Abstract
The US juices market is the world’s largest (29% of the global market). Estimated a$32.121 billion a year, the market is seeing a change in consumer tastes away from high-energy/sugar products, in favor of healthy natural and organic alternatives. Unfortunately, healthy products are either unavailable or provided by unreliable suppliers/brands. Kreation Juice seeks to fill this gap, by providing high quality products and a consistent brand. Kreation Juice products’ lack of intensive processing helps preserve active, natural ingredients (including antioxidants, fiber, silicon, liquid chlorophyll, vitamins, proteins, and amino acids) that have beneficial effects on health. This project plan includes an assessment of the product concept, market size, consumer needs, and expected project costs/returns.
Recommendation Overview
The proposed concept is highly differentiated natural and organic juice/smoothies for special and regular dietary needs. The product is 100% organic, chemical-free, non-pasteurized, gluten-free, filler-free, and preservative-free. Kreation juices, smoothies and other products are cold-pressured using non-high-pressure processing technologies to preserve natural taste and nutrition, while at once killing hurtful bacteria. The products’ nutritional richness and health benefits should help meet the increasing consumer demand for healthy, natural food offerings in the US and elsewhere in the developed markets across the world.
Basis of Recommendation
Rationale
Consumers in the US are increasingly alive to the adverse health effects of most of the regular high-energy and processed drinks. This awareness has driven an explosion in the demand for natural and organic foods, which bodes well for Kreation Juice. Even most importantly, there is an expected reduction in the consumption for high-sugar/energy soft drinks, which should see an even bigger growth in the demand for healthy replacements. Kreation Juice/smoothies offers a range of products to cater for a variety of consumer needs.
Customer Need
The target consumers are health conscious buyers (aged above 35 and mainly female), including the aging population, are substituting their soft drinks with healthier alternatives. This consumer group has a relatively high per capita income, and are highly likely to spend on products like juice and functional drinks. Effectively, with the expected growth in GDP in 2015-2019, the target market will also expand. This market is also likely to be value-driven, which means that consumers are concerned about ethical business practices, corporate social responsibility, and sustainability. Kreation Juice hopes to meet these needs by availing organic juice/smoothie offerings through exclusive juiceries, kafes, and the company’s website. Further, the company’s strong belief in ethical business practices, corporate social responsibility, environmental sustainability should have a positive pull on the market.
Customer Benefit
These products help prevent or reduce the risk of some cancers and heart diseases, besides promoting normal body functions. Organic juice offers immense healthy benefits to consumers and Kreation juice is designed to ensure just this. A focused differentiation strategy should enable the product gain attention and loyal following in the target markets fast, making for higher brand equity. To this end, the product quality, unique packaging, and personalized customer relationships will be critical. Further, the product is distributed through company-owned or closely controlled outlets to ensure that product and service quality. The use of electronic commerce allows for customers in areas without Kreation juice juiceries to access the product (Rugman & Collinson, 2012; Kreation Juice, 2016).
Customer Value
Common preservatives, food colors, and other ingredients used in drinks such as sodium cyclamate are 4-methylimidazole (4-MEI) are known to be carcinogenic, while excessive processing of foods also leads to nutritional loss. Even most importantly, regular high sugar/energy drinks are associated with heightened risks of developing obesity and diabetes, whose prevalence has reached epidemic proportions in developed nations. It is estimated that two in three adults and one in three adults and children are obese/overweight, and the country spends upwards of $190 billion annually treating obesity-related health problems. The high consumption of high-energy/sugar drinks is a major contributor to health crisis. A 20-ounce soda contains up to 18 teaspoons of sugar and yields up to 240 calories. Even most importantly, sugary drinks comprise 4% of the country’s daily calorie intake and its implications for health has be en scientifically proven to be negative. Lastly, excessive use of chemicals in the production of fruits and vegetables used in regular drinks results in chemical contamination of the products, which has equally dire consequences on the consumers’ health.
Size of the Market
The US juices market was estimated to be worth $32,121.2 million in annual revenues (14,456.5 million liters). Pure fruit juice (100% fruit juice) was easily the best performing segment in 2014, having posted $7,827.1 million in revenues (24.4% of the total market takings). The 100% fruit juice (not from concentrate) represents 23.3% of the market, while the vegetable juice, fruit drinks, and nectars represent 21.5%, 19.6%, 11.3% of the market, respectively. The vegetable juices market, green juices with vegetables, fruits, and other variants, using items like kale, romaine, celery, cucumber, and parsley, are often combined with fruits for better taste/variety. Kreation organic juice pushes the frontier further, by directly challenging both natural and organic juice offerings in the market, to ensure that it benefits from the growing wave of customers that are reducing their consumption of high energy/sugar soft drinks. Successful product differentiation should make for a unique customer experience and a strong brand (Rugman & Collinson, 2012; IBISWorld, 2016).
Reason for Purchase
The reducing demand for high-energy/sugar beverages in the US creates a potentially lucrative market for healthy alternatives, and 100% organic products offer an excellent alternative for high-income, health conscious customers. The product seeks to offer high quality products to the existent and new market. By offering exclusive Kreation juiceries and kafes, the company will ensure that customers have a relaxing place that projects the brand image. The juiceries and kafes offer a unique experience to customers that are otherwise swamped by unhealthy foods and drinks, to relax and get the best organic drinks there is on the market.
Strategic Fit
Since there are many of natural and organic food/drink offerings on the market, Kreation juice’s use of focused differentiation as a generic strategy will allow the company to establish a foothold in the market and thrive. The company’s string focus on supreme quality products, exclusive juiceries and kafes, unique packaging, and marketing strategy seeks to the it aside an organic juice market leader. Particularly, the product is meant to benefit from the reducing demand for fast foods and high-sugar soft drinks (due to health concerns), which means that it does not necessarily have to capture the market from other established players in the market. Further, Kreation Juice will seek to set itself aside an ethical and sustainable organization, not only to appeal to value-conscious customers, but also because the company recognizes its role as a responsible corporate citizen.
Forecast
While the overall volume of juice sales in the US fell by 2% in 2014 and is expected to continue the marginal decline in the short term, the demand for organic and natural foods has risen due to increased awareness of the related health benefits as well as the harmful effects of processed foods. As the demand for regular beverages and soft drinks reduces due to health concerns, it is anticipated that the demand for healthy substitutes, including green tea, unprocessed and organic juices/smoothies will see a further expansion in demand. In 2010-2015, the healthy eating index, which assesses the proportion of recommended diet an average American eats, rose by an average yearly rate of 0.2%. According to MarketLine (2015b), organic food sales reached $36 billion in 2014, representing a 10% expansion since 2013. The US Department of Agriculture’s seal for organic/natural foods is fast gaining market recognition, which should translate into increased demand for organic and natural offerings. Further, there has been a marked growth in the market for functional drinks both in the US and elsewhere in the world. . Between 2014 and 2019, the US juice market is expected to grow by a CAGR of -0.7%, to reach $31,064.8 billion in revenues (or 13,697.4 million liters).
Since Kreation Juice has established operations, all that is required is to scale up its operations. To this end, the following costs are anticipated:
At the current level of demand, it is expected that the company would realize in excess of $492,000 in net profit at the close of the 2016-17 financial year.
Project Plan
Conclusion
While organic juices and smoothies are not new in the market, their availability to the growing market in the US remains a problem. The market still needs a reliable and accessible brand to provide these products, and Kreation Juice will strive to meet this need. The company will offer excellent quality products that promise considerable health benefits to consumers. Further, the company will seek to establish a strong brand and company, founded on ethical business practices, CSR and quality products.
References
IBISWorld. (2016). Juice Production Industry. IBISWorld. New York: IBISWorld.
Harvard School of Public Health. (2015). Sugary Drinks and Obesity Fact Sheet. Retrieved 2016, from http://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/
Johns Hopkins Bloomberg School of Public Health. (2015, Feb 18). Popular Soda Ingredient Poses Cancer Risk to Consumers. Retrieved Feb 14, 2016, from http://www.jhsph.edu/research/centers-and-institutes/johns-hopkins-center-for-a-livable-future/news-room/News-Releases/2015/Caramel-Color-in-Soft-Drinks-and-Exposure-to-4-Methylimidazole.html
Kreation Juice. (2016). About Us. Retrieved Feb 14, 2016, from http://kreationjuice.com/
MarketLine. (2015a). Company Profile: Whole Foods Market. New York, New York: MarketLine.
MarketLine. (2015b). Juices in the United States. MarketLine. New York: MarketLine.
Rugman, A. M., & Collinson, S. (2012). International Business (6th Ed). London: Pearson Education.
Yip, G., & Hult, T. (2011). Total Global Strategy. New York: Pearson Education.
