Organic Agri Produce – REALAKTIV | Market Research & Strategy

Target Customer Segments

Question:

Discuss about the Opportunity Analysis of a New Business Venture for REALAKTIV.

The innovation in the business forms the key to growth and sustainability and the idea to withstand the competitors therefore highlights the need to conduct an opportunity analysis (Deane et al. 2006). This helps the possibility to identify the emerging ideas and trends which when combined with the consumer latent needs helps to redefine a product or service in a given market. Therefore innovation can be built upon an existing idea, product or service, while it can also be unique which has not existed before adding value to the user (Brodie et al. 2009). In this report, a new business opportunity, REALAKTIVE will be highlighted as a feasibility idea wherein a self analysis, venture description, external market research, industry analysis, feasibility technicalities, financial aspect, multiple scenario and scalability for the future. It will also help to understand and test an idea for its viability and the potentiality to emerge as a dominant trend favoured by the consumers. Health safety is important and hence organic foods score versus non organic foods should occupy consumer mental space.

The entrepreneurship is a process which has distinct stages to design and launch a product or service or both that separates itself as new in this world. The challenges are however, the scope of the idea to be translated into the reality as there are many barriers that are inherent to the whole process. The trait theory states that it is inborn while human capital which has the capability to align the resources, finance and materials in time shows the managerial capabilities (Dess and Lumpkin, 2009). It can be defined as entrepreneurial capability that has the passion and the attitude to pursue the vision in mind. Therefore it is essential to understand the three elements which are human capital, the entrepreneurial side of the human capital, and the demographic control variables.

Human Capital Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Characteristics	Rating
General	Education and knowledge	Medium to High
	Managerial	High
	Capabilities	High
	Demographic control variables	Medium
Entrepreneurship specific	Entrepreneurial skills	Medium
	Family background	Low
	Attitude and passion	High
Venture specific	Knowledge domain	High
	Motivation level	High

The above analysis shows that it is more of general perceptions of the industry, the ability to think innovatively which has creativity to drive the idea at conceptual stage to reach entrepreneurial level. The self analysis is about the ideologies that are based in mind while the capabilities will be only tested when the concept is translated into a entrepreneurial venture (Dobson et al. 2009).

The proposed venture is about pure organic product (agri produce) which is the result of natural farming methods aided with advanced technology of seeds that is ideal for backyard gardening or organised large scale farming. The goal is to provide pure organic food (farm fresh vegetables) that are completely free from traces of pesticides and insecticides, no chemical treatment use of preservatives before packaging,  till the end user buys for consumption in UK. It can be segregated into vegetables, fruits and whole grains. Organic- more than 95% organic agricultural ingredients is the purest form,

Certifying body stamp	Country of origin
EU/US/AUS accredited registration number	Use by date(latest)
Name of the product, brand, category	Weight( in metrics)
Name and address of the producer	Ingredients listing

The total investment in the venture was £60,000, with both contributing equal share for the business.

Brand Differentiation

Customer profiles who prefer organic food for healthy living and eating, and earns at least $35,000, a graduate and falls in the age group of 25-60 years of both genders are the target market. This will be done in a staged manner with strategy adopted based on the consumer acceptance of the brand REALAKTIV.

Market research:

There is a widespread organic product that is available in the market with retail store brands ranging from vegetables, whole grains, fruits (Greasley, 2009).  The total market size in UK is 400 million and it is growing at the rate of 15% YoY. There are certified organic produces who are either producing partly organic (70-90) % while rest are the non organic market of agricultural produce. The market share in terms of organic and non organic in the retailers stocks is shown below.

Retailer	Total Grocery in millions	Organic vol in Millions	Importance of corporate strategy
Tesco	25.3	26	Medium
ASDA-Walmart	14	4.5	low
Sainsbury	14.1	28	High
Morrison’s	10.5	4.5	Low
Waitrose	4.9	23	High
Coop	5.4	3.6	Low
LIDL	3.7	0.9	Low
ALDI	4.9	0.5	Low
Iceland	2.0	0	Low
Ocado	0.5	7.0	High
M&S	3.1	2.0	Medium

The key reasons the conscious customers are buying is because, taste is better, no pesticides, better for planet environment, animal welfare (poultry and meat), perceived better quality and health benefits (Handlechner, 2008).

There is 3.2% growth in supermarket YoY (2014-15), 9.1% growth in box schemes, 15.2% in catering and 7.5% growth in independent retailers. Most of the sales is now coming for the connected customers (online and technology) and the Millennials (upto 40years age) (Paul, 2012).

Product: The first foray is in produce, and subsequently the company will enter grocery, babyfood, bakery, meat fish poultry and dairy.

Price: Premium segment pricing that corresponds to the pure organic category (>95-99%) of vegetable produce.

Promotion: Promoting the launch events in television culinary shows, and new customer engagement process through blogs and social media for educational strategy to teach the enhanced methods.

Place: The online website (web2.0) and retailers stocking the brand REALAKTIV.

People: The contract based employee will be specialised to handle the supply chain functions, inventory, packaging and labelling and distribution functions in UK. The people will be trained to be the brand ambassadors coordinating with the retailers to stock the brand REALAKTIV.

Process: The element which will set the brand REALAKTIV is the processing of the agri produce, with organic manures for the farming land. The soil testing to find the actual soil composition will be done, and any deficiencies will be treated with natural methods.

Physical evidence:  The print media promotion that is online presence is first step to increase brand visibility and penetration to differentiate from others (Shafie and Rennie, 2012). The packaging process videos of the products will be uploaded in YouTube. The first company outlet will be established in the Eastern London area.

The market as per the UK organic trade board is in abundance of processors, manufacturers and marketers engaged in organic activity with business selling vegetables and fruits which shows that there are different players engaged in the total supply chain management (Pracejus et al. 2003). The packaged processing has shifted towards the fresh produce and or British origin which is growing each year and accounts for 53% of the total market in the organised retailing sector. There are organic suppliers, producers and retail marketers who are also supplying to the supermarket own brand, catering, hotel chains, flights and cruises, box schemes and online (Zepeda and Deal, 2009). To understand industry forces where the own label organic brands are affecting the business, the following tool is used. The issues are late entry, entry with high price amidst big established competitors in the fast growing market also needs buyer’s preference to be customised (Shafie and Rennie, 2012). Porter’s five forces:

Product Line Expansion

Threat of new entrant:

The success of a new entrant depends on inking the deal with the agri-producers and the ability to distribute the products. The establishment of the organic firm can require huge farming requirements with organic manures, testing, output to be tested which requires time (gestation period) and financial support (Winter and Davis, 2006).

Threat of substitute product:

The substitutes have a lower price, and ample number of different grades of organic foods that are priced differently. The grades define the quality of the existing product and pricing done accordingly will help

Bargaining power of customers: The customer understands that the organic produce is important for maintaining the eating habits, and hence the power as a customer is high as there is low price sensitivity. There is also low dependency on the distributors as choices at store and doorstep delivery is abundant.

Bargaining power of suppliers: This is making tough to penetrate the market as higher concentration of the players have longer negative term impact. The retailers, marketers, processors and manufacturers all are equally looking at this lucrative market growth that can create cartelisation of prices sourced from common source.

Intensity of competitive rivalry:

The industry is growing fast that is spread across fruits, vegetables, meat, poultries, milk, bakery and even beverages that is finding place in the organic industry marketing. The present competitor is on price but the future competition needs to be differentiated on the quality pure organic, and partial organic that is more on the qualitative parameter.

The organic firm setup and processing with manufacturing to the packaging element and distribution to the retailers presents the total end to end supply chain process. The total output of a farm (owned or leased on contract) will depend on the soil nature and type, the availability of organic manure, gestation time from start to the first harvest, the testing, labour and finance. All of these are feasible when the market based (pull) exists for the (>95%) pure organic produce. These above elements are controllable while the climate conditions and the whole operations impact on the local community; ecological damage needs to be studied.

The use of machines that are a larger part of the crop cutting while the use of biodynamic agriculture that uses unified and individual organisms that balances ecosystem for soil, plants, animals will be undertaken. The bio-intensive farming systems also can be thought as a key driver to achieve (>95%) purity, which uses minimal land and improve soil quality as the agricultural process is ongoing. The soil conservation process for greater sustainability will be done where, crop rotation, contour farming, water conservation, residue management will be done to gain on time, and keep soil productivity balanced.

The training of the labours on contract will be the key to turnaround the framing process.

The cost of the total project that has harvesting, stocking and packaging and overall REALAKTIV activities are shown below:

Cost	2016 First Quarter	2016 Second Quarter	2016 Third quarter
Owner hours spent on marketing/online	1000	500	480
Owner hours spent on Supply chain	0	500	5000
Owner hours spent on farm activities	2000	480	250
Transactions per customer/month	1	2	4
Spend per customer	£20	£31	£39
Business referral partners added	3	4	3
Investment	£ 60,000	0	0
ROI	20%	31%	35%
Profit after expenses	£ 8000	£ 11,580	£ 15,900

The firm specific activities that are necessary for REALAKTIV to adopt the bio-intensive farming systems, is underlined here.

Resources needed	Per month	Per Year	Per 3 Years
Natural manure	2250	27000	81000
Seeds GM	3000	36000	108000
Labour	8000	96000	288000
Other	500	6000	18000
Interest	2000	24000	72000
Principle return	34,575	4,14,900	17,44,700
Expenses total	50,325	603900	2311700

Marketing Mix (4P)

The options for the REALAKTIV can be conservative or full-fledged approach where the operations will differ so will be the strategies for harvesting and packaging. The approach will be market survey to identify the demand of premium organic produce followed by establishment of firm, bank mortgage after business plan feasibility approval. The three years time horizon that has been earmarked for the ROI (return on investment) for the firm where the judicious mix of the seven Ps of marketing explained earlier will be deployed. The profits each month to be reinvested continuously for the first year till the ROI is achieved. The target is to keep the overhead cost low, the output per firm to be high weathering the climatic irregularities.  The choice of right strategy will depend on the market response (reality scenarios) and the strategies deployed to execute those (Zepeda and Deal, 2009). The QMS (quality management system) practices to be implemented with HACCP (hazard analysis and critical control point) to be introduced and labelled in the packet is necessary to project brand image ‘premium’ tag. The outsourcing option to do continuous replenishment in retailers for REALAKTIV, will have smallholders and external assistance in quality management, training and QC methods download and the incentives for achieving (>95%) purity in organic produce.

The threat of premium organic foods from the retailers is likely to happen, as the organic market is moving towards the maturity stage of the PLC (product life cycle) curve. At this stage the consumers seek differentiated brands and want to move ahead seeking novelty by paying premium. There can be faster acceptance and higher sales prompting the competitors like retailers to offer to buy stake or want to do M&A.

The strategy is to differentiate the REALAKTIV brand is needed to showcase the premium pricing and the scalability. The initial strategy that is demand centric will be tested with the market accepting the brand REALAKTIV while the subsequent offline and online strategies to expand the REALAKTIV portfolio will require the following thrust in retailing, home delivery and penetrate the B2B segment of the foodservice industry. The key issues here is the stock after the harvest and gaps to be met by the import where quality needs vigorous testing. The scalability in REALAKTIV will happen from brick and mortar to the online version where home delivery will enable to capture front part of supply chain. This forward integration of activities will help to streamline over time that will use the experience curve to foray into service centric from the present product centric offerings (Pracejus et al. 2003). So customisable solutions of organic product in terms of volumes, quality for the food service sector can be done, which can be extended to hospitality industry as well.

Conclusion

The above report hence outlines the basics of the entrepreneurship where the existing product like organic food with purity over (>95%) will be the choice of the innovation. It will be requiring the advanced agricultural technology, a detailed process of HACCP certification followed by testing to create a product that is worth the price (premium). The opportunity analysis thus laid down the stages, the key forces acting on the business, the strategies to eliminate, the financials which will be used to generate revenues, expansions and foray into other product range. Entering a high growth arena is a tough, as it will be critical for the company to understand its demand before penetrating the market, however, the product to service shift for the organic produce will be ideal to customise the customer aspirations. The success of the innovation is largely dependent on the farm land quality, the treatment process, seed quality and trained staff executing the whole process.

References:

Brodie, R J, Brookes R .W. and Little, V. (2009). ‘Towards a paradigm shift in marketing; an examination of current marketing practices’. Journal of Marketing Management, 13(5), 383-406

Deane, R., McDougall, P.P., and Gargeya, V.B., (2006). Manufacturing and marketing interdependence in the new venture firm: an empirical study. Journal of Operations Management, 10 (3), 329–343

Dess, G. and Lumpkin, G. (2009) Strategic Management: Creating Competitive Advantages. 6^th ed. London: McGraw-Hill Education.

Dobson, P. et al. (2009) Strategic Management: Issues and Cases. 6th ed. Hoboken, New Jersey: John Wiley and Sons Inc.

Greasley, A. (2009) Operations management in business. 6^th ed. Mason: South-Western Cengage Learning.

Handlechner, M. (2008) Marketing strategy .5^th ed.Canada: Grin Verlag.

Paul, J. (2012). Consumer behavior and purchase intention for organic food. Journal of Consumer Marketing, 29(6), 412–422. https://doi.org/10.1108/07363761211259223

Shaafie, F. A., and Rennie, D. (2012). Consumer Perceptions Towards Organic Food. Procedia – Social and Behavioral Sciences, 49, 360–367. https://doi.org/10.1016/j.sbspro.2012.07.034

Pracejus, J. W., Olsen, G. D., and Brown, N. R. (2003). On the prevalence and impact of vague quantifiers in the advertising of cause-related Markeitng (CRM). Journal of Advertising, 32(4), 19–28. https://doi.org/10.1080/00913367.2003.10639146

Zepeda, L., and Deal, D. (2009). Organic and local food consumer behaviour: Alphabet Theory. International Journal of Consumer Studies, 33(6), 697–705. https://doi.org/10.1111/j.1470-6431.2009.00814.x

Winter, C. K., and Davis, S. F. (2006). Organic foods. Journal of Food Science.