Sample Case Study On Nantucket Nectars – Harvard Business School Case #9-898-171

Cohort Name

CESR
Finance
An “angel investor” is an individual who is affluent and provides the seed or capital for a business startup. Usually he or she provides this funding in exchange for ownership equity in the business and or convertible debt. During the years 1994 through 1996, NN focused its asset investment on improving their distribution and increasing inventory. They also secured better independent bottlers. In doing so , they implemented a wide-scale advertising campaign to increase brand awareness (Biotti 2000) They also opted to move their product through an independent network of distributors that would be able to carry multiple brands at the same time. (Biotti 2000) They encouraged increased distribution their product by offering incentives to distributors who would reap rewards by promoting their products in alternative stores and other locations with increased visibility. During the same years of 1994 through 1996, NN financed these asset investments through the help of Mike Egan, their angel investor. The two original founders of Nantucket Nectars, as well as Ned Desmond, were able to convince Mike Egan to invest $600,000 of startup capital in their venture.(Biotti 2000) The agreement was that Desmond would in return receive 50% of company ownership. Later, Desmond also became director of sales and marketing. Mike Egan was an angel investor who had gained his money from founding Alamo Rental Cars. At the time the agreement was made.(Biotti 2000) Egan still owned over 93% stake in the Alamo company stock. Perhaps because of his heavy involvement in other business dealings, Egan was able to maintain a passive role in the company's day to day operations. He provided the startup capital in return for ownership agreement, but he largely stayed out of the company's major business other than playing the role of a trusted advisor.(Biotti 2000)

Management

NN made a decision in the early days of their company about how to distribute their juice. Starting out, the founders operated their business like an “in-house 7-eleven” with an in-house distribution system targeted to smaller stores.(Biotti 2000) This targeted approach allowed them to penetrate small outlets and to to build up brand recognition and awareness. The downside to this operation was the economics.(Biotti 2000) They quickly realized that overhead could not be made without carrying at least one of the big brand names. The company moved its business forward by separating its distribution between in-house and outside distributors with incentive based agreements which contributed to its success.
In the mid-1990's, while NN experienced considerable growth, some choices about their product created problems. NN marketed to a young, active and health oriented consumer with a great emphasis on quality. (Biotti 2000) Profitability concerns heightened as prices for sourcing unadulterated juice increased, cutting into margins while competition surged. (Biotti 2000) The company experienced competitive disadvantages because of its commitment to product quality, and this forced them to reevaluate priorities. While other companies were seeking to undercut the market by using cheaper, less healthy ingredients, NN expanded product lines to include a more diverse mix of still healthy equivalent beverages that blended teas instead of corn syrup.

Marketing

Nantucket Nectars positioning statement: For young, active health oriented cosumers, Nantucket Nectars juice will promise to be a great tasting juice. Nantucket Nectars juice is a healthy, tasty beverage. Our juice promises to be better than the big guys. On page 10 of the case, the founders list what they consider to be the most significant assets that drive the corporate value of NN. Of those listed, the following arose from marketing activities: Value of the brand: quirky, eccentric and memorable, Guerrilla marketing skills, A more appealing story than any other juice beverage company (great material for a company with a large marketing budget and more distribution power). (Biotti 2000) Best vehicle for juice companies to expand into juice cocktail category without risking their own brand equity.(Biotti 2000) If we are to categorize these value drivers among the 4Ps, the brand value we would characterize as Product. Guerilla marketing skills and appealing story both may be characterized as Promotion. As a product vehicle for expansion, this marketing asset can be considered a feature of the Product. As NN considers future growth and the strategic needs of the business, the product side of NN's four Ps is currently most constrained in its ability to execute.(Biotti 2000) At the time of the case, Nantucket Nectars faces a crossroads in its production capabilities. It finds that it is having difficulty growing its company due to constraints in securing proper futures contracts for its not-from-concentrate juices. In order to navigate around this predicament, the company leaders also realize they would benefit from the help of strategic management who could perform the right kind of market and product research in order to match the product offerings to their target markets. The right kind of buyer would make financing accessible and bring on the qualified kind of people who would enable it to grow in the same vein as the initial company vision subscribes.

References:

Biotti, J. M., & Harvard Business School. (2000). Nantucket nectars. Boston: Harvard Business