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Nantucket Nectars Presentation

Strategic Management Presentation
by

Jan Zawadzki

on 25 March 2013

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Transcript of Nantucket Nectars Presentation

History Mission Statement "We simply make good tasting juices, from the best ingredients" Early start - Started company to sell great juice

- Mixed juice in blenders from boat convenient store and sold it in cups or wine bottles

- Opened Nantucket General Store, sold 8,000 cases in 1st year and 20,000 in 2nd year

- Used combined personal savings of $17,000 to start company

- Worked for three years without paying themselves or the third employee - Tom Scott and Tom First met at Brown University

- Created floating convenience store at Nantucket Harbor

- Tom First discovered peach juice that he'd like to produce in the US

- Founded Nantucket Nectars in 1990 -Undercut pricing to flood the market while offering a high quality product

-Utilizing image and brand strength

-Blocking the smaller, less powerful players from retailer shelf space Financing - Convinced investor to invest $60,000 in exchange for 50% of company

- Because capital was too limited, had to distribute product themselves

- Founders had to do everything: lease warehouse space, organize distribution, customer service

- Buyers immediately liked story of founders Initial growth Competitive Strategies - Obtained rights to distribute Arizona Iced Tea in Boston

- Within 3 months, distribution channel grew from 7 to 100 employees and cases sold from 8,000 to 30,000

- Founders were able to convince small stores to carry Nantucket Nectars alongside Arizona Iced Tea

- Revenues grew in 4th year to $8 million Marketing - Tried to achieve best marketing through minimal budget

- Relied on word-of-mouth, creative packaging and memorable story line to distinguish from competitors

-Samplings, giveaways, and publicity stunts with salespeople dresses up as fruit

- Focused on advertising founding story in radio spots Growth problems Competitive Advantages -Unique story of how Nantucket Nectars came to be

-Made of real cane sugar rather than high fructose corn syrup

-Used 4x the amount of fruit juice instead of relying on water and artificial flavorings

-Offered full line of 100% unsweetened juices

-Offered sizes that competitors did not

-Developed 27 different flavors throughout 3 product lines - Had only three initial flavors:
Cranberry Grapefruit, Lemonade and Peach Orange

- No business background knowledge, didn't know how to best grow company

- First priority was quality in product development

- Partly outsourced distribution channel

- Hired sales force to contact stores directly

- Focused on long-term growth -Cost of cane sugar higher than cost of high fructose corn syrup

-Unable to predict growth of company

-Inability to institutionalize future contracts on ingredients

-More dependent upon fruit harvest Decisions IPO Sell company Do nothing Con Pro Con Pro Con Pro - Remain independent

- Keep founding story, company culture

- Remain control over employment of employees

- Benefit from extensive growth in future - Struggle to finance growth

- Lack of outside business expertise

- Lack of capital to invest into advertisements, research

- Not able to benefit from economies of scale Managers comfortable with any option - Company would be in hands of more experienced managers

- Nantucket Nectars could get appropriate financing

- Company could grow rapidly - Managers lose control over employee employment

- Nantucket Nectars risks to lose competitive advantage

- Keeping negotiations secret, ownership structure in which initial investors owns 55% of company - Instant capital funding

- Managers remain in control over company

- Create brand awareness - Managers have to report to shareholders

- Risk to lose company culture through focusing on short-term goals

- Additional legal regulations and constraints Value-chain analysis Inbound logistics Operations Outbound logistics Marketing/Sales Customer Service - Management created good relationships with suppliers - Experience as self-distributors

- Good access to single-serve distribution channels in New Beverage industry - Experience with logistics - Great quality of product

- Authentic, unique, memorable story

- Geographic expansion opportunities

- Ability to respond quickly to changing

- Value of brand: fresh, new, different, memorable

- Different marketing strategies - Satisfaction guarantee How to sell company? Threat of New Entrants LOW Public bidding Secret bidding Identify favorable buyers Implications Implications Implications Blocking of smaller players from shelf space
Undercutting prices to flood the market (aka dumping)
Placed emphasis on already existing strong brand and image
"Industry dynamics and the fast-paced changes within the industry really decrease the probabilities of an early entrants success" Rivalry Among Existing
Competitors HIGH - Will lead to highest possible price of company

- Best way to determine market value

- Bad reputation if managers decide not to sell in last minute New Age Beverage industry was the latest battle ground in the Cola wars
Over 100 companies vying for market leader position - Will not lead to highest attainable price and exact market value

- Might be able to negotiate beneficial terms for employees

- Might be able to avoid publicity and thus make customers believe its still an independent company Bargaining Power of Buyers HIGH - Selling price won't be close to market value

- Keep corporate culture alive

- Managers and employees might be able to maintain jobs Bargaining Power of Suppliers MODERATE Financial ratio analysis Threat of Substitute Products or Services HIGH Need for quality ingredients
Have a good relationship with their current suppliers
Other suppliers are available but quality of ingredients are inferior - Revenue growth: 100%

- Current ratio: 1.08

- Profit margin: 1.25% No switching costs The proliferation of brands and flavors distract/tempt even the most loyal juice drinkers
Promotions and new flavors entice new consumers to "shop around" BCG Matrix - ROE: 36.67%

- ROA: 4.64%

- Debt ratio: 87.33% Recommendation - Go public

- Use benefits of instant financing and keep entrepreneurial spirit

- Access outside business knowledge to handle growth TOWS Competitive Disadvantages Video http://www.foodnetwork.com/videos/nantucket-nectar/1813.html Video Decision prelude - Rumor that Triarc wanted to acquire Nantucket

- Founders met secretively with other beverage companies

- Identified favorable buyes whose company culture matched with Nantuckets Forecasted growth in standalone scenario
Full transcript