Green Delight is a wholesale food manufacturer specialized in organic food. The development of the organic food sector and consumers’ increased interest in organic products have determined the start-up’s owners to start a business that serves the healthy interests of people, while being able to provide significant incomes to its owners.
Green Delight’s mission is the following: our company intends to provide high quality organic food at available prices, in order to encourage consumers’ orientation towards a healthy lifestyle.
The vision that the company’s owners are trying to transform into reality consists in building a business that would provide people healthy food, in order to encourage and to support a healthy lifestyle for more and more people. The business owners’ idea is supported by the fact that an increased number of consumers prefer to purchase organic products, whether one refers to food, clothing, or cosmetics, even if their price is higher than in the case of regular products.
The company’s competitive advantage is represented by the quality of its products. Although higher quality means higher prices, Green Delight intends to maintain its prices at available levels for customers with medium incomes also, in order to be able to address a larger customer base.
The general market area is represented by the local one in the beginning, with the intention of expanding the business on national level if the company’s objectives are reached in the given period of time.
Organic Foods Industry
The organic foods industry is in a continuous growth and development process. In the U.S., the sales for organic foods and beverages have increased from $1 billion in 1990 to $24.8 billion in 2009, when the sales increase for this type of products accounted for 5.1% in comparison with 2008 sales (OTA, 2010).
The most important growth is represented by the organic fruits and vegetables sales, reaching 11.4% of the country’s total fruits and vegetables sales. Mass market retailers, including mainstream supermarkets, warehouse stores, mass merchandisers, sold 54% of the organic food. Natural retailers sold 38% of the organic food production. In addition to this, the rest of the organic foods production was sold through the Internet, export, and specialty stores. The organic foods sales are increasing on global level also.
However, the economic and financial crisis has significantly affected the organic foods industry. Given the fact that organic products are considerably more expensive than conventional ones, the lowered incomes of consumers affected by the economic crisis have determined them to reduce the quantity of organic foods they purchase.
The organic foods industry has also been affected by a series of studies showing that there is no significant difference between organic products and conventional ones (Goodchild, 2009). Critics of such studies state that pesticides were not taken into consideration when assessing these issues.
Specialists in the field have observed that the organic foods market is divided into two main categories: the health market and the traditional organic market.
The health market is the largest. Consumers in this market purchase organic foods for the health benefits that they perceive organic products as having (Knudson, 2007). These consumers usually address supermarkets and mass merchandisers for their organic shopping. These consumers are interested in not paying high prices for these products. Such market channels encourage low cost production and economies of scale. This situation makes it even more difficult for a company like Green Delight to address such a market.
The traditional organic market also benefits from an increased number of customers. Consumers targeted by companies in this market segment are interested in the social aspects regarding organic foods. In other words, such consumers are interested in supporting a clean environment, small scale agriculture, and locally produced food. This is the market segment that will be addressed by Green Delight, due to the fact that this market allows smaller companies to enter the market easier.
As mentioned above, the organic foods market is continuously increasing its capacity. This increase is due to the fact that consumers are interested in buying products that are perceived healthier, and also to the fact that the standards imposed by food regulation organizations determine consumers to trust the organic products they intend to purchase.
The fact that there are not numerous standards to be met by producers in this industry has helped lower the market entry barriers. The increasing demand also helped. As a consequence, the production costs in this industry have declined. Therefore, it was only natural that the prices in the organic foods industry would decline also, becoming more affordable for consumers.
Green Delight’s owners are aware of the fact that the most important resource that the company can make use of its represented by the human resources. The company’s personnel and their dedication to Green Delight’s mission and objectives will add value to the company and its products. The company will start with the following organizational structure: general manager, operations manager, sales manager, 10 production employees, 5 distribution employees, and 5 sales employees.
Competition in the Organic Foods Market
As mentioned above, the organic foods market is in continuous growth process, leading to an increased number of companies that want a piece of the capacity of this increasing market potential. Although the competition is intense on this market, there are little market entry barriers for new companies wanting to enter in this business sector.
Some of the companies have a long tradition on the market, they have a strong image in consumers’ minds. Campbell’s Soup is one of these companies. Important restaurant and food production chains that are specialized in commercializing conventional products have acknowledged the potential of the organic foods market. As a consequence, these companies have introduced certain organic products in their menus. These companies include: McDonald’s, Green Mountain Coffee, Kraft, Dean Foods, Groupe Danone, Wal-Mart, and others (Warner, 2005).
It is rather difficult for new companies to gain important market share in this business sector. Therefore, it is recommended that Green Delight addresses the local market.
Small players in this industry are affected by the numerous mergers and acquisitions between small organic products manufacturers and large restaurant and store chains. Conventional food manufacturers also have included lines of organic foods in their production process.
Restaurant chains also benefit from the development of the organic foods industry. Customers of these restaurants have increased their demand of having organic foods in the restaurants’ menus.
Farmers that supply this increasing demand have adapted their production capacity to this situation. But the fact that this market sector is developing might lead to the opposite effect for some organic foods consumers. Some of these consumers prefer to purchase organic foods because they want to support and to encourage small local production.
Key Success Factors
Same as in the case of other business sectors, companies that intend to gain market share in the organic foods industry must be aware of the fact that there are several aspects that must be respected in order be successful on this market.
One of these aspects is represented by maintaining the integrity of organic products by the manufacturers (Dimitri & Richman, 2000). In other words, buyers in the organic foods industry do not select the products they purchase only in accordance with the price and quality of the goods in case, but also with the social and environmental benefits that are associated with organic foods consumption.
The main customer target that Green Delight intends to address is represented by individuals with medium to high incomes, oriented towards a healthy lifestyle. The majority of the targeted customer segment is represented by families. Women are most likely to purchase organic foods in comparison to men.
Some of these customers are mainly concerned about the health benefits associated with organic products consumption. The fact these products have not been treated with pesticides is of great importance when making the purchasing decision.
Another category of customers that Green Delight intends to address consists of individuals that are concerned about social and environmental issues. Such customers are interested supporting local production, small farms, and maintaining a clean environment.
There have been several surveys and studies conducted in order to reveal consumers’ approach to organic products. One of these surveys has revealed that 25% of the surveyed consumers have purchased organic food. Most of them consider that such products are healthier and more beneficial to the environment.
Regarding the safety of the food, 22% of consumers have a low level of concern in this department, while 30% have a high level of concern.
The availability of organic products is another factor of interest to the consumers targeted by Green Delight. Most of these consumers want their organic food to be purchased from the places where they do most of their shopping, like supermarkets. This may be a problem for Green Delight, since the company may not be able to sell its products in large supermarket chains.
Also, consumers targeted by Green Delight are somewhat price sensitive. Most of them are not willing to prices 10-20% higher for organic foods in comparison with conventional products. The company’s numerous small local suppliers will help Green Delight to benefit from efficient production costs, which will further allow the company to introduce available prices.
Green Delight intends to offer a diversified range of prepared and packaged organic foods. The main categories of products that will be manufactured and commercialized by Green Delight include: frozen entrees, sauces, salad dressings, soups, desserts, and snacks.
The ingredients used in preparing the company’s products will be supplied by small local farms able to provide organic ingredients. These farms are located in the region where Green Delight will produce and sell its products in order to reduce transportation costs.
Green Delight must take into consideration the fact that the main problem that affects organic foods producers is represented by frequent shortages in the supplied provided by small farms. Therefore, it is recommended for the company to establish a relationship with a higher number of suppliers, rather than to rely on a small number of suppliers that can suffer a series of supply shortages, affecting the company’s activity.
The company’s product range must cove all the prepared foods categories. Otherwise, consumers will turn to conventional foods for satisfying their needs. In this case, it will be difficult to create a loyal customer base that the company can count on.
The packaging of the company’s products is also important in attracting customers. The product design must stand out among competitors’ products. Also, the product design must show the consumer that these products are natural, organic products.
Given the name of the company, the packaging color will be a natural green. The size of the products is important also. Green Delight products will be commercialized in sizes suitable for one person, and in sizes for the entire family, with a better pricing.
As mentioned above, organic products can be significantly costlier than conventional products. Many of Green Delight’s potential customers are price sensitive. Although they want to purchase such products, it is quite unlikely that they will allocate a higher budget for such products, especially during the economic and financial crisis that has affected consumers’ incomes.
The fact that Green Delight is able to purchase its ingredients from small local suppliers that practice lower prices in comparison with larger suppliers, will allow the company to introduce smaller prices for its products.
Practicing lower prices than those of competitors’ will help the company gain an important number of customers, although the company’s profits in the beginning will not be significant, given the lower prices and the reduced number of customers. But the number of buyers will constantly increase, the company being able to create a loyal customer base.
The company’s products are differentiated from conventional ones from the beginning. The promotional challenge consists in differentiating Green Delight’s products from those of direct competitors’. Given the fact that organic foods present similar trends, like the fact that they are all natural, pesticides were not used in their production, and they are not genetically modified.
Therefore, it is necessary to implement a price differentiation strategy. Green Delight will commercialize its products on local level initially, in order to reduce distribution costs. This economy can be used in practicing lower prices in comparison with prices practiced by the company’s competitors.
The company should participate in organic products fairs in order to promote its products. In addition to this, Green Delight should sponsor certain events that take place in the region where the company will commercialize its products.
Green Delight will also have a website where consumers can find information on the company’s products and where they can purchase the products they want. The website will also offer a series of recipes that can be prepared using the company’s products.
Green Delight’s products will be sold in small neighborhood stores specialized in commercializing conventional or organic foods. The company will also try to sell its products large, national organic foods stores.
Large supermarket chains could represent a great opportunity for Green Delight. This is because supermarkets represent customers’ favorite shopping locations. Also, the targeted consumers are interested in the availability of Green Delight’s products. They want to do most of their shopping in one place, which means that most of them are unlikely of making the extra effort of purchasing Green Delight’s products from other locations.
1. Industry Statistics and Projected Growth (2010). Organic Trade Association. Retrieved August 25, 2010 from http://www.ota.com/organic/mt/business.html.
2. Goodchild, S. (2009). Organic food no healthier blow. London Evening Standard. Retrieved August 25, 2010 from http://www.thisislondon.co.uk/standard/article-23725592-organic-food-no-healthier-blow.do.
3. Warner, M. (2005). What Is Organic? Powerful Players Want a Say. The New York Times. Retrieved August 25, 2010 from http://www.nytimes.com/2005/11/01/business/01organic.html?_r=1&hp&ex=1130907600&en=1a66fec0344c8870&ei=5094&partner=homepage.
4. Dimitri, C. & Richman, N. (2000). Organic Foods: Niche Marketers Venture into the Mainstream. Agricultural Outlook. Retrieved August 26, 2010 from http://www.ers.usda.gov/publications/agoutlook/jun2000/ao272f.pdf.
5. Knudson, W. (2007). The Organic Food Market. The Strategic Marketing Institute Working Paper. Retrieved August 26, 2010 from http://www.productcenter.msu.edu/documents/Working/organicfood1.pdf.
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