Trends in the NAB Industry and Reasons Why Fruit-Fuse is Smart Choice

Executive Summary

The report comprehensively explains the strategic, financial and marketing plans of the All-O-Ganics store. The store serves as the whole sale retailer for organic food and vegetables. In this day and age where health issues are rising every day and people are consuming more and more junk food, it is a refreshing sight to have a store that has made health a priority. This has proved to be a differentiating factor for the company. In addition the company does not promote the non-alcoholic beverages like coke etc. These carbonated drinks are high in the sugar content and prove to be harmful for the people’s health. The fresh alternatives by the store have become highly popular with people. The store has had exponential growth in comparison to its peers. This is observable through the stats that are part of the report. There has been a growth of 12.8% in the year 2015. This shows that store is highly popular because of the out of the box products that it has been serving its customer. The company plans to double its sales and foot print in the world with expansion as well as adding more organic and healthy items to the already list of products that are being sold at the stores. Despite people gaining information on the level of negative impacts do not stop from getting such drinks is due to fact that they do not have better alternatives. In shape of the All-o-Ganic this issue has been removed and there has been a considerable shift in the customer choice as has been observed in the previous years. All-o-Ganic has become a choice for all sorts of healthier options in the diet.

  

Trends in the NAB Industry and Reasons Why Fruit-Fuse is Smart Choice

Non-alcoholic beverages possess an important part in today’s dietary pattern, as they are regarded not just as refreshments, but also meal drinks, due to the fact that the human body needs several liters of fluids everyday, especially during dry season. NABs are mostly made up of 90% water, with added sugar or sweeteners, plant parts and flavorings, as well as preservatives for longer shelf-life (Osuntogun & Aboaba, 2004). NABs has a dynamic and wide segment, with categories ranging from caffeinated drinks to energy drinks, bottled and enhanced water to fruit juices and carbonated sugar drinks (CSDs). In Australia, an increase of 13% in total volume sales of NABs, specifically plain water and non-sugar carbonated drinks, was reported from 1997 to 2006. A significant shift from sugary beverages to non-sugar was observed, with the larger portion of CSD consumers being the younger population of high-income households (Levy & Tapsell, 2007). The projected market growth for NABs is $160 billion to $190 billion, from 2008 to 2020, respectively.

CSDs remain as the largest market in the NAB category, followed by bottled water, with juices coming in third. There is however, a growing demand for healthier beverages that still pack both taste and attractive packaging, in accordance to increasing wisdom and independence of thinking in purchasing behavior, as well as rising awareness in health, and company transparency and social responsibility (Kim & Fry, 2015). Advertisements are still key players in increasing demand for NAB products, especially for traditional CSDs, although the same tool is being used by emerging beverage products of other NAB categories to increase profits (Zheng & Kaiser, 2008). For instance, the growing global incidence of obesity, consumers and institutions are focused on food marketing more than ever (Kelly, et. al., 2013), with advertisers investing significantly in strengthening their standards and adherence to government structures that promote health in food and drinks selection and consumption (WHO, 2006). This is particularly true in relation to advertising for children, since they make up the largest target market of NABs, as they can encourage their parents to buy products for them, These components establish a great potential for emerging markets of beverages like Fruit-Fuse, because they pack safer and healthier ingredients – natural ones – that are delicious, energizing, and refreshing. Healthier choices without the compromise on taste are great option for everyone – regardless of gender, age, or income status.

Europe and North America remains the biggest market for organic food produce, with Asia, Latin America and Australasia as the main producers and exporters. Despite the large production in organic produce seen in recent years, the supply is not enough to suffice the growing demand, therefore giving a better position in the market for organic food businesses, both big and small (Sahota, 2009). Of course, companies like Whole Foods and Safeway are not beatable, but as consumers are the main drivers of successful marketing strategies (Zanoli & Naspetti, 2002), All-O-Ganics has a chance. It would be best to incorporate social and ecological aspects in the company’s marketing strategies, like using recyclable containers for its food products and beverages, being involved in environmental community programs, and putting environment-friendly tips and reminders in packaging, as such strategies can increase sensitization of consumers towards making an active move in protecting the environment (Belz, & Schmidt‐Riediger, 2010).

Selection for the Fruit-Fuse beverages will be many, as they will be sold in different names attributing to different infused flavors. For example, Berry Energy, which is spring water infused with blue berries, cranberries, strawberries and raspberries, is perfect for energizing electrolytes while hitting the gym. Another is Mint Zest, which shall contain lemon, cucumber, and mint.

Overview of the Company’s Distribution Channels

The market for organic produce increases and the increase in distribution among retailers is one of the reasons. Like other organic food businesses, targeting supermarkets, grocery stores, club and sports/gym stores, and even smaller community stores will be some of the distribution channels for All-O-Ganics products, including Fruit-Fuse. Many people are sticking to e-stores for faster and more convenient buying process, so a website/e-store for the company shall be established as well, with free delivery options. Being involved in community programs, such as fun runs sponsored by gyms, clubs, or universities will be a great way to introduce Fruit-Fuse items to as many people as necessary.

Types of Risks the Company Faces

One of the risks that the company faces is competition. Considering that All-O-Ganics is a small and emerging player in the organic food business, there is no way it can compete face-to-face with companies like SafeWay and Whole Foods. The first and most difficult step is introducing the products to the market, and gaining consumers and their trust by great product quality, and honest and transparent service of the company. Competition leads to another risk, which is acquiring a sustainable market, because many retailers and wholesalers are emerging, especially now that the advertisement and marketing tools are readily available with technology. Organic food industry is also threatened by food inflation due to economic downturn world-wide, and the conversion of lands to biofuel crop farms. While today’s organic food industry experiences an all-time surge in market profits, the growth will suffer a slow trend in the coming years (Sahota, 2009). Another risk is the innovation, especially on product shelf-life. As products like Fruit-Fuse promise all-natural ingredients, the use of chemical preservatives to increase shelf-life is out of the question. The use of 100% natural alternatives for preservatives will require an investment on R and D.

SWOT Analysis

The SWOT analysis of Fruit-Fuse from All-O-Ganics is shown in the following table:

Strengths ·         Healthier and safer alternative for traditional NABs (100% organic, natural) ·         Unique yet delicious flavors with energizing properties from fresh fruits, veggies and herbs ·         Brightly colored ingredients increase market attraction

Weaknesses ·         Possible shorter shelf-life ·         Higher price compared to traditional NABs ·         Taste appreciation may be risky especially among kids who like sweets

Opportunities ·         Consistent market potential of joining the “make green and buy green” bandwagon ·         Positive trend in appreciation of ecological and organic products and businesses, as well as growth in organic food industry ·         Unsaturated organic food market due to lower supply of organic products in the US and Europe ·         Advanced technology provides opportunities for marketing especially among small businesses

Threats ·         Large competitors such as Whole Foods and SafeWay, as well as increasing emerging businesses in organic food business ·         An expected slow growth trend in organic food industry in the coming years that might require internal business analyses and diversification to manage risks

 

Industry Analysis and Trends

 

In light of the Porter’s five forces the industry analysis is listed below:

Rivalry:  The rivalry is quiet strong and it is getting stronger with every passing day. Each wholesale retailer is aiming to gain even one percent margin if possible.

Substitutes: The substitutes are far stronger in terms of other grocery stores. Lot of stores are selling the fresh vegetables and fruits which does not make All-o-Ganics completely one of its kind but the substitute of the fresh juices is the one that still provides it with an edge. Restaurants do not pose to be strong substitutes.

New Entrants: The new entrants are stronger then the substitutes that are already available in the market.

Supplier: They range from medium to weak. They are not in much position to strike huge bargains as the alternatives available are numerous.

Buyers: Buyers are stronger comparatively. They have huge number of alternatives to choose from. There are many grocery stores that already operating as well as the fact of convenience. All-O-Ganics is expanding still and is not available at many locations. People prefer nearest location for doing the groceries.

Analysis of Industry in general:

Everyone is being effected from the recession that is prevailing in the economy. There is a cut throat competition to remain profitable. The competition is so high that even a point five edge is something that is fought for.  Businesses are struggling hard to maintain the profitability as well as meet the competition headlong.

Factors of Industry Evolution

• Economic Recession
• Demand for value Pricing
• Social Acceptances of Organics
• The demand for food does not decrease

 

Merger of Markets:

The organic and general grocery market have merged in to one. This market serves both the organic and no organic consumer. The hybrid population visits the same store. Organic differentiation thus has become commoditized. The differentiation has to be increased further from the organic and non-organic perspective. To gain an edge the shift in the segregation has to be brought.

Market Size:

The above graph depicts that the market size is very limited and the potential for growth as discussed earlier is becoming limited due to the merger in the market. The new strategy has to be devised by the organic industry to bring in perfect differentiation. Limitation of consumer is quiet visible. Food industry is quiet large but the grocery shopping sector still has limited involvement from the customer. The changes need to be bigger and more prominent to attract the customers.

Competitive Positioning:

Organic positioning is on price and core market. On the other hand the general grocers offer commodity of organic goods. In comparison the social-organic retailers have the ethical differentiation. Ethical differentiation means that they target their customer on the fair pricing module.

Competitors Market share:

If the competitor analysis is done it shows that the Wal-Mart tops the competition. It has most grocery sales if put together by all grocery store. These sales are not based on only organic products but all sorts of products. Here the important point is that Wal-Mart even offer the organic groceries at the discounted prices.

Primary Competitors in industry:

General Grocery Stores

• Kroger
• Safeway
• Supervalu

Organic Grocery Stores:

• Trader Joe’s

There has been a general shift in the competition where the general stores wants to keep more and more of organic grocery in their stores. This will definitely increase the competition by large. However to beat the competition certain factors can play a key role in improving the competition.

• A strong network of suppliers
• Access to location rich in the target market
• A strong brand name
• Effective marketing communications
• Product must be a fit with market demand.

Factors of attraction in Industry:

• Consumer do not want to compromise on health and will continue to buy organic food
• Health conscious people will still opt for value-priced products
• Social organic people also consider the value but that is mostly based on the ethics.

Strategic Position and Risk Assessment

The All-O-Ganics brand stands for the best quality of the organic food available in the market at the moment. It appeals to the greater social responsibility and ethical people prefer this brand. It has a strong distribution network that has been discussed in report further. In addition the private brands provide a high quality product that as a value pricing. These private brand have time and again proved the quality of their produce which has kept the customers continuously very satisfied. The company has made quality it’s highest priority. The brand does no compromise on the quality of the products that it sells. The customer loyalty and trust is something that company can in no position play with. Hence each new lot is carefully checked before it enters the store grounds. The customer response is something that speaks for itself. One failure and prove failure for company reputation. The freshness of its products is a pride that company exercises. This consistent quality is maintained through a series of checks that have become a part of the company operations all over the units of the company. This standard is maintained no matter where the store of the company is operating.

Marketing Tactics:

For the promotion of Fresher, marketing tactics would be used effectively so that company can attract their target customers and implement marketing strategy effectively (Nguyen, 2013). Marketing tactics for the Fresher Company is explained below by which company implement their strategy:

• Fresher should use target marketing and advertise in proper way which address their targeted age group and design their advertisement in such a way which get their attention immediately and also advertise their products in different areas.
• It is also advised to make their website which provide all details of products and also offer some deals to them if they make online orders and purchase directly from the company and thus company can build direct relation with their customers.
• With the dynamic creativity, Fresher can also highlight their products in market and attain customer’s attentions in this regard. Fresher must make advertisement which clearly address to their target customers and contains the benefits associated with the products and thus company can increase the buying attention of their customers.
• With the help of social sites, Fresher can increase their sales and attract more customers. Promote their beverages on social media like Facebook or Twitter etc. company not only attract their target customers but also reduced their cost of advertisement as social media advertisement need less money as compared to other marketing tactics.

Operations Plan

OPERATIONAL PLAN

Operational plan is the complete outline provided by the higher management for their middle and lower management as the instruction to do operations for the company and guidelines by which organizations enable to achieve their strategic goals with the help of their operations. Operational plan describes that what to achieve and how to achieve and it also cover the cost and provide the complete outline to employees (Finkle, 2015). For the purpose of this assignment, the operational plan of Fresher is provided below with the detail and gives how operations are done.

Key aspects of operations

The key aspects of operations of Fresher are described below in detail and these are:

• Facilities: Fresher has the facilities by which they invest in three production units and in all these three units, 5000 non-alcoholic bottles are made in one hour.
• Production process: For the Fresher, production process follow the strict quality and complete inspection procedure is provided to ensure that operations are done with the high standards. All employees are required to follow these standards and work accordingly. It will be ensuring that to produce non-alcoholic beverages, pure water must be used with the sophisticated softening techniques by which all impurities are removed (Andini & Simatupang, 2014).
• Equipment: For the process of Fresher, it ensured that all equipment should be designed according to latest technology. Automated machinery will install and these machineries will further dispense the mixture in the calculated quantities in the sterilized bottles. It will ensure that all process must be done through machinery like labeling of bottles etc. After the packing of bottles, it must be ensure that employees check all the bottles and then delivered it to the distributers (Ochoa, et al., 2016).
• Labor force utilization: For the Fresher process, labor force firstly involved up to 1050 men including all employees. With the help of these employees, Fresher ensures to provide the best quality non-alcoholic beverages to their target customers.

Cost and Time Efficiencies:

It is ensured that all process will be done within the time and within the budget. To minimize the cost, large scale economy method will be adopted and the total cost divide per bottle will be resulted reasonable and then company offer price more than their cost to ensure their profits. To minimize the cost, organization also pays attention to minimize their extra and unnecessary expenses and avoid irrelevant things to adopt in workplace.

Competitive Advantages:

For the competitive advantage, Fresher ensures to offer their products in the reasonable prices so that more customers will attract and buy their products. Advertisement will also help the Fresher to make position in the market even in the presence of competitors and earn revenues. As, there is high competition prevail in the market, but with the better quality product in the reasonable price and with the attractive advertisement, Fresher will achieve competitive advantage.

Problems Addressed and Overcome:

For the Fresher, it is ensured that all problems should be solved in a decent manner and no one will be face harm during the operations of the Fresher. It is provided that issues related with the operations should be solved by the supervisor and also with the involvement of higher or middle management. Stock issues, high expenses, cost problems and not achieving the targets along with the equipment and employee’s issues, all these problems must be solved with the strategies and solutions of all these problems must be placed at the workplace so that employees already know and beware of the solutions of these entire problem. Fresher will ensure their employees that they will not only satisfy their customers but also provide best compensation to their employees so that they perform better in the workplace and the quality of product will increase in this way and thus they will ensure to make better position in market (Chamorro & Maturana, 2013)

Growth Strategy:

The growth strategy would enable and increase of about 15 to 20%.  In addition there will be about 8 to 10% increase in the compound sales. The sales would be stabilized when store improvements will be incorporated. The organic forward demand is increasing with the increasingly poor health of people. There has been a drive towards eating safe and healthy and hence the potential for growth is quiet high.

 

References:

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Kelly, B., King, L., Baur, L., Rayner, M., Lobstein, T., Monteiro, C., … & Hawkes, C. (2013). Monitoring food and non‐alcoholic beverage promotions to children. Obesity reviews, 14(S1), 59-69.

Kim, H., & Fry, N. (2015). The Evolving Non-Alcoholic Beverage Landscape. First Beverage Group. Retrieved from http://www.firstbev.com/wordpress/wp-content/uploads/2015/03/FBG_Non-Alc-White-Paper_March-2015.pdf

Levy, G., & Tapsell, L. (2007). Shifts in purchasing patterns of non-alcoholic, water-based beverages in Australia, 1997–2006. Nutrition & Dietetics 64: 268–279. doi: 10.1111/j.1747-0080.2007.00223.x

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World Health Organization. (2010). Set of recommendations on the marketing of foods and non-alcoholic beverages to children. Set of recommendations on the marketing of foods and non-alcoholic beverages to children.

Zanoli, R., & Naspetti, S. (2002). Consumer motivations in the purchase of organic food: a means-end approach. British food journal, 104(8), 643-653.

Zheng, Y., & Kaiser, H. M. (2008). Advertising and US nonalcoholic beverage demand. Agricultural and Resource Economics Review 37(2), 147–159.

Andini & Simatupang, 2014. A process simulation of inventory planning and control for Minute Maid Pulpy at Coca-Cola.

Chakrabarty, Sharma & Tamang, 2014. Traditional technology and product characterization of some lesser-known ethnic fermented foods and beverages of North Cachar Hills District of Assam.

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