Beginnings Baby Food (hereafter known as BBF) located in North Miami, FL, is the only supplier producing meat-based Kosher and organic baby food products. According to the North American Industry Classification System (NAICS), BBF, operating under number 311422, is a business primarily involved in food manufacturing (U.S. Census Bureau, 2015). BBF wants to bring awareness to the significance of consuming nutrient-based food and stimulate a healthier lifestyle. According to a survey conducted in 2014 by Gallup, a global research consulting firm, 45% of all Americans consume organic food (Riffkin, 2014). The percentage of health-conscious consumers in Miami, FL, was 32% in 2012, and this trend is predicted to increase in subsequent years (Rivera).
In 2010, global baby food sales accounted for $36.7 billion of the food market and today, it represents $55 billion (Figure A1 and Table A1) (Statista, 2014). In the U.S., baby food sales are projected to reach $6.4 billion by 2016 (Figure A2) (LeBeaux, Epperson, & Huang, 2009).
While Miami offers a unique business environment, according to Hoovers (2014), small businesses in Miami-Dade County with fewer than four employees account for nearly 81% of all domestic market businesses (Figure A3). Furthermore, findings corroborated that the success rate for start-up and small businesses is less than 15% within the first year (Ritholtz, 2012). However, a thorough analysis of the competitive environment revealed that the real competition facing the baby food market is consumer demand and willingness to try new brands.
The BBF company needs a team of researchers, in this case MIB candidates, to ascertain the feasibility of penetrating the baby food industry by early August 2015, through a test market, for Stage 1; that is, food for infants aged four to 18 months. In addition, the team is charged with proposing a competitive five-year exit strategy.
In that regard, significant data on the marketing mix, competitor’s analysis, demographics evaluation, and required capital investment were gathered to correctly outline the client’s charge. Lastly, the team studied pertinent financial data and a company valuation in an effort to calculate the business sustainability of BBF.
The team developed a 10 question online survey (Appendix X) for the targeted consumer, parents between the ages of 25 and 40, with infants or toddlers, who have a household income between $75K and $100K. The survey was deployed via SurveyMonkey® on the most popular online platforms (e.g. Facebook, LinkedIn, Twitter). Additionally, the team used specific e-mail distribution listings for direct contact with consumers in the Miami region. The purpose of this research was to acquire insight into the motivating factors driving purchase decisions for the targeted consumer. The research team not only used the online platforms to collect data, but also printed surveys throughout various establishments in Miami, reaching a total of 191 respondents.
In addition, the team used archived data via the Florida International University’s (FIU) remote databank and publications such as the (a) Journal of Marketing Research, (b) Journal of Consumer Research, (c) Journal of Product & Brand Management, and (d) Passport Euromonitor International.
Target market selection. The selection process necessitated to two main decisions to be made: determine the market regions and identify the target consumers (Nylen, 1990). In order to successfully enter the food industry, BBF must understand its consumer. Previous experience has proven that certain businesses practiced unusual methods to amass success by simultaneously targeting every consumer in an industry, a process known as mass marketing (Nylen, 1990). On the other hand, target marketing is the selection of small groups of consumers with similar wants and needs, and tailoring the marketing mix to meet those needs (Nylen, 1990). A start-up business such as BBF, with limited capital, can best succeed implementing the target marketing approach.
Competitor’s analysis. The competitor’s analysis included the compilation of formula milk, pulverized milk, prepared food, and other miscellaneous types of baby food. The data contained in this section of the report was derived using the Euromonitor International’s Passport Information System. More than 500 analysts across the U.S. performed and consolidated the research information. Research included the comparison of baby food companies, store checking, interviewing top-industry players, and analyzing industry trends (Passport baby food Americas, 2015).
Marketing mix. In order for BBF to create an adequate and effective marketing mix that contains product, price, place, and promotion, the business must first understand the present-day marketing context in the baby food industry. As a part of the marketing research, a third-party graphic designer was contracted to create alternative product labels. In addition to an effective marketing mix, Google Scholar was used to survey recent quantitative and qualitative research studies, which are printed in peer-reviewed journals. Complete journals were accessed through FIU’s remote access and the United States Department of Agriculture (USDA) Economic Research Service. The criteria used for these data only included English-written publications dated 2012 or later. Finally, all material used for research focused on the (a) baby food industry, (b) Kosher food products, and (c) start-up companies.
Budget analysis. Determining a financial research procedure for BBF required pinpointing the costs for the production, primary sources; including but not limited to contact with certain providers using the www.alibaba.com databank, and in-person inquiries with suppliers of materials. Alibaba served as a link between the companies and providers, a tool the team used to eliminate geographic and linguistic differences.
Exit Strategy. BBF’s 5-year exit plan included an organizational valuation based on evaluation methods in accordance with the Chartered Financial Analyst (CFA) Institute. CFA-accepted philosophies were important for this research because, “The Chartered Financial Analyst (CFA) charter is an investment credential that, for more than 60 years, has been the global standard for exemplifying the integrity, dedication, and advanced skills needed to build a stronger, more accountable financial industry” (CFA Institute, 2015).
Findings and Discussion
Results of Survey
The analyzed survey data revealed that color of baby food purée is not a main determinant in the purchase decision on a particular type of baby food. Over half of the respondents selected that the color either (a) does not matter or (b) was neutral in their decision making (Figure B1). When asked about their preferred packaging, glass jar or pouch, 102 respondents (54%) chose glass jars whereas 54 (29%) chose both, glass jar and pouch (Figure B2). This has essential implications when determining which type of packaging to choose for BBF. Furthermore, the results correlate to the fact that out of 191 respondents surveyed, 53% mostly use baby food at home, while only 22% use baby food during travels (Figure B3). Pouches are ideal for traveling, since a spoon is not required to eat; however, glass jars are more traditional and offer visibility of the contents. This substantiates that if parents use baby food predominantly at home; glass jar would be the favored packaging choice.
The most popular flavors were vegetable-based and meat-and-vegetable mix, accounting for 75% of all responses. A very small percentage (1.63%) of respondents selected a meat-based flavor as their purchase choice (Figure B4). When asked which factors matter most when buying baby food, a total of 157 respondents (87%) ranked quality and product ingredients at the top of the list. Surprisingly, 108 respondents (57.84%) listed the product taste as a deciding factor when purchasing baby food, although it is known to be tasteless (Figure B5). The importance of baby food prices during purchase decisions ranged from moderately important to extremely important (Figure B6). This implies that though BBF will be positioned as a premium product, it should be carefully priced to remain competitive. Lastly, nearly 90% of parents stated that if they had time, they would make their own baby food at home versus purchasing it (Figure B7). Most processed baby food sold in supermarkets and grocery stores have a shelf life exceeding one year, providing BBF a competitive edge by positioning its homemade food products with a shelf life of less than six months.
Target market selection. The team evaluated a series of factors: segment potential, competitive environments, and the ability to serve the chosen market, and the competitive advantages (Nylen, 1990). In a mature industry, BBF can succeed targeting the Kosher community (e.g. Jewish and Muslim population) because of its ability to better serve this niche. Now, no competitors exist that offer Kosher meat-based baby food products, which represents an opportunity for BBF to thrive and cultivate its brand.
Cultural Diversity. Growing cultural diversity, although challenging for manufacturers, provide opportunities by launching products that meet the targeted consumers needs (Euromonitor International, 2015). As a Kosher product, BBF would largely position itself next to other cultural products. Presently, the Kosher market catering to the needs of Jews and Muslims (Euromonitor International, 2015), is significantly smaller when compared to other ethnic products within the market. Statistics show that 1.3 million Jewish and 3.5 million Muslim consumers (including people from other religions) eat Kosher products in the U.S. (Euromonitor International, 2015; Seal-K, 2015). Moreover, 21% of Americans purchased Kosher products for cultural or traditional reasons. The Kosher market in the U.S. represented nearly $12 billion in 2010, the most recent data collected (Euromonitor International, 2015; Seal-K, 2015).
Another obstacle for ethnic consumers is accessibility of products. In developed markets, like the U.S., most ethnic consumers shop at independent supermarkets or cash-and-carry stores, due to a lack of desired products in mainstream supermarkets (Euromonitor International, 2015). These data signify an important advantage for BBF, if they are able to enter supermarket chains.
Jewish Population. The Jewish population embodies the largest consumer of Kosher food products. The state of Florida, with a Jewish population of 638,985, is home to the third-largest Jewish region in the U.S. Additionally, Florida has four southern areas listed in the top-11 metropolitan communities (Table B1 and Table B2) (Berrin, Solomon, & Brodie, 2014; Sheskin & Dashefsky, 2012). The Jewish community in southern Florida is concentrated in three main regions: North Miami-Dade, South Miami-Dade, and Palm Beach, with an emerging Jewish population in downtown Miami & Brickell (Berrin et al., 2014). The Jewish population in North Miami-Dade increased by 19 percent in the past 10 years, while the Palm Beaches’ population remained unchanged, and South Miami-Dade decreased by seven percent (Berrin et al., 2014). The increase in north Miami-Dade is because majority of its residents are adult’s aged 65 and older (36% of the population; 24,696) and the growing cohort of children (19% of the population; 13,034). The plateau in Palm Beach is due to a shrinking older adult generation (20% of population; 4,180) and the increase in children (25% of population; 5,225). In south Miami-Dade, the negative correlation between its older adult residents (29% of population; 11,687) and a decrease in children (14% of population; 5,462) is the cause of the overall decline in numbers (Berrin et al., 2014).
For BBF, the Orthodox Jewish society in southern Florida exhibits to be a promising niche market. Orthodox Jews, unlike non-Orthodox Jews, adhere to Jewish traditions far more, with 79% of Orthodox Jews observing Jewish law as a fundamental part of their lives. Likewise, 92 percent of Orthodox Jews live in a Kosher household compared to 22 percent of non-Orthodox Jews. While Orthodox Jews encompass the smallest of the three major denominational movements, following Reformed Jews and Conservative Jews, they are on average younger, and aligning with the target consumer criteria: parents of young children (Pew Research Center, 2013). In contrast, Orthodox Jews have an average of 4.1 children per adult, versus non-Orthodox Jews with only 1.9 children per adult. Lastly, not only are Orthodox Jews more observant of the laws, but their households are also growing more rapidly (Table XX) (Berrin et al., 2014; Cooperman & Smith, 2013; Pew Research Center, 2013).
Targeting the Consumer. To successfully penetrate the baby food market, BBF must understand the factors that affect the purchasing behavior of consumers. According to Faw (2013), out of the 11.2 million Americans who purchase Kosher items, most who seek out Kosher products buy for three main reasons:
- Food quality (62%)
- General health (51%)
- Food safety (34%)
Based on research conducted by Miller & Washington (2015), a total of 53% of Americans between the age of 18 and 29 want to eat more organic, demonstrating BBF’s potential to tap into that market.
Start-up business success-rate
Graph 1:The graph shows the start up business success rate
BBF is positioned in the upper echelon of baby food, especially vis-à-vis the cost of other baby foods. Thus, BBF must market itself to the middle and upper class that can afford higher-quality product. In general, Jewish Americans have higher income rates and are better educated than the average American (Miller & Washington, 2015). According to Miller & Washington (2015), 25% of Jewish Americans report household incomes of more than $150,000, compared to 8% of all U.S. households. Also, only 27% of Americans have college or postgraduate education compared to 59% of American Jews and 66% of Reform Jews (Miller & Washington, 2015). There is a positive correlation between higher income and a willingness to pay more to purchase quality products. In 2014, quality of products or services was most important to 80% of American consumers (Miller & Washington, 2015).
According to a study, roughly 80% of purchasing decisions are made or influenced by women and 74% of them are primarily responsible for buying groceries as well as basic supplies (Miller & Washington, 2015). Young mothers are crucial decision-makers in terms of baby food purchases. The average age of first-time mothers is 25.1, with 3.5 million births in 2010 registered to mothers between ages 20 and 44, accounting for 90% of all births (Miller & Washington, 2015). Sixty-one percent of mothers with a recent birth went right back into the labor force and they tend to purchase products and brands that make their lives easier and make their family’s happy (Miller & Washington, 2015). The high-income professional mother rarely compromises when purchasing baby food and almost always seeks experiential brands that enrich her busy, personal and family life (Miller & Washington, 2015).
In short, it is fundamental for BBF to understand that organic food represents a growing and already important market to pursue. Food safety and focus on the female public as ways to both satisfy the market and obtain a higher market presence are also fundamental aspects to take in consideration for BBF.
Baby Product Demand factors
Factors that determine demand for the client’s product are (a) U.S. birth rates, (b) demand for baby food, and (c) demand for kosher food.
Mintel, a marketing intelligence research company, published an article in 2009 that cited a 64% growth in the Kosher industry since 2003. In fact, by 2008, Kosher baby food sales in the U.S. amassed $12.5 billion, with 62% of consumers purchasing Kosher food for quality and only 14% purchasing Kosher food for religious guidelines (Mintel.com, 2015).
Forecasts show a sales increase of value and volume from 2014 to 2019. Experts project number of births in the U.S. to rise 0.6% annually until 2020 (Figure B8) (IBISWorld, 2015).
According to Euromonitor International (2015), prepared baby food sales are forecasted to increase from 2014 to 2019 by both value and volume (Figure B9). As compared to other categories of baby food, prepared baby food will have the highest percentage of both volume and value growth from 2014 to 2019. In conclusion, both the kosher and the prepared baby food industry are forecasted to grow in the next five year. In addition, due to the association of kosher with quality and adults purchasing kosher, there would be an increase in the demand for Kosher Baby Food production in the near future.
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