Final Analysis

NATURAL BLENDZ

Executive summary

As a team with very diverse backgrounds, we all agreed on the core idea behind Natural Blendz: to create something that tasted great without sacrificing the nutritious value. A combination of factors including the obesity epidemic along with somewhat abrupt shifts in healthcare influenced our decision to focus our business on the well-being and health of individuals. We offer prepackaged, ready-to-use smoothie packets, which eliminate the tedious and messy task of making a smoothie. Furthermore, we reduce the storage space for all the necessary ingredients and make it much more cost efficient for the consumer. Natural Blendz’s smoothies are made with the highest quality ingredients, have superior nutritious value, and offer three succulent flavors.

The equity in Natural Blendz is split evenly between the three partners, but distinct roles are assumed by each partner to ensure decisions are made diligently and swiftly. Natural Blendz’s business plan was designed to be very simple in order to stay organized, develop the company step-by-step, and remain focused on our main goal: to deliver value and satisfaction to our customers.  Due to limited resources, we focused our effort on developing a concise but encompassing product line, which included a mix of green and fruit smoothies. Although we offer only three flavors, each flavor is distinct, ensuring that a customer will find a flavor that appeals to them.

The survival of our business depends on our revenue streams, thus the sale of our product is a key facet. As Natural Blendz grows, operating costs will increase and more money will be needed to deliver our final product to the customer.  We believe as the company grows we will be able to utilize economies of scales and that this will aid in our ability to gain a higher margin.  This higher margin will allow us to cover the operating expenses we expect to incur with growth. Although similar products already exist, our competitive advantage is that our product offers customers the highest quality of natural organic ingredients and super foods; thus, the value proposition facet is our most important.

As we have begun to lay the core foundation of our business, we have run into several roadblocks, but have been able to overcome these by taking a step back and regrouping. In our initial business plan we did not include realistic operating costs due to our in house production, packaging, and delivery. Moving forward we will need to adjust our operating cost projections and make sure these are realistic and reflective of our business. Sales drives our business, thus a lot of emphasis should be put on this aspect. We were timid and very reserved when it came to selling to people outside of our personal network. Learning to overcome our fears and become more comfortable with accepting the inevitable rejections that accompany a new business will be key for the growth and survival of our business. Many components of our business require attention, learning how to allocate time accordingly is important in order to successful strengthen the core pillars of our business first and address the minor ones later.

The opportunity for market penetration and retention is very high for Natural Blendz’s on-the-go smoothie packets. Although some smoothie companies like Jamba Juice are currently struggling, our product differentiates itself by offering convenience and value of a fast and nutritious product that can be made virtually anywhere with little effort. Similar products such as Yoplait Smoothie packets currently exist, but they lack the super foods and organic ingredients contained in Natural Blendz’s. In the time it takes to walk to the local smoothie store or to take out all the necessary ingredients to make a smoothie, you can make a delicious smoothie using Natural Blendz smoothie packets and be out the door and on the way to your next adventure. As business expands, the need to outsource the process of packaging and delivering the product increases. However, this will enable Natural Blendz to achieve more of an economy of scale cost structure due to our ability to buy our materials in bulk and distribute our fixed costs over more units sold. We will then be able to adjust our prices and offer customers even more value while steadily increasing our profits. Our return on original investment is currently 2.36 and we look to increase this number as we expand our operations. Looking forward, much more planning is needed in order for us to take the next step in the right direction. We are confident that we have the tools and resources to make Natural Blendz the premier smoothie company.

Business Model

Key Partners

Natural Blendz’s final business model includes a buyer-supplier relationship predominantly with Whole Foods to ensure many local and organic foods are used in smoothie production.  Other suppliers include Trader Joes and ALDI.  Supplier partnerships remained the same from start to finish, thus this portion of the business model did not evolve.  No other key partnerships existed throughout the duration of the venture.   

Key Resources

Key resources include physical, financial, intellectual, and human components.  Key physical resources include a kitchen space, Magic Bullet blender, and other basic kitchen supplies i.e. measuring cups, knives, and cutting boards.  Due to in-house production, packaging and distribution by the partners, labor costs were not incurred.  Specific health knowledge and smoothie mixologists were essential to product development to ensure smoothies were crafted not only deliciously, but naturally and nutritiously too.  Due to an initial goal of maintaining simplicity in our business, key resources required minimal evolvement from start to end. 

Key Activities

Key activities include smoothie research and development, packaging, distribution, marketing and social media.  Smoothie research and product development involved increasing our knowledge of health foods and their benefits.  Packaging ended up as putting smoothie ingredients into a freezer safe Ziploc bag.  This evolved from our initial idea to create a pop-up smoothie table in Grainger and other campus buildings and sell ready to eat smoothies.  We planned to use the same freezer smoothie packs, but go one step further and empty the frozen smoothie ingredients into a blender on-site.  As a result of moving away from the idea of ready-made smoothies to frozen smoothie packs our distribution model evolved as well.  Our final distribution model included delivery of smoothie packs by us to all customers we should to via our networks and social media.

Value Proposition

Natural Blendz’s final business model derives value for customers through adherence to our core principle of simplicity.  Smoothies are crafted using only wholesome, natural ingredients.  We believe that simple, clean, and minimally processed foods are essential to exceptional health.  All ingredients are freezable, and packaged and sold in on-the-go, disposable Ziploc bags.  Customers simply empty contents into a blender or food processor and add one cup of a desired liquid.  Rinsing, washing, measuring, and chopping are complete, thus offering value through time saved.  Individuals may be hesitant to invest in some of the newer, trendier, superfoods our smoothies contain, so our product enables customers to try more expensive superfoods such as chia seeds, coconut oil, and ground flax.  This offers incomparable value to customers because it eliminates the risk associated with the cost of purchasing expensive superfoods prior to ensuring product satisfaction, and at a more affordable price than competitors such as juice bars.  Additionally, one of our core customer segments includes college-aged students who typically live in small apartments and share common spaces with roommates.  Our freezable smoothie packs offer a convenient, cost-effective way to reduce food storage space by containing the exact amount of each ingredient needed per smoothie.  This also cuts down on waste that an individual might encounter when purchasing smoothie ingredients on their own because fresh foods have a short shelf life and may not be used quickly enough.  Lastly, our pricing structure offered value to customers through a quantity discount.  Individual smoothie packs sell for $3.00 each, however if customers purchase three full price smoothie packs a fourth is available for only $1.00. 

Conclusion and Reflections

Project Experiences

As with all projects and ventures, things do not always go according to plan. This calls for constant involvement and readjustments in order to stay on course and navigate our way around whatever we encounter. To us, entrepreneurship is taking an existing concept, tweaking it, and then molding it around what we believe to be an emerging trend. Coming up with our initial concept was not very hard due to our shared interest in health and wellness. However, the tweaking and molding of all the components proved to be a greater challenge. Overall, we were very satisfied with the outcome of Natural Blendz and learned more than we ever imagined. Lectures can provide a core foundation, but the application and dirty work involved in designing and implementing our business cemented many of the concepts we learned in class. Making mistakes proved very valuable because we had to remain calm, reflect, and then collaborate to come up with a new course of action that better suited the success of our product. We delegated our roles at the beginning of the venture and were better able to manage and guide Natural Blendz to where we wanted it to be. Furthermore, communication proved key in making sure we were all on the same page and did not lose site of our goal: to deliver a valuable product to our customers.

Our initial sales projections were much higher than what our actual sales turned out to be. Getting our product ready to sell took us a lot longer than we expected. Looking back, our inexperience in product development explains the incorrect projections; we needed to be more realistic with the time allotted. The development of our product was a lot of fun because we would get together and test different concoctions until we found the three best flavors that we thought would appeal to our target market. However, packaging each individual product took a lot of time, as we did not have a systematic way to do this quickly. We realized that if we wanted to expand we would eventually need to outsource the production and delivery of our product. Our vast personal networks proved to be invaluable as many of our customers came directly or indirectly from our network. However, we were also sometimes frustrated when selling our product because many times we were told we had a great idea, but we could not land the sale.

The first pivoting point in our business model was taking our existing business model and scaling it down to something more manageable. We wanted to make sure we did not get in over our heads and drive the company into the ground right from the start. This was fairly simple to do, but it did take us some time to decide on what the most important components to focus on. The second pivotal point we made was adjusting the price of our product. We had originally estimated our cost of goods sold to be much higher and therefore we were selling at a much higher price than necessary. The new price delivered even more value to our customer while still producing our target profit margin comparable to similar industries. Overall, we all had a lot of fun and gained valuable insight into the world of an entrepreneur. Many components came into play, but we were able to learn how to better manage all of these components together and therefore produced satisfying results.

Team Evaluation

As a team, our main goal was to gain valuable experience by diving in headfirst and bringing an idea to life. In order to make this a reality, we had to delegate our time wisely and make use of our personal experiences and backgrounds. Our group was very successful because we all brought something to the table and we were able to aggregate our expertise. Cassie’s expertise was in product management, Jen’s in creativity, and John’s in project management. Our biggest strength was our dense social and professional networks. We were able to use these networks to get advice, feedback and ultimately sales. Furthermore, being UW-Madison students helped out a ton due to the exposure to group work from day one of freshman year. This project would prove challenging to us, but we were able to utilize our past experiences to better organize and complete our task. We all had general business knowledge, confidence, and the drive to make sure we completed our task, no matter what! One of our weaknesses was that we were all relatively shy. It was difficult for us to go outside of our comfort zone or deal with the inevitable rejection we would face at some point in our venture. An ideal team would have included a variety of ages and perhaps an even greater diversity between its members. We would have benefited greatly if we had a member that had expertise in technology or sales, for these were two areas that we lacked significant expertise. Overall, we worked well as a team due to our shared values, constant communication, and trust. 

Learning Outcomes

Throughout the semester a class focus has been on understanding the main takeaways of each lesson and case study.  As a team, we strived to carry this over to our project and reflect on a variety of key learning points as we completed each component of our business venture.  Our most significant start-up business learning outcomes revolve around financials, sales, and their connection to business sustainability.  With respect to finances, our financial statements always had zero monetary operating costs.  This was mainly a result of labor costs not being incurred due to in-house production, packaging and distribution by the team.  Reflecting on this component of our business, we realized that in start-up ventures, it is highly unlikely for a company to have no operating costs or expenses.  Thus, we thought that this projection might have been unrealistic despite the truth in its calculation.  As a result, looking forward to future growth of Natural Blendz became more of a challenge.  We were not sure how sustainable our business would be after adding in a more realistic operating expense budget.  Our gross margin percent was on par with the average 36% of the general retail industry, so we were proud of that accomplishment.  However, our concern is gross margin dollar wise we may not be able to maintain sustainability long-term with the addition of operation costs.  We learned that increasing net sales drastically and correspondingly leveraging better economies of scale might allow us to increase gross margin through lower costs.

Our second major learning outcome dealt with brand recognition and customer trust.  As a start up company, we relied heavily on our personal networks to sell smoothie packs.  Reliance on personal and professional networks is not uncommon for start-up companies to acquire sales, however to grow exponentially Natural Blendz would have to expand into sales largely beyond our personal networks.  In reflecting upon the possibility of exponential sales expansion, we learned that this would require a much more in depth marketing and promotional plan than we used to reach our personal network.  A formalized marketing and promotional plan would require significant time, efforts, and would likely be costly.  This would greatly impact our net operating profit and ability to remain a profitable business.  Additionally, we learned that for obvious health and safety reasons, food is a product that consumers are especially particular about when it comes to trusting it in the hands of others.  As a company we would have to increase our efforts to establish brand credibility in order for customers outside of our personal network to trust that our smoothie packets were prepared in a safe, clean kitchen.  A legal license and safety, hazard and health code permit would be necessary.  This can be costly and it is an element that we overlooked because it was not necessary to conduct sales over the semester because we did not operate a legal entity.  Additionally, while our team holds significant health and dietary knowledge, it was acquired mainly through personal research and experience and additional online research specifically for this venture.  We learned that likely at least one or more employees would need to hold a formal health certification of some sort, or we would need to bring on board a licensed dietician etc.

If we were to start this process over, we would have included members of our primary customer segment in our product development phase.  We experimented with approximately ten different smoothies options, altering them as needed until we found the perfect product mix.  Early on, we established that we wanted our product mix to include three smoothies.  The product development phase was a matter of finding three smoothie packets that were in line with our value driven cost structure, and that were simple, yet held enough breadth to attract a diverse customer segment.  While we are confident in our final selection, it may have been wise for us to provide free taste testing to gain less subjective feedback.  This also would have increased product awareness and potentially allowed us to increase our quantity of sales outside of our personal networks.