Veritas: The First “Real Food” Supermarket Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Veritas: The First “Real Food” Supermarket Case Solution

Technological

The competitors or leading players in the supermarkets, such as: Walmart, Whole Foods, Target, and others operated as online stores. Similarly, they had been offering as the independent online grocers, specialized in the production of fresh organic products, in order to become more popular. With the emerging trends in the retail industry; the organization should invest in research and development, such as building a mobile application. It would allow the organization to remain competitive with the existing players. Additionally, investing in the management of the fresh products, to make fewer investments with local suppliers in seasonal sales would also help the company.(Barnes, 2019).

Political-Legal

The occurrence of strict regulation regarding the environment mainly involves a series of practice, cost and bureaucracy, which customers are unfamiliar with. Considering the responsibility of the regional government of Spain regarding the control and certification of organic agricultural products; some of the NGOs in Spain and Europe represented actions to monitor the enforcement of environmental regulations. As reported by the Trade publications; the leading supermarkets like Aldi, Lidl, Eroski, El Cortes Ingres, and Carrefour viewed the consumption of organic food as a growing trend than a niche market among the highly competitive supermarket chains.

According to the law of Spanish government; the packaged products are required to feature the logo and control code of the European organizations in terms of product verification to ensure that the European requirements for the product growth were met. Additionally, the legislation of Europe states that the adjectives bio (biological), eco (ecological), organic, and sustainable were sustainable. This meant that the products were not treated with any kind of chemical or pesticide, were grown concerning the natural cycles, no genetic manipulation and provision of benefits for local farming communities and the environment.

Socio-cultural

Over the past decade; the consumption rate of organic food per capita has doubled with concentrated sales in central and northern Europe, because of the sharing of concern about the environment and healthy eating. The interest of Spanish consumers has represented a substantial increase in the organic products, according to the report on food consumption. This has significantly resulted in a change in consumers’ preferences. Therefore, the customers are more likely to pay for better quality food. The growth of population in the capital of Spain – Madrid was the highest, followed by high construction and per-capita growth rates representing the probability of high sales volume and low prices.(Olayanju, 2019).

Natural Environment

Consumers were well-aware of the environmental and animal welfare issues: like water utilization, intensive land, genetically modified seeds, use of pesticides and emission of carbon dioxide and utilization of energy. Due to this reason, the development of stores represented the use of unpainted, natural materials and energy-saving lights. The organization was looking for local producers for cost-saving, environmental and ecological reasons. Thus, the concept of real food was mainly based on the provision of values, such as: environmental care, biodiversity, local sourcing, taste, health and conscientious responsible for the consumption of organic products.

Section 03: industry environment

Porter five forces model

Bargaining power of buyers

The bargaining power of buyer is of high force due to the presence of the valuable market players with brand reputation and large market size. The customers are cost sensitive and they look for the product that is high in quality and low in cost. The buyer’s cost of switching from one competitor to another competitor is low,since the competitors including: Target, Safeway, Kroger and Walmart rely on the aggressive pricing as well as the wider range of the organic products on their shelves, offering less expensive experience to the shoppers.

Furthermore, the high bargaining power of buyer is driven by the growing online sales of the organic products, and the popularity of the independent online grocers specialized in fresh organic. Thus, the facility of the e-retailing has increased the ease and convenience of buyers to get the product from different competitors.

Bargaining power of suppliers

The bargaining power of suppliers is of high force in terms of the presence of the established market players, and their dependency on the local suppliers makes the bargaining power of suppliers high. Additionally, the company’s local suppliers charge high process and are inflexible, allowing Veritas to import most products from the wholesale distributors, but it has resulted in an increased cost and Veritas has grown overly dependent on its suppliers.

In the retail industry, the suppliers are large as well as threatening to forward integrate and the suppliers are bought by Whole Foods to seize the US organic and natural food market leadership. Building the long term relationship with the suppliers is of paramount importance as it ensures the visibility of the business. Also, the long term relationship with the suppliers help sin ensuring the consistent delivery of the seasonal as well as non-seasonal items at the fixed costs. Due to an increased dependency of the retail companies over suppliers; the suppliers have greater control over the products’ prices, thus making the bargaining power of suppliers a high force in the market.

Intensity of rivalry

The food and retailing industry of Spain is shaped by the high competition and the market rivals have been showing strong results as Mercado has the highest share-of the Spanish market, i.e. 22.9 percent, followed by Dia and Carrefour with 8.5 percent,each.

The key factors that tend to drive the huge growth in the retail food sales, include: population growth, increased disposable income, changing preferences of customers for e-commerce or online shopping followed by the features of ease and convenience and comparison between the product’s prices. Additionally, the continued expansion of the competitors in the market makes the competition more robust with the passage of time. The intensity of rivalry among the competitors is driven by the eco-friendly neighborhood stores, bio space – featuring the dedicated sector, which tends to provide the customers’ advice on the healthy habits and foods, local chains with three to five stores and international organic supermarkets.

Threat of new entrants

The threat of new entrants is of low force in the market, because of the high cost of capital involved in opening an organic supermarket and attracting the customers. So, for the new entrants, it might not be easy to compete against the renowned brand, such as: Target, Walmart, Kroger and Veritas, which are trending exceptionally in the market.

The barriers to enter in the market, includes: high capital requirements, an access to distribution channel, strong and long term relationship with suppliers, availability of the location of store, availability of the qualified personnel, government policy of driving sustainable business operations and product differentiation.(Fisher, 2015).Also, the customers’ loyalty towards the valuables brand is high due to which the new entrants would find it challenging to attract the customers and turning them into loyal customers. Furthermore, the existing competitors in the market are enjoying the large cost advantage over the potential new entrants.

Threat of substitutes

The threat of substitute products is of high force due to the competitor’s attempt to offer the wide range of the organic products in the market, followed by anincreased customer demand for the organic products, having more nutritional benefits and reduction of the public health risk(Lee, 2015). Thus, making the threat of substitute a high force. Additionally, the buyers have availability of choices with attractive prices and better quality, which makes them to switch with little cost involved. The customer loyalty is one of the strongest barrier in contradiction of the substitute products.

Industry Driving Forces/KSF:

The growth of the retail industry is mainly driven by many factors, which include: significant change in consumer behavior, growth of the industry, an increased spending of customers over better quality food, government regulations and awareness of customers regarding the difference in conventional and organic products. Such factors have not only influenced the growth of Veritas but also of all the players operating in the supermarket chains. Although international expansion is also one of the crucial factors,this approach has not been considered by Veritas yet, as Baristas is known to be more focused on regional expansion in comparison to the international expansion.

All the supermarkets were known to take initiatives to increase the engagement of customers with organic products through the allocation of more shelves, for organic products’ sales. The customers’ preference towards purchasing organic products was more focused on buying from a specialized store rather than a conventional supermarket. Due to this reason, leading companies like Doctor Veg with La Tavella shared their approach to professionalize the business and reach the customers with significant improvement in the services. To drive the customer experience; the selection of the vendors was primarily based on the capability of offering good products to the customers at fair prices.

On the other hand, the compound annual growth rate of the organic product market around the world, was 9.4 percent in 2010; representing the sales of more than 60 billion Euros in the year 2014. The contribution of Europe in the global sales of the organic product was around 41.4 percent, i.e. highest among all the regions of the world. Similarly, the annual compounded growth rate in Europe was around 7 percent, exceeding the sales of 26 billion. In contradiction, the spending power of customers towards the organic products was increased based on the reliance of the retailers over aggressive pricing strategy and offering wide-ranging organic products, and the provision of less expensive options. Such increased demand led to the change in the business model of Veritas i.e. Contiguous, which allowed them to specialize in both fresh and local products..............

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Veritas: The First “Real Food” Supermarket Harvard Case Solution & Analysis