1.Did you choose the company as an example of effectiveness or ineffectiveness? Why?
Bolthouse Farms (http://www.bolthouse.com/) is an example of an organization that was highly effective at aligning its operating and business models after repositioning its strategy. Bolthouse was like many agricultural businesses, in that it was concerned primarily with maintaining supply against a demand that was shrinking at 7% annually by 2012 (1). It focused primarily on carrots, with juices and dressings comprising a smaller segment of the business. In 2008, Jeffrey Dunn, former President of Coca-Cola North America, took over as CEO of Bolthouse and sought exponential growth. He concluded that if Coca-Cola could convince people to consume more than a billion servings of its products every day, then by using similar tactics the same should be possible for healthy vegetables. He aligned the operating and business models by repositioning the company’s entire strategy around three A’s: availability, accessibility, and affordability. As discussed further below, this realignment brought Bolthouse’s carrots into school vending machines, which enabled the company’s business model to much more effectively capture value from its operations; ultimately, the realignment allowed Bolthouse to grow net income by a CAGR of 7% from 2010-2012 to $92 million on sales of $689 million in 2012, when the company was purchased by Campbell’s for $1.6 billion (2).
2.Describe the company’s business and operating models. What is interesting about them?
The aforementioned three A’s effectively realigned Bolthouse’s business and operating models around a new mission, “to inspire the fresh revolution.” Before repositioning, the business model centered on selling medium and large bags of carrots and expensive quart or gallon bottles of juice through the grocery store channel. Operationally, grocery stores were the primary channel because they had the necessary infrastructure for keeping fruits and vegetables chilled and fresh. The multiple-serving sizing followed from being the norm for vegetables in grocery stores.
Jeffrey Dunn (@ChiefCarrot), however, had different plans: making Bolthouse products more available began with packaging them as single serving juices, vegetables, and fruit packs in vending machines (pictured below). This initiative coincided serendipitously with bans on soda vending machines in many school districts in 2013. Making their products more accessible centered on a massive advertising campaign of $2 million in one year–compared to a previous maximum ad-spend for the company of $100,000 (1). In order to attract the best creative talent, the company upended its entire operation by relocating its headquarters from Bakersfield to Santa Monica, CA. For their single-serving fruits and vegetables, they adopted the slogan “Eat ‘Em Like Junk Food.” Bolthouse credited this ad campaign with a 10-12% rise in sales (3). In addition, they created an offering of fresh fruit purees similar to the yogurt tubes to which many children have become accustomed. The company was also able to convince Sesame Street to allow Bolthouse to use its brand and characters without a fee. Finally, to compete with junk food on affordability, the company set a goal price point of less than $1 for many of its products, including its 40-cent fruit tubes and 79-cent vegetable snack packs.
3.Do the models align and support each other? How? What specific features of the operating model are designed to create and sustain competitive advantage? What features of the business model leverage unique capabilities of its operating model? What are the implications for performance?
The operational model, especially the realigned focus on availability, accessibility, and affordability, strongly supports the business model of increasing demand for their products. For example, making their products available in vending machines allows them to compete with other similarly ubiquitous snack foods and beverages more effectively. Making their products more accessible, through single serving sizes, interesting flavors, and advertising allows them to better match customers’ consumption patterns, provides variety, and creates interest in their products. Affordability is key to their ability to compete with other snacks and beverages, which they do through comparable and sometimes even cheaper pricing than competitors. They were able to compete on price by improving efficiency and reducing costs in production (1).
Creating a network of availability in vending machines is probably the single strongest operational capability that they have leveraged to support their business model. Increasing accessibility through advertising and other means then augmented demand, while affordability ultimately guaranteed that customers have the means to follow through with purchasing. This effective realignment of Bolthouse’s operational and business models has allowed them to further grow revenue to approximately $1 billion of Campbell’s $8 billion sales in 2014; not content to stop there, Dunn targets doubling their revenue through a mix of growth and acquisitions in the next five to seven years (4).
Campbell’s Stock Price Since 2012
- A video describing Bolthouse: https://www.youtube.com/watch?v=kXujNmtmokw
- And a humorous example of one of their innovative products: https://www.youtube.com/watch?v=T9Umw-MbLxE