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
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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
The existing concentrate business is largely controlled by Coca-Cola Company (Coca-Cola) and PepsiCo (Pepsi), together claiming a combined 72% of the U.S. carbonated soft drink (CSD) market sales volume in 2009. Refer to Exhibit 1 for an illustration of the CSD industry value chain. For more than a century, Coca-Cola and Pepsi have maintained growth and large market shares through mastering five competitive forces, shown in Exhibit 2, that drive profitability and shape the industry structure.
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