Question 1:

True Foods is a manufacturer of infant formulas for infants under the age of 1. They are a well established brand in this segment, and have a top 3 share in the US. However recently the sales have been declining due to a declining birth rate, and the CEO is concerned about the long term future of the company. She believes there is potential to take their expertise on nutrition and health to expand into other segments, and have approached us to help identify these new opportunities. How would you approach this problem?

Possible Answers to Question 1:

To address True Foods’ declining sales and explore new growth opportunities, I would structure my approach into several key dimensions:

Market Expansion:
Geographical Expansion: Consider the possibility of expanding into international markets with different birth rate trends and nutritional needs.
New Customer Segments: Identify specific customer segments or demographics that could benefit from True Foods’ expertise, such as elderly nutrition, sports nutrition, or dietary supplements.
In both options the client should assess and understand the regulatory requirements and standards in potential new segments to ensure product compliance and market entry feasibility.

Competitor Analysis:
Direct competitor: Assess the competitive landscape in the infant formula market, identifying strengths, weaknesses, and strategies of key competitors.
Other nutritional companies: Assess the competitive landscape of other nutritional segments such as sports nutrition, elderly nutrition, pet nutrition, etc. and understand what are their strengths, weaknesses and strategies.

Product Diversification:
Portfolio Assessment: Evaluate True Foods’ existing product portfolio, including its nutritional expertise and research capabilities, to identify potential areas for product diversification.
Innovation and Research: Determine the potential for leveraging True Foods’ research and development capabilities to create new products or formulations.
Strategic Alliances: Investigate opportunities for strategic partnerships or collaborations with other companies in related segments to accelerate diversification efforts.

Question 2:

After in depth research, we see that other competitors and startups are entering the senior nutrition market targeting consumers above 60 years old in the US. The CEO believes a lot of the R&D and IP will be transferable for the elderly consumers. Yet, in order to understand the potential, she has asked for a quick back of the envelope estimation of the potential market size. Please explain the approach you would take, and an estimated market size.

Possible Answers to Question 2:

Estimate Senior Population:
We start with the total US population, which is approximately 330 million. Assuming an average lifespan of 80 years and a roughly linear distribution of the population across age groups, we can calculate the senior population aged 60 and above. This is done by dividing the total population by the average lifespan to get the number of people per year (330 million / 80 years = 4.125 million people per year). Multiplying this by the 20 years in the senior age group (60 to 80 years), we estimate the senior population to be approximately 82.5 million people.

Estimate Adoption Rate:
We can assume that 50% of these seniors are interested in nutrition products. This assumption is based on increased health awareness and media influence highlighting the importance of nutrition for maintaining health in recent years. Of those interested, we further assumed that 20% are likely to purchase nutrition products. This percentage reflects a conservative estimate considering factors such as income, health status, and willingness to spend on specialized nutrition.

Calculate Potential Market Size:
By combining the estimated senior population and the adoption rates, we calculated the potential market size. Specifically, 82.5 million seniors x 50% interest rate x 20% purchase rate = 8.25 million potential consumers.

Estimate Revenue Potential:
Assuming an average annual spending of $300 per consumer based on products in the market today we estimate the potential revenue. The calculation is 8.25 million consumers x $500 = $2.475 billion.

The above is a sample of how to structure your logic in deriving to a market size. It is important to clearly explain your reasoning and logic of how you would calculate the market size and make educated assumptions.

Question 3:

With further consumer research and market analysis we have got the following information. What can you deduct from this data and what do you recommend the client to do?

Possible Answer to Question 3:

Based on the data, True Foods should prioritize developing products for muscle & joint health (60%) and gut health (50%), as these categories have the highest prevalence among seniors, and powered drinks are significant in these segments. They should focus on creating powered drinks where they have expertise and leverage existing R&D to develop innovative products, and educate consumers through targeted marketing campaigns. Additionally, partnering with healthcare providers and senior communities will help drive product adoption and establish credibility in the new market segments.

Question 4:

What would be your final recommendation to the client?

Possible Answer to Question 4:

True Foods, facing declining sales in the infant formula market, seeks to expand into senior nutrition products to leverage their expertise and mitigate the impact of declining birth rates.

Recommendation:
Prioritize developing powered drinks and supplements for muscle & joint health and gut health, maintain balanced offerings for blood sugar and blood pressure, leverage existing R&D, and engage in targeted marketing and partnerships with healthcare providers.

Risks:
Potential risks include market competition, regulatory challenges, and the need to maintain product quality and brand reputation during expansion, as well as potential negative impacts on their core infant formula business’s brand image.