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Nantucket Nectars Tom Scott and Tom First started Allserve, a floating convenience store serving boats in the

Nantucket Harbour during their summer holidays in college. After graduation, during the winter of 1990, First recreated a peach fruit juice drink that he came across in Spain and started a side business selling fresh juice. Everyone loved the product and they went on to open the Allserve General Store on Nantucket's Straight Wharf. They named the fruit juice "Nantucket Nectars". Scott and First invested their collective life savings of about $17,000 to contract a bottler and finance inventory in the first two years. The next two years saw them operating in an undercapitalized state on a small bank loan. Subsequently, in order to raise funds to improve distribution and increase inventory, they sold 50% of the company to Mike Egan. Nantucket Nectars achieved its first year of profitability in fiscal year 1995. Nantucket Nectars continued to grow and in 2000, they were approached by five companies that were interested in acquiring a portion of the company. Scott and First had to decide if they should: 1) sell a part of or all of the company; 2) undergo an initial public offering (IPO); or 3) operate under status quo. They had several questions that they would like answered. If they do proceed with the sale, how should they negotiate for a maximum price? How could they hold the meetings with the prospective buyers and not let the employees find out about the transaction prematurely? Should they organize an auction to sell the company? Will it generate adverse publicity if they decided not to sell after the auction? As there were a lot of questions to be answered, First and Scott wondered if they should hire an adviser. And if so, should they hire a local investment broker from Boston or a large investment bank from New York? SWOT Analysis Strength Nantucket Nectars' numerous strengths have led to their success. They produce all natural products that have a great taste, have a very strong management team as well as a strong branding, guerilla marketing skills, possess the ability to exploit small, rapidly changing market opportunities, last good access to single-serve distribution in the New Age beverage market, and is the best vehicle for juice companies to expand into the juice cocktail category without risking their own brand equity. In addition, Nantucket Nectars' management team has the required knowledge and experience with the single-serve business and thus has the ability to add value to large player who wants to roll out new single-serve products. Weakness As a company with limited financial resources, Nantucket Nectars have been disadvantaged in their channels of distribution. They have not been able to distribute their products in the

supermarket on a large scale. As can be seen from tables D and E, although most of the New Age beverages were sold in the supermarkets (55%), the proportion of Nantucket Nectars supermarket sales was only 1%. Nantucket Nectars distributed their products mainly through other channels like delis and educational institutions and is thus missing out on a large portion of the consumers pie This inevitably means that the company would be able to increase their revenue substantially if they were able to distribute their products in the supermarkets. In addition, Nantucket Nectars has one of the lowest profit margins in the New Age beverage category. They relied heavily on the harvest of fruits due to the high proportion of fruit juice in their products as well as their limited futures contracts in commodity procurement. Lastly, Nantucket Nectars had problems finding quality bottlers at affordable price. Opportunity Four companies have approached Nantucket Nectars and expressed their interest in buying part of the company. They include Tropicana (Seagram), Ocean Spray, Triarc and Pepsi. This present an opportunity for Nantucket Nectars to form strategic alliance and leverage on the strengths of the counterpart or parent company to achieve greater growth. Threat Competition in the beverage industry is extremely intense. Competitors continually introduce new innovative products and consumers are bombarded by numerous choices and promotions. Nantucket Nectars has been successful with increasing sales and continually innovating new products, and grown to a middle-sized company. This position proves to be a dangerous one as it does not possess the financial strength of a large company but yet may not have the nimbleness and innovativeness of a small company. In addition, the entrance of big players such as Coke, Pepsi and Tropicana (Seagram) with strong financial standing may reduce their revenue. Furthermore, the past few years saw Nantucket maturing and it has begun to stabilize as a company. This is a dangerous period for the company as they will reach a crisis should they not undergo renewal in order to rejuvenate and stay relevant as well as competitive. Therefore, it will be advantageous for Nantucket Nectars to form strategic alliance in order to leverage on the financial strength of its counterpart or parent company to obtain shelf space in supermarket chains. With an extension of the distribution channels, they would be able to gain a greater market share. Should First and Scott sell Nantucket Nectars? From the SWOT analysis, my recommendation would be for the founders to sell part of their company. This will form a symbiotic relationship whereby Nantucket Nectars can leverage on the financial strength of the parent company to expand their distribution channels to include the

supermarkets, thereby greatly increasing their market share. The parent company can also penetrate the New Age beverage segment with a strong brand. Who should First and Scott sell Nantucket Nectars to? The table on the following page presents the advantages and disadvantages of the various companies that have expressed interest in Nantucket Nectars and other companies that may be interested in Nantucket Nectars (NN). Information has been derived from Exhibit 9. As can be seen from the table, both Seagram (Tropicana) and Ocean Spray are good candidates for the sales. However, Ocean Spray has the greatest number of advantages. More importantly, there is a good fit between the needs of Nantucket Nectars and Ocean Spray. Nantucket Nectars will be able to overcome its weaknesses by leveraging on Ocean Spray's network of five captive bottling plants and several long-term arrangements with bottlers as well as access to the commodity market. Moreover, there is a good match of culture. One of the greatest concerns of the founders was that the culture of the company would change drastically with the sale. First's greatest fear was that the entrepreneurial spirit that made the firm successful would be destroyed. Name of company Advantages Disadvantages Seagram (Tropicana) - strong platform for NN's expansion- same geographic markets strong buyer power in the juice business Ocean Spray - good match of culture- private and thus NN could operate in a similar waygood internal cash flow- world's largest purchaser of non-orange fruit juice- secure national manufacturing coverage at advantageous cost and quality control - loss of Pepsi distribution Pepsi - more prepared to take risks with new products - history of downscaling the quality of products to achieve higher volume Triarc (Snapple & Mistic) - best platform for growth - replacement of distributors Cadbury (Schweppes Ginger Ale) - deep pockets - need to improve its management team, set up succession plan, reduce dependence on Cadbury family- not much operating improvements or increased distribution strength Starbucks - understand the tastes and trends of the new generation- strong interest Welch's - very similar corporate structure- reactive to market trends - thinks the rest of the industry produce faddish kinds of products Coca- Cola - lack of success with Fruitopia products Another important point of consideration is that Ocean Spray was private, thereby allowing Nantucket Nectars to continue operating in a similar fashion. This would allay the founders' fear that the consumers may not be able to enjoy the Nantucket Nectars story if the company was owned by a large public company.

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