zen Grove Fresh Ltd: Marketing Organic Juices “Many companies have already stopped producing organic grapefruit juice, because there is not enough supply. The same thing is happening now with orange juice.”" — Amarjit Sahota, Director, Organic Monitor,’ in 2005. “The British and French organic juice markets are to show the lowest growth rates. The organic juices market in these countries showed very high growth in the late 1990s and market expansion has slowed due to consumer demand stabilising. Retail penetration is reaching saturation in these countries with most food retailers offering organic juices.” — A Research Publication Analyzing the Future Prospects for Organic Juices in the UK, in 2002, INTRODUCTION In April 2005, Grove Fresh Ltd. (GFL) was ranked 68" in the Fast Track‘ 2005 Profit ‘Track 100. The rankings, published in The Sunday Times, were based on profit growth over a three year period ending 2003. GFL's profits rose from £ 0.9 million in 2000 to £3.2 million in 2003; the company registered a 52 % year-on-year growth in its profits in 2003. The company was also admired for its high-quality products and innovative marketing. lowever, the situation, as of 2006, is quite different. Competition in the UK orgenic Juices market has become severe. Though GFL posted healthy séles growth, the market for organic juice, especially in the UK, was expanding at a much slower rate. ‘This was expected to affect soles in the near futire, Besides, GFL has 2 supply shortaces BACKGROUND Grove Fresh Limited (GFL) was founded by John Taylor (Taylor) in 1994 to market chilled organic fruit and vegetable juices. Prior to his foray into the organic juices market, Taylor owned a successful bakery business, Freshbake Foods, which he sold to Borthwicks, a food and drink flavoring supplier for several million pounds, However, Borthwicks soon faced financial problems. Taylor re-purchased his business from Borthwicks for a token payment of £1. He brought the company back to and subsequently sold it to Campbell Soup Company’ in 1988 for about ‘Organic Marketing Stunted by Undersupply, Says Consultancy Firm,” ‘sw nutraingredients-usa.com, December 19, 2005. Organic Monitor, established in 2001, provides business information on the global markets for organic goods European Market for Organic Juices.” www.organiemonitor.com. October 2002. Fas Track Profit Track 100 ranks Britain's fastest-growing medium-sized companies by k growth over their last three years. ‘srapbel: Sour Company was founded by Joseph Campbell in 1869 in New Jersey. In 2005, Ee company posted sales wonh USS 7 Billion. Campbell's products, which are sold in 120 countries around the globe include soups, confectioneries, pastas, sauces, and prepared food FradussMarketing Management Surrey, UK, in 1994, Taylor spent his frst mse, years in ihe business(convincing orchard owners and growers in Florida to shift to organic —*, fatming and building the supply chain trough to the UK. In 1996, GFL became he —— Eistcompany to market organic juices in the OS In 1998, GFL acquired the Germany. Frische and its French subsidiary Frsicheur for a sum of £ 1.3 million, With the ‘acquisition, the company entered the European non-organic fruit juice markes as well, ho Company further strengthened its Conponyia, te BOt-organic fruit juice market by acquiring Fruity King, a Dutch company, in 2000. Subsequently, i inued to own United Foods international (UFN, the holding n Ten Of GEL, Fische and Fruity King, through ¢ Bar Site in the Ise of Man, The acquisitions together with increasing sales and Profits due to/a marked increase nthe dorac for organic products in the UK. pushed UFI to the 3 rank in the 2001 Fast Track 100, @ ranking of British businesses with the Highest sales growth. The company had achtoweee sales growth of 185% with total sales reaching £ 18 million in 2000, Inch 2000s, GFL's sales continued their healthy growth (Refer tol Exhibit Ther sales turnover of GFL). However, by then, organic ules constituted only 10 percent of UFl's sates This was because, ‘with its erations in continental Europe, the company's sales of non-organic juices were Egwing. The growth in demand for organic juices in Continental Europe (especially Genany and France) was not as high as in the Uk i MARKETING GROVE FRESH GEL marketed its organic juices under the Grove Fresl iddle-ased veople, especially those who SSeS the Same time, the company found that the eect SAYS ete taking to organic juices in a biz was painsging Director, GFL, said, “The key conse 355 whose children have left home-and whe ality food and drink available, However we are seeing a growing number af ‘younger consumers becor Purchasers of organic juices."* PRODUCTS Fi GFL’s juices were not made from concentrates iluted with water, which in the company’s opinion, did not qualify as ‘organic It Prided itself on selling “pure Crganic_ juices’ — Grove Fresh packs contained only the juice from fruits or Vegetables, without any . Sugar, ives, colorings, or additives. The on standards” ‘uice Steals Share from Traditional Breakfast Beverage,” www.neaneteoti. March 5i 2006, ” Soil Association Cenication Lid, the UK's lgest organic cenification tex. has been Seti Standards for organic foods and cenilying organic enki since the 1976s,A Ne ere erg PRICING Grove Fresh Ltd: Marketing Organic Juices GFL also introduced juices from unusual combinations of fits and vegetables, such BecaPPle & Cranberry, Carrot, Tomato & Red Pepper, Tomato, Celery, Carrots, Fctoot & Onions, ete, The variety of is juice combinations has been res factor Aifferemiating the company's produets fom other products inthe UK ones {UPically, organic products commanded a premium over products grown using Beall napa arming techniques, because consumers were willing to paycentn foc ee health advantages that they supposedly derived ftom products grown eines the use of Pesticides and chemical fenilizers, Moreover, organke wen considered posites SRnaly friendly and by buying them customers fel that they were making a Positive choice to safeguard the environment. When asked why se chee organic Products, a customer said, “I choose organic for my health and for the environment because organic food is free from pest Surveys indicated that customers were willing to pay a premium of 20-30 % for organie products over conventionally grown products. - far onl ts Products through supermarket chains, which dominated the UK market xlucts. In spite of the stiff competition from the Supermarkets” ona » GFL had not only managed to hold its own, but had also ercated ‘a loyal customer base, for organic produce, The |In the 2000s, e-retailing emerged as a distribution alternati retailers and mainstream retailers with Intemet UK had a mix of 5 Qperations. GFL sold its merchandise through specialist ¢-ret s_like_Simply Quzanis a major player which operated only via the Iniemet ard sok see, aSSoriment of organic products, GFL. also distributed its products through other e- fetailers like poodnessdirect.co.uk, organicdelivery.co.uk, beanstalkorganix.co.uk etc ‘and through the Internet divisions of supermarket chains like Waitrose” and Booths."° PROMOTION thet Company displayed its trademark The Organi Juice Co. (Refer to Exhibit for Came omPany pee) prominently in is packing. Ad agency HPI wg°y Communications! was engaged for promotions and marketing. GFL placed ads in the ‘The Facts They Don't Want You to Know,” www symbio-organic com. June * Waitrose was founded by Wallace Waite, Anhur Rose, and David Teyior Jendoa. In 1937, the John Lewis Partnership scquired the buemee branches, Waitrose supermarkets dot England and Wales, snd people. * Booths, founded by Edwin Henry Booth in 1847, has grown to become 5 28 branch supermarket chain, "DM Total Communic: Provides integrated, strategi 8 is an independent ad agency base’ in London. UK. and ‘and creative services to its elientsMarketing Management print media, especially the weekend supplements. of national newspapers, women's, “magazines and food titles. The company also gave out free samples of its juices at ‘Supermarkets and other retail outlets to encourage In late 2005, GFL released a sct of four posters (Refer to Exhibit IV for copies of the posters) as part of its marketing campaign. However, The Blackmoor Estate Ld., a commercial apple grower, the Crop Protection Association (an organization which represented members active in crop protection), and a member representing the public, complained to the Advertising Standards Authority (ASA)"” against GFL's advertising. The controversial posters contained the following messages - “Insects ‘Won't Eat Fruits Sprayed with Pesticides, Why Would You?" and “Fruit Juice - Now. Available in Non-Pesticide Flavour.” The complainants argued that the messages were ilsteading, irresponsible, and denigrated growers who used pesticides to protect their Gop. Though ASA found most Of ihe objections unwarrante ed GFL to avoid using the “Fruit Juice - Now...” poster as it seemed to suggest that pesticide residues affected the taste of fruit juice; ASA declared that this was misleading. The other posters had the following messages - “With 2.5 Kes of Organic Fruit in Every Carton, There's No Room for Pesticides” and “We Spend a Lot of Time Adding Nothing to Our Fruit.” CHALLENGES ‘The UK market for organic juices began to slow down in the mid 2000s. It was a far xy from the torrid pace of growth witnessed in the early 20008 (Refer to Exhibit V for the UK market for organic not-from-concentrate citrus juice). Moreover, the number Of players operating, in the organic segment of the juice market had also Seen an ipeizase. As if these difficulties weren't enough, the organic citrus juice market had become increasingly vulnerable to supply shortages, The organic citrus juice market, especially orange juice, accounted for around 40%"* of GFL’s sales. The shortage in the supply of organic fruits also affected the development of new products at GFL. Shupick said, “The main obstacle we face with NPD (New Produc: Dexelopmeng) is sourcing organic ingredients that match our very exacting standards.”"* These forces were expected to have a direct impact on GFL's sales in the furure. Like many of its competitors in the UK, GFL imported the fruit for its juices from USA and other countries, prompting a debate whether the imported produce was bein: analyzed an .d thoroughly enough. “The whole approach of organic standards is to minimize the risk of someone using chemicals, but the further a field itis, the more difficult it is to be sure what is happening,” said Francis Blake, Standards and Technical Director, Soil Association. The certification standards also seem ing. In the light of these, some analysts wondere ier the premium that companies like GFL charged for their organic products was justified. Some analysts even went so far as to declare that, in terms of health benefits, it really didn't make a difference whether the food was organic or not (Refer to Exhibit VI for additional information on marketing organics), "ASA is an independent regulator for advertisements, sales promotion, and direct marketing “sas set up ky the UK advertising industry to police the rules laid down in the code. Is job is to ensure that offensive, harmful, or misleading ads are removed. case 2 close second with 30%, while all other flavors like grapefruit, nd combi Srzzs. arpie & mango. apple & cranberry, etc. constituted the remaining 30% sas Snare tem Traditional Breakfast Beverage.” www.nexnst.co.uk, March 01, ‘aot: The Facts They Don't Want You to Know,” www.symbio-organic.com, JuneOUTLOOK Grove Fresh Ltd: Marketing Organic Juices In spite of the challenges, GFL, with its high-quality products, wide ass strong. distribution, and appealing communication has been trying hard to retain its position as the leading organic juice brand in the UK. In 2004-05, it breached the £ 5_ rillign mark in sales. In th same year, the company introduced oganie vegetable Juices under the sub-brand -/'V Juice. By early 2006, V Juice was registering strong, sales at health stores thus helping GFL. to post year-on-year sales growth of 65% at these stores." Overall, GFL sales grew at 30%, outperforming the market, which expanded by 9.5%. ‘The company was planning to organize consumer shows throughout the UK in the summer of 2006 with a marketing budget of over £1 million. In these shows, the company planned to give away free samples of its juices to persuade customers to switch to organic juices. Shupick said, “Our research shows that once someone has tasted organic juice they rarely go back to standard products because the flavour and freshness is so much better, so we consider this activity a sound investment in the future of the brand and the organic sector as a whole.”"” As of early 2006, the company continued to dominate the UK organic juice markel with a market share exceeding 60%." Of his company’s success, Shupick once said, “The key to our successful growih js our commitment to refreshing the range in order to maintain consumer interest.""” However, the company would have to think of ways to counter the slowing market growth, mounting competition, and supply problems to remain ahead in the race. Questions for Discussion: 1. Is marketing of organic juices any different from marketing other convenience foods? Can the marketers of orgenic-products hope to achieve high growth without decreasing the prices of their products? 3. Which channel of distribution, according to you, is most suitable for organic products? 4, Do you think that the communication strategy of the company was effective? 5. Apart from distributing samples, how else can the company promote the acceptance and usage of organic foods? © 2006, Icfai Center for Management Research All rights reserved. This case was vriiten by Sachin Govind, under the direction of S. S. George. "The year-on-year sales growth rats was for the financial year 2005-06 at independent and specialist health wholesalers, V Juice Attracts New Shoppers to Specialist Heakh Stores.” www nexnetco.uk, March 01, 2006. “NV Juice Anracts New Shoppers 10 Specialist Health Stores,” wwww.nexnet.co.tk, March O1, 2006. “Juice Steals Share from Traditional Breakfast Beverage,” www.nexnet.co.uk, Match 01, 2006.arketing Management Exhibit I Sales Turnover of Grove Fresh Ltd. In€000 ‘Source: www.productchain.com ~ Exhibit I Competing Brands and Prices S.No. Brand Price for I liter 01 Luscombe Devon, 80° 02 Sainsbury's Pure" 98 pence 03 Duchy Originals Refresher £2.60%~ 04 Tesco Pure" 99 pence pea er Source: www.guardian.observer.co.uk * - approximately, # - supermarket brands veGrove Fresh Ltd: Marketing Organic Juices Exhibit III GFL Company Logo Fae. Organic Juice Cor zulee Cor, Source: www productchain.com Exhibit IV Grove Fresh Posters Source: www grovefresh co.ukarke Management Exhibit V The UK Market for Organic Not-from-Concentrate Citrus Juice Year Volumes Volume Growth Revenues Revenue (000 titers) (%) (USS mn) Growth (%) 1998 822 - 247 - 1999 2,660 224 6.78 175 2 3,903 a7 9.16 35 2001 4,500 15 1035 3 2002 4,864 8 11.07 7 2003 5,107 5 11.63 5 2004 5,362 5 1221 5 Source: www fao.org yi 1 tcnmnnacnee animist ust Rae Aceh sn AARNE ASH matReeNimeine nrc