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What if: Walmart + Organic Food + Ecommerce?

Organic is the fastest growing sector of the U.S. food industry.  Consumers are eating more organic food and using more organic products than ever before.  Walmart, the largest retailer in the world, has adapted to changing consumer preference and now has a variety of in-store organic offerings. In 2020, Walmart’s revenue was over $500 billion with about 10% of that coming from its ecommerce operations. Now what if there was an opportunity for Walmart to increase its ecommerce revenue and further capitalize on the increased demand of organic products? Turns out there is a way to manifest this possibility: through the acquisition of ecommerce platform Thrive Market. 

Why Thrive Market?

Thrive Market is an American e-commerce membership-based retailer that sells organic and non-GMO products from various brands along with private label products. They offer a membership fee of $59.95/year or $9.95/month and their products are discounted from 10%-50% off standard retail price. A Gallup poll revealed that those more likely to implement organic food into their diet were aged 18-29 and have an annual household income over $75,000. This acquisition could help Walmart acquire younger customers who also have more money to spend. This move will draw consumers away from competition and create loyalty amongst mindful grocery shoppers. Walmart can use their extensive resources (logistics, capital, marketing ability) to augment Thrive Market’s existing business operations. 

Thrive Market seems like a extremely plausible choice for Walmart to increase ecommerce revenue.

The Price Tag

In 2017, Walmart acquired e-retailer Bonobos, who sells men’s clothing and accessories, for $310 million. Bonobos annual revenue prior to the acquisition was approximately $150 million. This shows Walmart paid about 2x the revenue to acquire the company. Due to the similarities between Thrive Market and Bonobos (both e-commerce, similar revenue), the estimated cost for Thrive Market would be between $250 million to $300 million, although it could be higher due to the growing demand for organic products. 

Below are revenue projections and the net present value of the acquisition with a discount rate of 6% based on projections:

Promotional Strategy 

If Thrive Market was acquired, Walmart could utilize its marketing resources to help accelerate the platform’s growth. With a substantial marketing budget, Walmart could set up informational booths in retail locations about Thrive Market and carry select products that Thrive Market offers to entice shoppers to purchase a membership. Walmart could also partner with farmer markets to promote Thrive Market as that would bring exposure to a key consumer segment. Digitally, Walmart could run display ads and search ads to generate traffic to Thrive Market’s website. Walmart could also feature information about Thrive Market on Walmart.com. To target the young adult core demographic, Walmart could hire social media influencers to consume Thrive Market products and share their affection for the brand to their network of followers.

 Would the acquisition of Thrive Market grow Walmart’s ecommerce sales and increase their hold on the organic market? Maybe. Was it interesting reading about how it could be a good buy for Walmart? You be the judge. 

Sources:

https://www.businessinsider.com/walmart-is-acquiring-bonobos-for-310-million-2017-6#:~:text=Bonobos%20generates%20between%20%24100%20million,most%20of%20its%20sales%20online.

https://advantage-marketline-com.dbproxy.lasalle.edu/Company/Financials/wal_mart_stores_inc

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The Rise of Bubly

Looking for a healthy alternative to sugary soft drinks? Well look no further! Sparkling water is the solution! The sparkling water industry is one of the fastest growing non-alcoholic beverage categories that is expected to grow at a five-year CAGR (compound annual growth rate) of 10.6% from 2018 to 2023 with dollar sales of $24.5 billion by 2023. Millions of dollars from venture capitalists has poured into the industry as consumers stray away from unhealthy sugary beverages like Coca a Cola and Dr. Pepper.  This change in consumer preference is a massive opportunity for sparkling water manufacturers, and PepsiCo has taken advantage with the introduction of their own sparkling water brand called “Bubly”. 

Bubly was introduced in February 2018 and features a variety of flavors of sparkling water in bright and bold packaging.  It was introduced to “provide consumers with a great-tasting, flavorful, unsweetened sparkling water in a fun, playful, and relevant manner that is unlike anything we've seen in the sparkling water category today," according to Todd Kaplan, Vice President of PepsiCo’s Water Portfolio. The brand has seen exponential growth with sales of $300 million from May 2019-May 2020, an 87% positive change vs prior year! They also hold 8.7% in market share, up 3.4% from prior year. Bubly has disrupted the industry and has put pressure on established brands like La Croix to rebrand their products. With such success, one may wonder, “What makes Bubly so successful?” 

The Bubly Advantage

Bubly isn’t anything particularly new in the sparkling water market, what makes it unique is its brand, design, and experience. Bubly’s colorful eye-catching cans come in a variety of flavors and feature smiles to stick out from competitors also on the shelf. A key competitive advantage that smaller competitors like SunDrift and La Croix don’t have is the world-class marketing team and huge distribution channels of PepsiCo. PepsiCo is using its vast resources to effectively develop and market Bubbly to quickly become a sparkling water staple. 

They also have subsidized a costly advertising campaign for the Bubly brand that has created brand awareness and accelerated market penetration. The ad campaign has reached a large audience and even featured a commercial in the 2019 Super Bowl (video shown above) which amassed 100 million viewers! The commercial, featuring Canadian singer Michael Buble, cleverly uses the similarity between the words Bubly and Buble to create a premise where Michael Buble is confused about why Bubly isn’t pronounced like his last name. This genius use of celebrity endorsement created a memorable commercial sending a message that resonated with audiences. 

PepsiCo is not wasting time growing the Bubly product line as they recently announced a partnership between Bubbly and SodaStream which will introduce “Bubly Drops”.  The matchup between the two PepsiCo brands gives consumers another way to partake in carbonated drinks and another way to enjoy Bubly’s different flavors. This is a smart integration of brands which will allow for cross-selling when consumers buy SodaStreams and will surely increase revenue for Bubly. The release of this collaboration comes at a good time as less people are going out due to the COVID-19 pandemic, which will result in more SodaStream usage. 

Bubly has quickly established itself as a serious player in the sparkling water industry. Under the guidance of PepsiCo, Bubly will surely continue to be a dominating force in the industry. Even though Bubly looks set for smooth sailing, PepsiCo must be weary of other big firms like Coca a Cola or Keurig Dr Pepper expanding their offerings in the increasingly lucrative sparkling water industry. Only time will tell if Bubly’s growth will speed up or slow down but if I was a betting man, I’d bet it will speed up. 

Sources:

 https://www.pepsico.com/news/press-release/oh-hi-meet-bubly-sparkling-water-and-crackasmile02082018

https://www.bevindustry.com/articles/93226-state-of-the-beverage-industry-all-bottled-water-segments-see-growth

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Subaru Outback Wilderness: Take a Ride on the Wild Side

https://www.subaru.com/something-wild - Outback Wilderness Info page

The new 2022 Outback Wilderness

Earlier this month, Subaru announced the all-new Outback Wilderness, a new model of their popular Outback line of SUVs. It is the most rugged and capable Outback to date and is targeted towards outdoor enthusiasts who want more out of their wagon. Major differentiating factors of the new Outback include a elevated 9.5-inch ground clearance, upgraded suspension, standard front skid plate, and a exclusive “X-MODE” which allows the vehicle to switch automatically from low speed managed driving to speeds over 25 mph without the interruption of power or performance.

Subaru has created a profitable market with the SUV/Station wagon Outback and is defying odds by achieving record sales in a market segment where station wagons have vanished. Data from J.D. Power shows the hot-selling Outback makes up an overwhelming 85.7% of all wagon sales in the US! With such a grasp on the market it seems obvious why Subaru decided to make a new version of the dominant Outback. Another contributing factor to the release of the Outback Wilderness is that lifestyle vehicles continue to grow in popularity, especially those aimed at off-road use. It's why there has been a recent resurgence in the segment with the rebirth of discontinued car models such as the Ford Bronco and Land Rover Defender. 

Major competition

The Subaru Outback has been synonymous with adventure for over a quarter century but can this off-road tailored version of the car match up against the competition? 

One of the biggest competitors of the Outback Wilderness is the Jeep Cherokee Trailhawk, a model of the popular Jeep Cherokee lineup. In terms of price, both cars are close with the Outback starting at $36,995 and the Trailhawk starting at $36,045. Although this price comparison could be misleading as the Wilderness has more features (driver-assist safety features, better tow package) in the base package then the Trailhawk does. Another major competitor is Toyota’s RAV4 Off-Road with a slightly-lower starting price of $35,980.The Wilderness also has more features then the Off-Road in the base package which gives customers more for less. Drive tester’s from MotorTrend citied that Toyota’s Off-Road had a “stiffly-sprung, rough ride” while the Wilderness is a smoother ride both off and on roads. 

Although there are signs that the Outback Wilderness is better then competition, the real verdict of the SUV’s performance will come when it hits dealerships’ lots this summer.