Natucket Nectars flyin’ high

I. Identify/Define the Key Issues/Situation Analysis

A. Key issues that will impact the focal firm’s ability to survive, thrive and grow. First Nantucket Nectar has to decide on a strategy on how to achieve increased growth in future. This may include an IPO, being bought by one of the big players in the beverage market or growing organically. Independently on how they achieve this goal, it is most important that they preserve the current spirit of the company. This includes both the inner structures and also the external image of the company.

Internally they have to keep up the entrepreneurial spirit, like the nonhierarchical structures, the non-formal dress code and other factors which make Nantucket Nectars a place where “work is still fun”. On the other side they have to maintain their image of being an independent company which only produces products with the highest quality and not willing to compromise that at any cost. Especially in the case of being sold to a big company, they have to make sure that they are not associated with the buyer but are still seen as the small independent “good-guy” company.

Finally, as the founders have a long term interest in the company, they have to find a way of keeping control of the company, so they should not give away too many of their shares in order to earn a lot now.

B. Critical Success Factors (then & now)

Their greatest success factor is primarily their great tasting, all natural, high quality product. This product enabled them to get a great and very committed customer base and build up a brand. The current trend of people favoring healthy and natural beverages additionally helps them to grow successfully.

Their entrepreneurial spirited and highly motivated team helps them to quickly react to new trends in a constantly evolving market and even with a small marketing budget they showed that they are able to establish their products successfully on the market, mostly using highly creative and alternative marketing tools. Additionally, the story they can build up their marketing on is much more appealing than that of any of the brands introduced by big companies. While still suffering from low margins, cost will be reduced with greater volumes and more experience in the market.

II. Mobilize Strategic Options
A. Keep the company and grow organically

1. This approach allows the founders to retain control over the company and be able to leverage at best on the image and story developed through the years. They would also be able to secure the job for all the employees who were fundamental in the growth of the firm. This strategy wouldn’t prevent the founders to sell the company in the future, after further increasing its valuation.

2. Refusing to sell shares would mean turning down fast growth opportunities and it would be difficult to access the multi-serve distribution, which offers the highest growth possibilities. Furthermore they would not be able to decrease their cost structure, exposing them to the risk of being taken down on price competition by large firms. Finally, there is no certainty that the valuation of the company will increase in the future and an opportunity of selling on these favourable condition may not happen again. B. Go public and do an IPO

1. This strategy would represent a fast way of gaining money to invest for growth while at the same time keeping a reasonable degree of control over the company by having a large number of shareholders with few shares. The further growth of the company would permit Azzarello – Chang – Chemali – Pallua

Entrepreneurial Management Case 11 – Nantucket

EoS, thus driving down the costs. In addition, the New Age drinks industry’s favorable market conditions would help increase the valuation of the company on the stock market. 2. An IPO would obviously entail the risk of being acquired by an undesired company. The process of contacting an investment bank and define valuation would be costly and timeconsuming. In addition, the short-term profits demanded by the investors would be in contrast with the long term orientation of the company. Finally, market conditions may change and this could be a source of stress for the founders and the employees. C. Sell the whole company or part of it to an established firm

1. There’s a big interest in the company at the moment, and this can initiate a bidding process that can further drive valuation up.  Many of the possible investors are highly attracted by the industry and, due to a strong need to complement their product portfolio with a New Age product some of them may bid high. Beside money and an improved cost structure, large companies could provide access to a broad distribution network, supermarkets and shelf-space as well as know-how. The founders and their associate still own large part of the company and can leverage on that to keep some control after selling.

2. The other side of the coin would be for the founders to lose substantial control over the company after the acquisition. There is also the risk of losing the culture that has characterized and differentiated the firm throughout the years, providing a main source of competitive advantage. In addition, the company could be acquired by a big company with low reputation and this could result in a bad image transfer. Finally, the highly valued employees might be affected by the outcomes of the acquisition.

III. Recommendation

To grow business without losing control and company culture, Nantucket should sell its shares to an established company, gaining resources for expansion as well securing their intangible asset. Getting momentum for growing

Being a small company in growing and competitive industry, selling the company enables Nantucket to scale up their business by leveraging the expertise of bidder, including distribution capability, financial strength and management. Compared to IPO, this approach allows Nantucket to receive resources for expansion as well as cash inflow. This strategy aligns with the vision of founders for long-term operation goal that would level up the business to a more sustainable level while keeping control of founders on the company.

Start developing their own taskforce

The bidding combines the mutual interests for bidders to penetrate the market and for Nantucket to grow in the market. Current situation creates a favorable buying condition and bargaining power for Nantucket which would minimize the loss of control so that Nantucket could still preserve their most important asset of business, the unique brand image and culture. With this good position, Nantucket should carefully choose bidders by to find the expertise that could be leveraged and match their strategic goal.

Successful experience of Ben & Jerry and Zappos

The case of Ben& Jerry acquired by Unilever and Zappos acquired by Amazon are two successful precedents of this strategy. After acquisition, these two companies were able to operate separately with bidders and secure their valuable intangible assets as well. Ben & Jerry kept running by its social responsibility philosophy and Zappos continued to operate as an independent entity from Amazon, both preserve the intangible asset like brand image and company philosophy.

Azzarello – Chang – Chemali – Pallua