ReTain Managing Growth And Market Share Case Solution

2. Problem Statement     

Johan Pienaar (VBC global business manager for PGRs) had to consider the most coherent strategy out of several possibilities, to boost ReTain’s revenue and maintain its market share, with a finite amount of financial and managerial resources available. 

3. Analysis

ReTain managed to secure 65% of its Total Available Market (TAM) of orchards in the US growing apple variants that were high on ethylene for processing. Overall, ReTain proved to be successful amidst apple farmers within the US, as it stretched the harvest window, provided massive yields of high-quality apples by preventing fruit drop, and cut labor costs exponentially. However, the Organic Materials Review Institute (OMRI) excluded ReTain from its list of permitted input materials for organic production. As a result, VBC was unable to dive into the organic fruit industry which had seen sales skyrocketing globally over the last few years and left a lot of untapped potentials.  

The reemergence of naphthalene acetic (NAA) which was applied by growers to combat fungus and pests was a cause of concern for Johan. It could potentially drive away a vast proportion of ReTain’s domestic market share as it was valued around 5 times less expensive than its counterpart ReTain. It was recognized as a bio rational PGR, which gave it a slight edge over naphthalene acetic (NAA) as it had negligible toxicity towards bees, other favorable life forms, and the environment. Sophisticated farmers started using both ReTain and NAA in equal proportions to cut costs while maintaining their yields, posing a threat to the company’s quota for earnings. Due to their incompatibility in utility, premixing ReTain and NAA was not an option for Johan to counter this situation. Hence, Johan needed to ensure that ReTain defended its domestic market share from its competitor.    

Johan considered the option of expanding VBC’s international market share and fostering its growth by venturing into Chinese and European fruit markets. While China was by far the largest producer of apples in the world managing to grow 33 million tons growing by 5-6% annually, it posed a few challenges before market penetration. Labor in China was abundantly available at cheaper rates. Most of the orchards in China were comparatively much smaller than their US counterparts. China’s potential for returning massive profits to VBC were undeniable as it contained massive pineapple, walnut, and peach acreage. Europe also posed an attractive option, producing 12 million tons of apples with most variants possessing high levels of ethylene. Similar to the US, European labor costs were the greatest expenses incurred and orchard sizes ranged from small to moderately large. On the flip side, VBC required certification before operating within Europe, which was highly unlikely to be granted with odds of 20% in their favor. 

4. Strategic Alternative 1: Work to reestablish OMRI Certification

Johan had the option of working to reestablish the OMRI certification of VBC. This pursuit would require a commitment of 15% of the company’s budget to go through. Internationally, transactions involving organic fruits experienced double-digit yearly growth rates in 9 out of the previous 10 years and were valued at more than $55 billion. Furthermore, the production costs per acre of organic apples were approximated to be around 6% more than regular apples. To add to that, Johan seemed quite optimistic regarding his company’s chances of receiving the certification from the organization again. Allowing more transparency with the manufacturing process of ReTain will further raise the chances of VBC achieving certification from the OMRI that will enhance the company's sales growth swiftly as they reap greater profits from selling organic fruits. The VBC already marketed ReTain as a suitable input for organic produce based on its agreement with the US Department of Agriculture’s National Organic Programs guidelines. To add to that, a large number of farmers within the state of Washington, continued to grow organic apples in the aftermath of the withdrawal of the OMRI certification for ReTain. Even after obtaining the OMRI certification, there would be very little room for improvement domestically for VBC in the organic fruit market.