Report On Innovation Trends In The Food Industry For The Case Of Functional Foods

Executive Summary

Discuss about the Report on Innovation Trends In The Food Industry for The Case of Functional Foods?

Executive Summary

The brand FruUgle, was formed after the products that it will be selling, which will be fruit that may be described as ‘unappealing’ by supermarkets to sell. It is an online based business serving customers around London until it expands into another city. The company’s main goal is an ethical one, as its aim is to show how Fruit & Vegetables are wasted and how less desirable fruit is avoided by supermarkets. A financial goal the company has set, is expanding into new areas, they plan to expand in the third year of  the business into Manchester, which therefore means it will have to be quite profitable in order to reach this.

Other than these goals, the future projections of the business will become profitable within the first twelve months and to make a profit of at least £8,000 after tax, which will be more than enough to carry on the business into the second year.     

Idea and Company Description

FruUgle is an online based business specialising in helping people save money by allowing them to purchase fresh fruit and vegetables at a low price. FruUgle will be able to provide a lower price to their customers as the produce will be classed as ‘unappealing’ by supermarkets. The customers can either buy the products as a one-off transaction or as a subscriptions package at a slightly reduced rate.The subscription package will be delivered weekly or every two weeks. It will save their time as they will not have to purchase the produce each week. They will then deliver the product to the customer at their soonest convenience.

The business will be the only service of this nature in this country, however there two similar businesses operating which are in America. (Imperfect, 2016) This is why this will appeal to price-conscious consumers who are looking for a bargain. It will furthermore attract consumers who are looking for products with from an ethical viewpoint as FruUgle would be selling goods that would normally be wasted. The service would contribute in eliminating food waste which is currently at  6.7 Million tonnes a year for household waste. Most of this is avoidable foods such as potatoes at 359,000 tonnes and apples equating to 178,000 tonnes. (Ventour 2008, April (Revised July))

The main competitors can be grouped into two groups, brick and mortar and already established food delivery companies;

Idea and Company Description

Supermarkets

Green Grocers

Farmers markets

Fruit and Vegetable delivery companies

They hope to compete with them by offering fruit and vegetables at a lower rate to the customer and by being the first in the country to offer environmentally ethical fresh products.

The business idea was influenced from an environmental perspective, where the team wanted to make a change to how unappealing fruit and vegetables were wasted where it still has the same qualities and taste as a normal looking fruit.

Industry and Market analysis – Vasyl

The subject idea focuses on the development of service delivery provision in London for fruits and vegetables. The produce sold will be inexpensive as it will be from local supermarkets, i.e. fruits and vegetables considered as defective for sale as per their standards. However, our consumers will have knowledge on this and that it is the reason for the low prices. Nevertheless, even though our produce will be what the supermarkets usually throw away, the business will ensure that they are not a threat to human health. It will create a platform to compete with the supermarkets and others delivery systems, particularly due to our low prices. Our customers will secure 7-day subscriptions as part of the profitability strategy in addition to connecting with other farming networks. They will offer the first delivery for free to attract more customers and create brand loyalty. Moreover, ensuring the produce is in the right size and has perfect taste will be part of the scheme.

Industry

The business will operate in the foods industry and will focus its business operations on the fruits and vegetables section of the entire foods industry. The foods industry involves a number of products and services delivered to the customers present in the corresponding markets during the process of delivering the food items. The major focus of the business in this industry will be delivering good quality fruits and vegetables to the customers at low prices without any harmful effects on the health of the customers (Malla, 2013).

The fruits and vegetables section of the foods industry in the United Kingdom involves a large number of organizations operating in it and providing a range of products and services to the customers present in the corresponding markets. Some of the supermarket chains operating in London are ASDA, Sainsbury’s, Tesco and Marks & Spencer, who provide similar products to the customers. The business will have a competitive advantage over these large supermarket chains in the industry because of the low price offerings for the fruits and vegetables rejected by the large supermarket chains. The fruits and vegetables industry in London also involves the operations of a number of other retail stores and wholesalers who provide the customers similar products as the new business (Wyness, 2012).

Industry and Market analysis – Vasyl

The increase in the healthy lifestyle trends of the customers present in the markets in London and Manchester, the fruits and vegetables industry can expect growth in the future. The citizens of the corresponding markets are gradually following healthy lifestyles due to increase of awareness of various diseases and weaknesses due to lack of vitamins and proteins. This allows the fruits and vegetables industry to grow along with the increase demand of the various types of vegetables and fruits which are rich in various minerals required for a good health.

Recent concerns about ecological and food safety in the food industry have prompted expanding enthusiasm for organic foods and vegetable generation as a distinct option for customary products and enterprises. Moreover, as more suppliers of organic foods and vegetables enter the business, it turns out to be more aggressive and existing makers are required to end up better tools and strategies that are more successful. Given the way of their subject activity, the business will have a higher ground as it will focus on a particular system of clients. So the latest environmental trend in the corresponding markets of operation is the consumption of organic food and vegetables. The customers present in the market are generally preferring organic foods and vegetables over the products with artificial substance. The latest business trend in the corresponding industry is based on the increasing demand of the organic foods and vegetables, which in turn causing the organizations operating in the industry to provide a wide range of organic foods and vegetables to the customers.

The political issues involved in the business operations in the fruits and vegetables industry are minimal in terms of their negative effects on the business. The organization operating in the corresponding industry has to follow certain guidelines and policies established by the government, in their business operations of providing the products to the customers present in the corresponding markets. Another political issue is the standard of quality set by the government of the corresponding market and the requirement of the business to maintain this minimum standard of quality in their business products and services.

Potential for development lies on the significant accentuation of the client. With this produce business, giving the client what he/she needs, when and how he/she needs more chances for prosperity (Yu & Nagurney, 2013). On the other hand, take note of that regardless of the possibility that an interest exists for the organic products supply; there is no rational reason for doing as such unless it happens for a benefit. Thus, effective marketing will rely on upon building up a careful promoting arrangement that structures how to supply the produce dependably, reliably and at a benefit. This in turn allows the business to have a perfect opportunity to grab a lot of the market shares by providing a wide range of organic fruits and vegetables to the customers at low prices.

Industry

Environmental and Business Trends

The organizations providing organic fruits and vegetables in the corresponding markets target various sections of the markets to increase the chance of success and to decrease the competition for the corresponding business operations. The amount of profit one makes offering foods grown from the ground depends largely on where an organization chooses to put their stand. Everybody needs their produce stand to be obvious to the objective populace, ideally in a range with heaps of pedestrian activity. We need those individuals to purchase the ‘imperfect’ produce and utilize the free deliverance services. Thus, it is a smart thought to put the stand where individuals are now looking for sustenance, for example, by a supermarket (ideally for this business thought) or a rancher’s business sector. Also, it is vital to put noteworthy consideration on building the display. It is acceptable to offer/convey the produce out of cardboard boxes; however, one will expect a superior reaction from clients on the off chance that they put a little exertion into how their item looks. Today, individuals adore the idea of perfect, alluring presentations for their food.

Typical Buyer – Target Market   

Students

The students present in the corresponding markets can be considered to be the targeted customers for the fruits and vegetables sold by FruUgle due to the low price of the products along with decent quality. The students will prefer the products at lower price in comparison to the other brands available in the market and the decent quality of the fruits and vegetables sold by FruUgle allows the students to be attracted to the offerings (Wyness, 2012).

Environmentally conscious

There are a number of people present in the corresponding markets who are conscious about the state of the environment along with the negative effects on it because of their actions. The products sold by FruUgle are the fruits and vegetables rejected by the large supermarket chains operating in the corresponding markets. These large supermarket chains don’t deem these fruits and vegetables to be in a standard state to be sold in their retail stores. This in turn leads to the loss of these fruits and vegetables. The potential customers who are conscious about the environment will prefer the products sold by FruUgle as it prevents the loss of environmental resources and hence negative impacts on the environmental factors.

Young Families

There are a number of customers present in the corresponding market who belong to young families. These customers are generally operating under a lot of pressure of maintaining a happy family with limited resources. So they will prefer the decent quality fruits and vegetables sold by FruUgle at lower prices in comparison to the high quality products sold by the large supermarkets at higher prices (Pierson, 2012).

Price conscious

There are a number of customers present in the corresponding market, who are conscious of the price of the products that they are buying. These customers prefer the fruits and vegetables sold by FruUgle due to the low price in comparison to the other brands selling the same products. The decent quality of the low cost fruits and vegetables sold by FruUgle will help the organization to attract more number of price conscious customers (Stuckler, 2012).

This business idea and delivery system supports the economy and targets a specific target market. The target market will be students, young families and environmentally/price conscious individuals. The business idea of reusing the fruits and vegetables rejected by the large supermarket and retail stores chains in the corresponding markets appeal to the environmental consciousness of these potential customers. The business idea of providing these products to the customers at lower prices also appeal to the price consciousness of these potential customers present in the corresponding market. The delivery system of the products sold by FruUgle through the stands at various places also appeal to the individuals targeted by the business model of the organization. The students present in the corresponding market prefer the quick purchasing process from the fruits and vegetables stands instead of the long queues in the large supermarkets and retail stores. The individuals who are conscious of the price of the products or belong to young families prefer the business model of FruUgle due to the low price offerings (Malla¸ 2013).

Segments in the market

The corresponding market of operation of FruUgle can be divided into a number of segments based on a number of factors. Some of these segmentation factors for the corresponding market are mentioned in this section of the report.

Socioeconomic status

The individuals present in the corresponding market can be segmented into various segments based on their socioeconomic status. The socio economic status of the potential customers in the corresponding market define whether they can afford or prefer the products sold by FruUgle. The individuals present in the middle and bottom socioeconomic classes in London will most likely to be the most attracted to the products sold by FruUgle (Kunkel, 2013).

Lifestyle

The lifestyle of the individuals present in the corresponding market is another factor which affects the purchase decision making process for the products sold by FruUgle. The individuals accustomed to the lavish lifestyle generally prefer buying their food from the large supermarkets and retail shops present in the corresponding market (Goldberg, 2012).  

Age is not a determining attribute as the focus is saving on cost and providing excellent products. As indicated by earlier research, customers can spare 32% of their budget purchasing organic food and vegetables from this type of outlet, as compared to the supermarket prices and simultaneously, experience the free delivery services. Other descriptions such as social/ethnic factors and typical lifestyle are not primal making the venture convenient and competitive with the other appealing outlets being the supermarkets and farmer’s markets. However, given developments in 2015, the fruit and vegetable markets have been experiencing a decline due to the mounting supremacy and acceptance of cheaper suppliers with excellent delivery systems. Moreover, even if these outlets decide to lower the prices chances of overpowering such a system are extremely narrow.

Competition

The competition for FruUgle in the corresponding market is based on a number of environmental factors. Some of these environmental factors are mentioned in this section of the report, which affect the overall business model of the organization.

Potential Size of the Market

In London, consumers acquire organic food and vegetable from farmers’ markets, community supported agriculture and delivery programs. Farmer markets comprise of open markets normally held outside where agriculturists assemble and offer local and fresh produce to shoppers. There are a few agriculturists markets all through London. On the other hand, the farmer’s markets are losing touch because consumers now know that not all items sold there is local produce. This creates a great deal of potentials for the London market. Presently, there is an additional strategy to endeavor opportunities in the business sector (Yu & Nagurney, 2013). Before and after the cultivating seasons, the customers could pay a certain fee and after that, at some point toward the starting or mid-year, produce, and other sustenance items will be accessible to them, courtesy of this venture. The business will convey the produce to a pre-decided area in the distinctive communities at a set time, and every one of the purchasers will just have to pick their produce.

Scalability of the market

The market for fruits and vegetables in London is definitely scalable, which allows the introduction of the new business models and ideas. The unique business idea of FruUgle allows the organization to sustain in the corresponding market and allows the business processes to be a success. The fruits and vegetables market will be able to sustain with the increasing demand and business operations for the corresponding products (Grunert, 2012).

Competitors analysis

There are a number of large and medium organization operating in the corresponding market can be considered to be the significant competitors for the business operations of FruUgle. The supermarket chains such as ASDA, Marks & Spencer, Sainsbury’s and Tesco are the biggest competitors of the organization with high brand loyalty and strong brand image. These organizations hold a lot of shares in the corresponding market, which in turn affect the business of FruUgle.

Potential risks

There are a number of potential risks present in the corresponding market, which can negatively affect the business processes of the organization. These risks should be effectively monitored to ensure the high performance of the organization. Some of these risks are mentioned in this section of the report.

Spoilage or contamination of the products are possible due to power outages or other issues (Bigliardi, 2013).

The safety of the products can be compromised due to the failure in the machines and processes responsible for maintaining their safety.

Possibility of errors and failures in the supply chain and inventory management systems may cause the organization to lose a lot of business.

The failures in the equipment may cause the disruption of the delivery of the products to the customers present in the corresponding markets.

Marketing plan

There are plenty of competitors who sell similar products to FruUgle, however where they excel is in the ability to market themselves as an environmentally conscious brand at a low price point. They’re selling organic produce that would have otherwise gone to waste, unlike their competitors. The business will use this vision to market their products; they want to convey a message to their target market that they care for the environment. This is why the customer should work together with them to improve the environment by purchasing the products from them.

The brand’s current marketing strategy will be primarily done via social media, blogs and podcasts. Facebook, Instagram and Twitter will be used to promote deals and announce new products/services.  Pictures of their fruit and vegetables as well as packaging will be posted to establish brand recognition and brand reputation. This is a new cost effective way of marketing compared to “old” marketing.

The business plans on advertising on Google and Facebook to gain new customers from existing delivery services. FruUgle will use selected keywords to find users who have shown an interest in topics which are related to their business. The business will additionally advertise on podcasts who share their target audience demographically. They will use personalised URLs to track the success of the advertising campaign. The business will also plan to work with bloggers by sending them products for free to test out and endorse. The blogger’s audience demographics will be studied to see if there’s an overlap before any exchange in products.

FruUgle believes that these kinds of marketing will be most suitable for the business. This is because it is an online based business and they will be able to reach key demographic which is students, young adults and environmentally conscious individual. They will also do their own packaging when delivering the products to the customer which will lead to promote the business further. This is because when the customers reuse the bag, other people will be able to see the brand name.  

The price of the products will be as economical as possible. It will be 30% less than the market price. The customer will get extra 15% off in their first order which will encourage them to try products. There will also have different types of promotional offers to attract more customers. One of the examples is the extra 5% off for customers who uses a promotional code; this special offer will be for the students. The company will work with NUS to advertise to student discount to attract new customers.

As FruUgle is an online based business, they have decided to deliver the products to a customer’s chosen location. In the first two years, the delivery service will be based in the London area only. Over the two years, the business will expand their delivery area to Manchester. For the delivery service, the customer will only pay a little amount of money. If the customer buys shopping for twenty pounds or more then they will be able to enjoy the delivery service for free. After one year of service to the customers, FruUgle will start adding more features to the way they deliver their products. One of the extra features they can include is allowing customers to pick up their products from the pickup points for free. There will be a number of pickup points in the different location to allow customers to pick up their products quickly and cheaply.

Company structure  

After the company was formed, FruUgle found out what each member’s specialty was and assigned a specialist role to them to ensure that each of their positions were the most applicable role.

Joe’s role is lead researcher and strategist as he contributed the most to the overall business concept and performed all the research from market and business perspectives, as well as having past experience in running his own business.

Vasyl has experience in HTML and CSS from when he was a part-time web designer, this allowed him to be the company website developer as he is the most skilled to do that position.

Ash’s degree made him the ideal person to be in charge of the financial aspects of the business such as being the accountant. His task is to deal with all the calculations that needs to be done to predict the costs and revenue.

Stuart’s role is to oversee marketing of the product and public relations of the business. He was chosen from experience he had at doing a similar position for a university society.

Matthew is in charge of general admin related tasks such as handling intellectual property related issues and answering customer inquiries. He was selected for this role because he is a friendly individual with really good people skills.

Service Development and Operations Plan – Stuart

From a business standpoint FruUgle plan on starting out small with an outside investment of £4000 realistically there are expectations that the business will have slow growth and it will take several months before it is making enough money to justify heavy outside investment. Disposable cash from each five of the directors of the business will be used as the outside investment.

Firstly, the plan is to cut overhead costs, therefore FruUgle has decided not to rent a warehouse straight away as there will be minimum stock when starting up, for which a warehouse is not really needed therefore, overhead costs can be cut for the first year this way until the business has a high enough growth and stock to need a warehouse.

For sourcing the Fruit and Vegetable initially the business will be making contact with the farming associates to essentially get the business known to many UK farmers who might be interested in partnering with them as they believe this will be more efficient than individually trying to contact the farmers themselves, also not to mention the fact the Farming associates will already have well established trusted contact with many farmers already. The idea is that the business will source fruit and vegetables from non-Genetically Modified Organism (GMO) farmers that would generally not sell to appearance, i.e. odd shaped apples, oranges e.g. that would not get sold in supermarkets. This is why FruUgle wish to use non GMO crops as they believe that if they were to use GMO crops that are deformed in any way, as controversial as it might seem to be people would not buy because they would think that the genetic modification has somehow altered the way it has formed and it may be harmful to their health. From the farmers themselves, a contract will be drawn up which will involve the organizing of farmers’ inventory that will be supplied to FruUgle.

For the actual delivery itself FruUgle will be setting up contracts with already existing courier companies, as they have no interest in essentially creating in their own courier service as well to transport the food itself as for a startup business they will end up taking on more than they can realistically do which in many startup business cases, is one of the main reasons why they will fail. FruUgle are currently with KDE Express who is a Courier company which is based in London. (kdeexpress.co.uk, 2016)

Initially the business will undercut any UK supermarkets cost of fruit and vegetables as they believe that with the money they are saving elsewhere for example the near nonexistent storage costs due to not using massive storage warehouses FruUgle will be able to undercut the prices of the leading supermarkets while still making a profit, and as the business grows in size and need for warehouses possibly arises, the business will have sufficient net worth to justify the costs. Also crucially they will be the only company within the UK offering this low cost fruit and vegetable service with the only two other similar company being operated in America, so they will have the benefit of no direct competition as yes supermarkets and grocers sell fruit and vegetables, but they will not sell fruit and vegetables that they deem non visibly appealing.

The website which will be created by one of the founding team members Vasyl which will be hosted on an out of house server where they will be making sure that customers information is secured and falls well within the Data Protection Act.

Lastly the business will be making sure that they fall well within the food distribution laws within the UK and will be contacting the Department of Agriculture regularly to ensure the what they are doing abides with several legal requirements for a food distribution service within the UK including the Food Safety Act, The General Food Law Regulation as well as the Consumer Contracts Regulations.

Financial projections

This is a new business, but it expected to sell a sufficient amount of products each year. This is because the business will be promoted in many different ways to attract as many customers as they can. The aim is to sell 11,428 crates in the first year. The second year it predicted to sell nearly double the amount which is 31,642 crates and in the third year, the target is to sell 70,643 crates. The crates have the capacity to carry 5.1 liters of products. (chep.com, 2016)

The price will be seven pound per crates, the crates will contain assorted fruit. The business expects to sell the products less than 70% of what their competitors are selling it for. There also will be other promotional offers to attract more customers; one of the examples is the extra 5% off for Students.

Expenditures will be kept as low as possible for the first year as FruUgle will not rent any office space in the first year, which will help them to use that money in other parts of the business. The expenditures which FruUgle will have are the:

Transportation costs

Packaging costs

Rent

Purchasing stock

Technology costs

Advertising

Staff

Waste management

The following financial projections are for the next three years. It is expected for FruUgle to sell £80,000 in the first year, which is a 177% increase from year one to year two and the potential profit is £8,880 after 20% tax is taken. The next year it is predicted to have a 155% increase from year two to year three, the expecting revenue for this year will be £221,500 and the potential profit will be £21,264.  Third-year the estimated revenue will be £494,500 and an increase of 27% and the expecting profit after tax will be £73,211. This is because the business is due to increase the target market by expanding the delivery area in the third year. The Cashflow forecast is located in the Appendix.

Appendix

Cashflow Forecast for first 3 years of starting business

For the first year ‘fruUgle’ is predicted to reach revenue of £80,000 and a profit of £8,880 after 20% of tax is taken. As you can see rent is not paid as the business will be run from the director’s homes.

For the second year it is predicted for FruUgle to reach a revenue of approximately £221,500, and a profit of £21,264, after 20% of tax is taken. From March, the business will be run from a warehouse and therefore rent will have to be paid continuously after this month which will increase the costs slightly.

  

For the third year of the business, it is predicted for FruUgle to be making a total revenue of £494,500, and a profit of approximately £73,211, after the 20% tax has been taken. During the March month of this year the business is predicted to undergo an expansion into another city where this will double the rent as rent will have to be paid for 2 warehouses both in London and Manchester.  

Intellectual property

Some intellectual property (IP) has been established that will be used for the particular service. One intellectual property that will be used will be trademarking the logo and packaging so that the product is unique to other brands of fruit out in the current market. By trademarking the packaging and logo this makes it illegal for other, upcoming companies, to copy it and use it as their own. Also there will be a distinct colour scheme to the packaging and logo which may differ amongst different types of deformed fruit and vegetables which FruUgle aims to sell such as oranges, pears and carrots etc. In this case they may sell a multipack of fruits in one crate and therefore the packaging may contain all the colours of the fruits in a design made specific for the packaging, where this specific colour scheme for the design can be trademarked so that other companies don’t use the exact mixture of colours on its packaging. This will overall make the packaging stand out to customers as they will ultimately see FruUgle as unique and will feel more inclined to purchase it.

Another IP that the business will be using is copyrighting the website and social networking page. This will be done to stop other companies, or just random strangers, from framing a copy of FruUgle and using it as their own for fraudulent reasons. For the social networking site such as facebook or instagram, this can be done through verifying the page so that other people can see that once the page is verified it will be the original one and not another one in which someone else set up as their own. Copyrighting the website will be done to make sure that once the website is set up, with the logo and colour scheme etc this will not be copied by anyone else for again fraudulent reasons or any other reasons.

Also, it is one of the business  IP to use confidential information to protect the business contacts and customers. By using this for an intellectual property they will be making all of the information given to them, by customers and business associates, strictly confidential under the laws of the Data Protection Act. In doing so the business will have the job of maintaining the full, security and privacy, when obtaining information from business contacts and customers, so they’re not used misused by any person within or outside the business.

Advertising will cost around £1000 for the first 7 months of starting the business

The business will be profitable within one year

The business will have access to enough stock to purchase

Waste Management will increase as stock increases

References

Bigliardi, B., & Galati, F. (2013). Innovation Trends In The Food Industry: The Case Of Functional Foods. Trends in Food Science & Technology, 31(2), 118-129.

Grunert, K. G., & Traill, B. (2012). Products and Process Innovation in the Food Industry. Springer Science & Business Media.

Goldberg, I. (2012). Functional foods: designer foods, pharmafoods, nutraceuticals. Springer Science & Business Media.

Kunkel, D., McKinley, C., & Wright, P. (2013). The Impact of Industry Self-Regulation on the Nutritional Quality of Foods Advertised on Television to Children. Ch1ldren Now. University of Arizona, 2009.

Malla, S., Hobbs, J., Sogah, E. H., & Yeung, M. T. (2013). Assessing the functional foods and natural health products industry: A comparative overview and literature review. Canadian Agricultural Innovation and Regulation (CAIRN) Network.

Pierson, M. D. (2012). HACCP: principles and applications. Springer Science & Business Media.

Stuckler, D., & Nestle, M. (2012). Big food, food systems, and global health. PLoS medicine, 9(6), 678

Wyness, L. A., Butriss, J. L., & Stanner, S. A. (2012). Reducing the population’s sodium intake: the UK Food Standards Agency’s salt reduction programme. Public health nutrition, 15(02), 254-261.

Ventour, L., 2008, April (Revised July). The food we waste. Institute of Food Research. Available at: https://www.ifr.ac.uk/waste/Reports/WRAP%20The%20Food%20We%20Waste.pdf (Accessed November 1, 2015).

Yu, M., & Nagurney, A (2013) Competitive Food Supply Chain Networks with Application to Fresh Produce: European Journal of Operational Research, 224(2), 273-282

Foldable Plastic Crate  – K1 – 5 Litres (14400)  Available at: https://www.chep.com/RPCs/Foldable-Plastic-Crate-K1-5-Litres-14400/ (Accessed: 4 Jan 2016).

Imperfect – Ugly Produce Delivery
Available at: https://www.imperfectproduce.com/ (Accessed: 4 Jan 2016).

Courier and Delivery Services in North West London from KDE Express
Available at: https://www.kdeexpress.co.uk/home/3822895  (Accessed: 6 Jan 2016).