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Nantucket Nectars Case Solution

Solution Id Length Case Author Case Publisher
2612 1742 Words (8 Pages) Joseph B. Lassiter, William A. Sahlman, Jon M. Biotti Harvard Business School : 898171
This solution includes: A Word File A Word File

Nantucket nectars, initiated by Tom First and Tom Scott is a growing fresh fruit-based juice business. The business was financed by the personal savings of the owners and later through silent partnership. Additionally, the business came about when the market preferences were changing towards fresh juices and drinks over alcoholic and carbonated drinks. However, it faces difficulties in growing its sales and distribution, procuring raw materials, and bottling due to high competition in the industry and their unpredictable cash flows. At present, the owners have three options to choose from to improve their business strategy and investment funds. These are: operating as they are (independently), selling the business to another company, or going public by issuing shares to raise investment for growth. It has been reached out by big names of the industry including Pepsi, Triarc, and Ocean Spray who have expressed their interest in acquiring the business.

Following questions are answered in this case study solution:

  1. Develop your own possible choices for the company, Nantucket Nectars.

  2. Explain how your answer was derived.

  3. Predict how your decisions impact the organization.

  4. What are the pros and cons for Nantucket Nectars remaining independent? For doing an IPO? For selling?

  5. Acting as an adviser to the company, what is Nantucket Nectars worth? To whom? Why?

Case Study Questions Answers

1. Develop your own possible choices for the company, Nantucket Nectars. 

One of the options in my opinion for Nantucket Nectars is acquiring another silent partner like Mike Egan who could provide investment while not interfering in the management of the business. The business can use this investment to negotiate with supermarkets and convenience stores to shelf their product. Similarly, new distributors who are skilled and have good relations with supermarket and convenience stores owners could be reached out and collaborated with using this investment from a new silent partner. However, this option does not guarantee the growth that the two co-founders are looking for in their fresh-based juice business as competition is high in the industry.

Another option is to sell a share to a company that has a good distribution channel and can provide the benefit of economies of scale to Nantucket Nectars. Numerous potential buyers exist including Seagram, Ocean Spray, Pepsi, Triarc, Cadbury, Starbucks, Welch's, and Coca-Cola. Of all these bidders, a strategic agreement with Starbucks has already been achieved which will allow the company to improve distributions and reach out to more consumers. Similarly, companies like Ocean Spray, Pepsi, and Triarc have reached out to Nantucket Nectars to buy it. This shows the promising value that this business holds for these big players of the industry in the evolving market. 

Of the three bidders that reached, Pepsi and Ocean Spray seem to be most beneficial for Nantucket Nectars. Pepsi’s brand name would enable Nantucket Nectars to reach more points of sales and a bigger distribution channel. While Ocean Sprays good cashflows, culture fit, manufacturing economies of scale due to agreements with major bottlers, and finally their expiring contract with Pepsi and subsequent loss of revenue would motivate them to bid a higher price for acquiring a share at Nantucket Nectars. Nantucket Nectars should choose to sell the company to the one that offers higher bids and better terms for the business which will enable the company to grow the most, and which company would guide better while giving the authority to the current management of Nantucket Nectars. 

2. Explain how your answer was derived.    

Nantucket nectar is a growing brand in a fad category in a highly competitive industry. Its unique story and smart yet inexpensive marketing strategies have enabled it to distinguish it amongst the other market players of the industry. In addition, its high-quality product helped it grow rapidly. 

The brand as well as its offering is a promising one. However, Nantucket Nectars is not able to reach its potential consumers because of the barriers that exist in the industry. Big players of market control access to raw materials and manufacturing like Snapple controlled access to bottling plants while Ocean Spray controlled most of the cranberry’s supplies. Similarly, the retail shelf spaces in supermarkets and convenience stores were controlled by big players of industry who also had the potential to reduce their prices and drive new entrants out of the market. 

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