Nantucket Nectar’s Case Solution
A collective savings of $17000 was invested by Scott and First to contract a bottler as well as finance the inventory. After two years, the company operated in an under capitalized state on a small bank loan & raised more funds for improving the distribution and inventory they sold 50 percent of the company in $600000 to Mike Egan, who is the founder and former CEO of Alamo Car Rentals, which the owners met while serving his boat in Nantucket Harbor during the early days to All-serve. Now the founders of Nantucket Nectar’s are trying to decide whether to sell the company or keep going as a standalone business with several problems that they are currently facing.
Who is the right buyer and why?
Given the low profitability levels of the company caused by solely focusing on only three flavor including Peach Orange, Lemonade and Cranberry Grapefruit, no business background knowledge, inability to institutionalize future contracts on the product ingredients and high dependency upon the fruit harvest and high intensity of rivalry amongst competitors, the company is concerned to sell the company to potential buyer. There are various buyers who show willingness in purchasing Nantucket Nectar’s based on its long term growth strategy and commitment to create all natural and high quality juice beverages and a wide range of flavors across three product line. The buyers include Pepsi, Seagram, Ocean Spray, Welch’s, Starbucks, Bradbury, Triarc and Coca cola. Out of these buyers, the right buyer would be Ocean Spray because of its strong buying power with fruit juice suppliers and it controls all the suppliers. By choosing Ocean Spray as the buyer of the company, Nantucket Nectars would be enjoy competitive advantage in procurement which in turn would positively affect the margins.
In addition to this, the name of Ocean Spray is most widely respected and recognized in the US. Furthermore, based on the fact that Ocean Spray is private which in turn would allow the company to operate in the similar fashion with less hassle, less disclosure and less short term pressure to hit earnings. The generation of internal cash flows would be used to fuel the growth of Nantucket Nectars, hence getting it back on the track of profitability. Moreover, it is engaged in effectively maintaining the 5 captive bottling plants and various long term arrangements with bottlers giving national and secure manufacturing coverage at quality control and advantageous cost. Thus, by selling Nantucket Nectars to Ocean Spray, the company would grow rapidly and it would be able to get the required funding. Based on the minimal business experience, expensive ingredients, inability to predict future growth and contract large distributors, the company must sell part ownership in exchange for capital and business advice.
What does Nantucket Nectar’s need to succeed in the future? What does each of the potential acquirers bring to the table?
Nantucket Nectars could succeed in the future by working to capture more market share as well as compete with the market rivals by finding ways to offer products in the convenience stores and supermarkets. Additionally, the company could sell the part ownership in company in exchange for the more robust growth opportunities, capital need and business advice. It can also go public to create brand awareness and instant capital funding.Furthermore, it must continue differentiating itself from the market competitors based on providing quality products, quickly respond to changing consumer preferences, retaining qualified and competent employees and foster the culture of innovation and creativity to lead the market(Thomas H. Davenport, 2011). Another option that the company could exploit is work in building brand awareness & advertising that Nantucket Nectars provides high quality and rich beverages than competitors because currently the company is only focusing on word-of-mouth advertising, memorable story line and creative packaging(Edelman, 2010)……………………
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