Monday, December 13, 2010

Jamie Oliver’s food revolution and business strategy

I was catching up on Jamie Oliver’s TV show “Food Revolution” last night, and my mind couldn’t help but draw parallels between the entrepreneurial nature of what Jamie was trying to do and launching a new start-up or a new product. If you have not heard of the show, details can be found here and you can also watch the episodes online for free. I thought it would be fun to do a strategic analysis and compare theory to practice.

The challenge: Take on entrenched incumbents (processed junk food), change consumer behavior (eat freshly cooked unprocessed foods) through marketing (customer education and raising awareness) and eventually capture the American market (every school in America should offer their students nutritious food choices).

When entering a new market, one of the first things to do is to determine the state of the current and future markets. In this case, the current market is the total number of schools in the US, with schools being classified as elementary or secondary (high) school. Per this data from the National Center for Education Statistics, the market consists of 132,656 schools. The future market is expected to grow since the census predicts that the US population will reach 392 million people by 2050. This is mildly reassuring from a business perspective. I say mildly because although the US population is growing in terms of absolute numbers, the growth rate is expected to slow down significantly as the population ages and dies in the coming decades. Assuming that the market entry strategy of food revolution (FR) focuses on schools and is not an end in and of itself, one recommendation might be for FR to next target the other end of the age spectrum since that demographic is growing rapidly and may I dare say, experiencing first hand the effects of years spent eating junk food.

The second thing to look at is competition. In this case, the competition is the processed food currently being served in school cafeterias. They have an advantage over the newcomers in a couple of different ways (a) it’s cheaper (b) less work for the school cooks (c) it’s easy to buy in bulk and (d) they have a longer shelf life than fresh food. Here, it’s important to look at how competition will respond to the entry of a new competitor. In this case, I suspected competitors will react by dropping prices even further making it hard for cash strapped school districts to financially justify replacing processed food with fresh ingredients. I was proved right in the latest episode where Rhonda was considering introducing processed food in the school cafeteria on Fridays to work through the stock in the warehouse. Even more alarming, she had already placed an order for the 2011 school year with the processed food suppliers, citing “cheap” as a reason...

The third thing to examine is the barriers to entry. I see the following as barriers to entry for freshly cooked food in school cafeterias: (a) fresh ingredients are more expensive (b) have a poorer shelf life (c) need more resources to process (people and time) (d) need cooks to be re-trained to use them and (e) students’ palates need to be retrained to appreciate this food. I liked how Jamie systematically tackled each of these issues. The big market risk in this case is that the students may not like this new food and may clamor for the old menu.

The fourth and final thing I would think about when introducing a new product or entering a new market is a strategy for entering the market. In this case, it’s rather obvious that neither acquisitions nor joint ventures are options, and FR must start from scratch.

In my next post, I will attempt to analyze FR’s marketing strategies and their effectiveness.

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