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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: Sell and ship product Expenses: Outside marketing support

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Imagination Farms, LLC

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  1. Imagination Farms, LLC Julie Conn AikoTherese Landerito Bonifacio Sessa July 27, 2008

  2. Company Facts “To increase the consumption of fruits and vegetables among children” • Committed to: • Health • Quality • Safety • Licensees: • Sell and ship product • Expenses: • Outside marketing support • Licensing fees • Quality control measures • Role: • Support Disney’s social corporate responsibility • Innovation • Integrity

  3. 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

  4. 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

  5. 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

  6. There is still a lack of consumer awareness

  7. Awareness increasing but not enough action… need more convenience.

  8. Marketing Food to Children Marketing Categories by Population Sizes a – mean servings Approximately 11 servings each day not being met Cases per year: 271.5 million Sales per year: $4.1 billion License fee at 5%: $205 million Sales volume potential: 10.8 billion lbs

  9. 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

  10. Company Challenges Internal External Market competition Complacent consumer & co-packers Inherent variation in commodity quality Retailer-supplier Relationship • Limited Resources • Contract renewal and short term performance focus • Small market share • Food safety • Lack of product visibility and commercial advertising

  11. 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

  12. 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

  13. 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

  14. 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 • 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) 1852-773-9002

  15. Projected Inventory Sales using the 80-20 Concept Source: Produce Marketing Association

  16. Future Recommendations • Product placement in Disney shows • E.T. and the Reeses Pieces phenomena • Food Quality Technology • Packaging • RFID

  17. Strategic Summary • Educational based School/Parent Program emphasizing nutrition and convenience • Growth into Disney Parks & Resorts • Pull Retail Strategy to increase sales volume • Consider future recommendations for advertising and consistent quality assurance

  18. Thank you! Questions, Comments

  19. 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)

  20. Projected Inventory Sales using the 80-20 Concept

  21. 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

  22. 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

  23. 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.

  24. 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

  25. External • Product differentiation • Price and quantity • Building good reputation between the supplier and the retailer • Long-term commitments • Visible • Understandable • Credible • Information Sharing

  26. Fresh Fruit and Vegetable Price Differentiation Source: Fayetteville, AR

  27. 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:

  28. Vegetable as Percentage of Total Vegetable Ads(July 18, 2008) Source: USDA; Agricultural Marketing Service

  29. Fruit as Percentage of Total Fruit Ads(July 18, 2008) Source: USDA; Agricultural Marketing Service

  30. Industry Assessment (con’t) Fresh Fruits 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 • 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

  31. Produce Industry Analysis • Threat of Entry • Market Share • Brand Strength • Increase awareness to promote • fresh produce • - Political pressure • Internal Rivalry • Price rivalry between firms • Variation between co-packers • Existing number of firms • Supplier Power • Pricing limited due to availability of substitute • Increase demand for FFV Buyer Power - Retailer and consumer negotiate purchase price Substitutes and Complements - Pricing should minimize the threat of substitute

  32. Company Analysis • Strengths • Association with the Disney Brand • Business ethics and child nutrition • Customer driven business model • *relationship w/copackers • Weaknesses • Limited resources • Small firm compared to competitors • Lack of commercial advertising • *visibility • Opportunities • International Expansion • Selling out to Disney • Product differentiation • Expansion to Theme Parks/Resort • *placement • *growing awareness • Threats • Brand damage from food safety • Contractrenewal • Competition with other firms and brands

  33. 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 OCE-2006-1

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