%
tomatoes, organic, 1%
tomatoes, on the vine,
11%
tomatoes, grape, 6%
tomatoes, grape
organic, 3%
Onions, sweet, 7%
Asparagu
s, 1%
Onions, yellow, 3%
Beans, round green, 5%
Mushroom, white, 9%
Broccoli, 4%
Lettuce, romaine, 3%
Carrots, baby, 8%
cucumbers, 7%
Corn, 4%
Broccoli, organic, 1%
Lettuce, iceberg, 2%
Cabbage, 2%
Celery, 1%
Carrots, baby organic,
4%
Source: USDA; Agricultural Marketing Service
Fruit as Percentage of Total Fruit Ads
(July 18, 2008)
Limes,
Pineapple, 3% 3%
Watermelon, Seedless,
3%
Watermelon, Mini, 4%
Lemons, 1%
Avocadoes, Haas, 5%
Bananas, 1%
Peaches, 13%
Nectarines, 11%
Oranges, Navel,
0%
Strawberries,
Organic, 5%
Cherries, 8%
Grapes, Green/Red, 11%
Cantaloupe, 6%
Mangoes, 6%
Plums, 9%
Honeydew
, 1%
Clementines, 0%
Strawberries, 8%
Pears, Bartlett, 0%
Apples, Red Delicious,
0%
Grapefruit, Red, 0%
Blueberries, 0%
Bananas, Oganic, 0%
Source: USDA; Agricultural Marketing Service
Industry Assessment (con’t)
Fresh Fruits
• Major Fruits(2006):
Apples – $4,260 M
Berries – $ 4,226 M
Grapes – $3,911 M
• Per Capita Consumption
(2005):
126.0 lbs
• Projected Production
(2008):
22,437 M lbs
Fresh Vegetables
• Major Vegetables (2006):
Tomatoes - $4,393 M
Potatoes - $3,201 M
Onions - $2,336 M
• Per Capita Consumption
(2005):
198.6 lbs
• Projected Production
(2008): 101,692 M lbs
• Total Acre Harvested:
1,250,830 acres
Produce Industry Analysis
Threat of Entry
-Market Share
-Brand Strength
-Increase awareness to promote
fresh produce
- Political pressure
Supplier Power
Internal Rivalry
Buyer Power
-Pricing limited due to
availability of substitute
-Increase demand for FFV
- Price rivalry between firms
- Variation between co-packers
- Existing number of firms
- Retailer and consumer
negotiate purchase price
Substitutes and Complements
- Pricing should minimize the threat of substitute
Company Analysis
• Strengths
– Association with the
Disney Brand
– Business ethics and
child nutrition
– Customer driven
business model
*relationship w/copackers
• Opportunities
–
–
–
–
International Expansion
Selling out to Disney
Product differentiation
Expansion to Theme
Parks/Resort
*placement
*growing awareness
• Weaknesses
– Limited resources
– Small firm compared to
competitors
– Lack of commercial
advertising
*visibility
• Threats
– Brand damage from food
safety
– Contract renewal
– Competition with other
firms and brands
References:
Ballou, R. H. 2003. Business Logistics/Supply Chain Management, 5th Edition. Prentice
Hall Publishing.
Besanko, D. et.al. 2006. Economics of Strategy. 4th Edition.
Dennison, B.A, et.al. 1998. Fruit and Vegetable Intake in Young Children. Journal of the
American College of Nutrition. Vol.17, No.4, 371-378
Hampl, J.S. et.al. 1999. Intakes of Vitamin C, Vegetables and Fruits: Which School
Children are at risk?. Journal of the American College of Nutrition. Vol.18, No.6,
582-590
McGinnis, J. M. et. Al. 2006. Food Marketing to Children and Youth: Threat or
Opportunity. National Academies Press. U.S.A.
Produce for Better Health Foundation. 2007. National Action Plan to Promote Health
through Increased Fruit and Vegetable Consumption.
Produce Marketing Association. Retail Fresh Produce Industry Sales.
Story M. and Simone French. 2004. Food Advertising and Marketing Directed at
Children and Adolescents in the U.S. International journal of Behavioral Nutrition
and Physical Activity.
USDA. Agricultural Marketing Service. National Fruit and Vegetable Retail Report. Vol.
11, No. 29
USDA. Per capita Consumption of Major Food Commodities. Table 9.
http://www.ers.usda.gov.
USDA. USDA Agricultural Baseline Projections to 2015. 2006. Baseline Report OCE2006-1