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Innovation And Entrepreneurship Frucor

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Question:

Discuss about the Innovation and Entrepreneurship Frucor Beverage Company in New Zealand.
 
 

Answer:

Business Description

The proposed business plan is an expansion of an existing business for Frucor, a beverage manufacturing company in New Zealand. Frucor primarily manufactures drinks for the customers of New Zealand. As commented by Boons & Ludeke-Freund (2013), in order to sustain in this competitive business market, business organisation needs to continuously keep on implementing innovative ideas in their business. According to Schaltegger, Ludeke-Freund & Hansen (2012), innovation will provide an opportunity to create a unique image in the customers’ eye and stand out among the companies of the same sector. Among the already existing products of Frucor, the company is thinking of launching a healthier option of the drinks. The business emphasises on manufacturing drinks that has less sugar content and has less or no percentage of alcohol. Therefore, the company is focusing on launching ciders that are completely made of different types of fruits.

The business emphasises on manufacturing range of ciders made of fruits for the targeted customers of New Zealand. This will provide an opportunity for the customers to obtain a healthier alternative for drinks. As mentioned by Pomeranz, Munsell & Harris (2013), recently, customers are becoming more health orientated thereby, looking for healthier drinks. According to Moodie et al., (2013), as a result, the business of carbonated drinks and drinks with artificial additives are losing their potential markets. Therefore, Frucor will emphasise on manufacturing ciders that are comparatively healthier thereby, brining innovation within their business.

The launch of ciders is an innovative idea for the already existing business of Frucor. The most significant feature of the ciders is they are non-pasteurised and contains no artificially added preservatives. The ciders manufactured by Frucor will also lack concentrates and sugar content. These features were significantly visible in the previous products of Frucos thereby, making them less healthy. As mentioned by Anand & Sati (2013), beverages containing higher sugar content and preservatives are harmful for individuals as it affects the bones making them weaker with age. Moreover, such high-level of sugar content also causes fattening among individuals with higher consumption rate of such drinks (Beezhold, Johnston & Nochta, 2014).

Frucor will use cold-pressed fruits for creating preservative-free, raw and unpasteurised natural ciders. Moreover, Frucor can also use wild ferment and barrel age in order to infuse locally available fruits into the ciders while manufacturing. This will provide an opportunity for Frucor to create natural, funky and most delicious ciders for the customers. The new product of Frucor is innovative because of the way of manufacturing and the properties of the product. Moreover, as the product is manufactured keeping in mind the present demand of the people of New Zealand, it is also considered to be innovative.  

 

Market and Environmental Analysis

According to the current market of New Zealand, the population are looking for healthier alternatives for drinks. As mentioned by Martin-Moreno et al., (2013), many customers prefer healthy beverages compared to fizzy drinks and alcopops. It can be seen that New Zealand target market is willing to pay comparatively more money for a product that is authentic and high quality. As asserted by Kregiel (2015), over the years customers have become more health oriented and are willing to pay more for a product that is healthy and tasty simultaneously. Therefore, the according to the present demands of the customers for opting for healthier drinks, manufacturing naturally processed drinks will be beneficial. The economy of New Zealand has taken a leap over the past few years making thereby, signifying stable economic condition of the country ("Medium-term Outlook from June 2017 to 2020 - Budget Economic and Fiscal Update 2016 —", 2017). Therefore, this highlights that the population of New Zealand have considerable spending power. The potential customers for the new product in New Zealand are the young adults and adults. New Zealand has many international students and working professionals from all over the world. Therefore, the population of young adults and adults are comparatively more. Moreover, the young population seems to be more health conscious thereby, increasing the chances of sales for the new product (Gallan et al., 2013).  Therefore, Frucor targets individuals customers as interacting with the customers individually will help in easily convincing the customers. As commented by Weske (2012), the stakeholders are defined as the number of people associated with the company for operation and production of the business. The stakeholders of the business can affect or get affected by the actions of the organisation (Fassin, 2012). Primary and secondary stakeholders of the company determine the success of the company (Turner & Zolin, 2012). Therefore, the different stakeholders of Frucor are:

  • Employees
  • Managers
  • Owners
  • Suppliers
  • Customers
  • Society
  • Government
  • Creditors
  • Shareholders
  • Trade unions
  • Investors (Lamin & Zaheer, 2012)

The other competitors in the market of New Zealand are Montheith and Zeffer that imposes threat for Frucor. Both Montheith and Zeffer are in the business of manufacturing ciders much before than Frocor. This is an added advantage for them as they have already established them in the New Zealand market and has built a strong customer base. The marketing strategy used by Montheith is innovative and new as they use apps and games for attracting the customers. For example, Montheith created a computer hunting game in which the customers has to find the final key for entering the warehouse by using a visual map. As commented by Festl, Scharkow & Quandt (2013), hunting games in computers attract users in this technology driven age. Therefore, such a marketing strategy helped in gaining huge customer attention for Montheith ("Monteith's | Stoppress", 2017). Moreover, an increase in the demand of wines among the population, the sales of Montheiths has increased by almost 14% in 2014 ("Monteith's brews export success - Business - NZ Herald News", 2017).

Zeffer Cider Co. is another cider company in New Zealand with an established and large customer base. Even Zeffer Cider Co. has implemented interactive and digital marketing strategies over the years to attract the customers. Report suggests, with 26 days remaining, Zeffer Cider Co. has achieved $1.2 million within 5 days. This suggests their strong marketing and operational strategy and hold over the market ("Zeffer cider achieves $1.2 million capital target in just five days", 2017).

The drink launched by Frucor is non-pasteurised, contains less sugar content and are produced naturally. This is a creative contribution developed by Frucor keeping in the the present demand of the customers of New Zealand. The beneficial properties of the drink will make it stand out and create an impression in the eye of the customers as they are more health oriented. This will act as a competitive advantage for Frucor.

 

Financial Aspects

Start-up Requirements

 

 

 

Start-up Expenses

 

 

 

Fixed Costs

Particulars

Amount ($)

   

Premises Rent

$5,000

   

Employee Salaries

$50,000

 

Variable Cost

 

 

   

Promotion

$3,500

   

Advertisement Cost

$2,500

   

Sales and Marketing

$1,800

   

Logistics

$2,500

 

Others

 

 

   

Pre-Opening expenses

$1,250

   

Total Start up Expense

$66,550

 

Average Monthly Cost

   
   

Rent

$417

   

Employee Salaries

$4,167

   

Total Average Monthly Costs

$4,583

   

x Number of Months:

12

   

Total yearly Costs

$55,000

 

Total Start-up Expenses

 

 $121550

The new business plan for launching a healthy drink and implementing the innovative idea, Frucor requires an estimated budget. Based on this estimated budget, Frucor will plan their overall business plan. The basic particulars of a start-up business are fixed costs, variable costs and average monthly costs. The fixed costs of the business start-up for Frucor includes rent for the premises along with the salary for the employees. In order to manufacture the drink the company requires a particular place to set up the production machineries. For this renting a place is essential. Moreover, the operation of the machineries requires suitable and trained employees. Therefore, salary of the employees working in the factory is needs to be considered.

 


The variable cost constitutes of the logistics, sales and marketing, advertisement and promotional strategies. The logistics for Frucor includes the entire supply chain management that includes the suppliers, raw materials, manufacturing, packaging, distribution and transportation. All these aspects of the logistics plays a significant role as logistics management helps in achieving desired goals with complete strategic planning thereby, minimal use of financial resources. Therefore, proper logistics management for Frucor will help them in achieving higher results in minimal expenses. Post manufacturing, Frucor needs to market their product exceptionally well as there are already existing cider manufacturing companies with higher sales. Significant amount of financial resources are required for advertisement, promotions and marketing as these will attract the target customers. On the contrary, if Frucor compromises with financial resources in this field, this might hamper the launch of their innovative product. Distributing free samples to the customers, providing coupons, using digital and internet marketing for the product, Frucor will require the above-mentioned estimated budget along with the pre-opening cost. Apart from the start-up cost, the business plan includes the average monthly expenses that includes the salary of the employees and the rent of the place that includes both the outlet of the drink and the warehouse.

Based on the current demand of the customers of the New Zealand market, the estimated profit of the business for for Frucor is around 15% of the total start-up expenses. According to the market research, the present demand for healthier drinks made Frucor propose the estimated profit. However, there always prevails a chance of encountering loss for new start-up business. Frucor has emphasised on targeting the psychology of the potential customers by highlighting the healthy properties of the drink. Therefore, there are chances that Frucor remains unsuccessful in targeting the psychology of the potential customers that might incur heavy loss for their innovative business start-up plan. In such cases, Frucor needs to implement strategies to revive their loss in the start-up business. Frucor can use re-evaluation strategy to revive their loss. This will provide an opportunity for Frucor to re-evalate their situation in terms of strategy, people, customers, product, process and finance. Re-evaluation of the current situation will help Frucor in determining the actual cause of their loss thereby, planning new marketing and operational strategy for revving. Moreover, Frucor can use seven P’s of marketing mix for promoting their product that will determine success.

 

Business Model Canvas

Key Partners

·         Distributors

·         Food & Beverage manufacturers

·         National Food & Beverage associations

·         Customers

·         Media Companies

·         Manual Distribution owners

·         Social networks

Key Activities

·         Distribution

·         Bottling

·         Producing

·         Marketing

Value Propositions

·         Nutritional value of the beverages

·         Brand Value

Customer Relationships

·         Displays and fridges

·         Advertisement to customers

·         Resident account developer

·         Interactive marketing

Customer Segments

·         Young adults

·         Adults

·         Large retail outlet

·         Small shops and restaurants

 

Key Resources

·         Product

·         Secret recipe

·         Bottles and crates

·         Brand

·         Employees

·         Partner and Retail Network

·         Bottling plant and Distribution Centre

Channels

·         Advertisements

·         Global Sales

·         Large scale distribution

·         Manual distribution centres

Cost Structure

·         Marketing

·         Fixed Cost

·         Variable Cost

·         Others

·         Rent

·         Logistics

·         Employee salary

·         Promotion and Advertising cost

·         Packaging cost

·         Taxes

 

Revenue Streams

·         Bulk Sales

·         Retail Price

 The Business Canvas Model of Frucor highlights the overall key features of a business and the associated partners with it. This helps in providing a brief idea about the partners, activities, resources, value propositions, customer relationships, channels, customer segments, cost structure and revenue streams. Therefore, the significant functions required for Frucor for implementing their innovative business launch is presented through Business Canvas Model.

 

References

Anand, S. P., & Sati, N. (2013). Artificial preservatives and their harmful effects: looking toward nature for safer alternatives. International Journal of Pharmaceutical Sciences and Research, 4(7), 2496.

Beezhold, B. L., Johnston, C. S., & Nochta, K. A. (2014). Sodium benzoate–rich beverage consumption is associated with increased reporting of ADHD symptoms in college students: A pilot investigation. Journal of attention disorders, 18(3), 236-241.

Boons, F., & Lüdeke-Freund, F. (2013). Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, 9-19.

Fassin, Y. (2012). Stakeholder management, reciprocity and stakeholder responsibility. Journal of Business Ethics, 109(1), 83-96.

Festl, R., Scharkow, M., & Quandt, T. (2013). Problematic computer game use among adolescents, younger and older adults. Addiction, 108(3), 592-599.

Frucor Beverages posts dip in profit - Business - NZ Herald News. (2017). The New Zealand Herald. Retrieved 19 May 2017, from https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10895530

Gallan, A. S., Jarvis, C. B., Brown, S. W., & Bitner, M. J. (2013). Customer positivity and participation in services: an empirical test in a health care context. Journal of the Academy of Marketing Science, 41(3), 338-356.

Kregiel, D. (2015). Health safety of soft drinks: contents, containers, and microorganisms. BioMed research international, 2015.

Lamin, A., & Zaheer, S. (2012). Wall Street vs. Main Street: Firm strategies for defending legitimacy and their impact on different stakeholders. Organization Science, 23(1), 47-66.

Martin-Moreno, J. M., Harris, M. E., Breda, J., Møller, L., Alfonso-Sanchez, J. L., & Gorgojo, L. (2013). Enhanced labelling on alcoholic drinks: reviewing the evidence to guide alcohol policy. The European Journal of Public Health, 23(6), 1082-1087.

Medium-term Outlook from June 2017 to 2020 - Budget Economic and Fiscal Update 2016 —. (2017). Treasury.govt.nz. Retrieved 19 May 2017, from https://www.treasury.govt.nz/budget/forecasts/befu2016/008.htm

Monteith's | Stoppress. (2017). Stoppress.co.nz. Retrieved 19 May 2017, from https://stoppress.co.nz/tag/monteiths

Monteith's brews export success - Business - NZ Herald News. (2017). The New Zealand Herald. Retrieved 19 May 2017, from https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11248575

Moodie, R., Stuckler, D., Monteiro, C., Sheron, N., Neal, B., Thamarangsi, T., ... & Lancet NCD Action Group. (2013). Profits and pandemics: prevention of harmful effects of tobacco, alcohol, and ultra-processed food and drink industries. The Lancet, 381(9867), 670-679.

New Zealand Brands - Frucor. (2017). Frucor. Retrieved 19 May 2017, from https://www.frucor.com/brands-nz/

Pomeranz, J. L., Munsell, C. R., & Harris, J. L. (2013). Energy drinks: an emerging public health hazard for youth. Journal of public health policy, 34(2), 254-271.

Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2012). Business cases for sustainability: the role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119.

Turner, R., & Zolin, R. (2012). Forecasting success on large projects: developing reliable scales to predict multiple perspectives by multiple stakeholders over multiple time frames. Project Management Journal, 43(5), 87-99.

Weske, M. (2012). Business process management architectures. In Business Process Management (pp. 333-371). Springer Berlin Heidelberg.

Zeffer cider achieves $1.2 million capital target in just five days. (2017). Theregister.co.nz. Retrieved 19 May 2017, from https://theregister.co.nz/news/2017/03/zeffer-cider-achieves-12-million-capital-target-just-five-days

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