Problem Definition
Our client is Multifit, a producer of vitamin pills.
Their primary customers are health stores and pharmacies. Right now they are considering entering the health foods and beverages market.
Your task is to give them a recommendation on what they should do.
Comments
A good way/structure to solve this problem would include:
- Industry analysis (growth, profitability, competition)
- Entry alternatives (joint venture, acquisition, etc.)
- Other (synergies, initial investment, etc.)
Multifit should enter the market (via acquisition of a competitor).
Detailed Solution
Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.
Paragraphs highlighted in blue can be verbally communicated to the interviewee.
The following topics can be discussed:
I. Background
Suggestion: You should share the structure with the interviewee after the introduction of the case (after the discussion of the problem definition and a quick brainstorming of the candidate).
Information that can be shared on the interviewee’s inquiry:
- Health foods and beverages include granola/protein bars, Gatorade etc.
- Client operates in the US.
- The health foods and beverage industry is highly profitable.
II. Market
Information that can be shared on the interviewee’s inquiry:
- Multifit has 16% share of vitamin market.
Share Diagram 1 with information about the market growth if inquired by the interviewee.
Main conclusions
- The health foods and beverages market is significantly larger than the vitamins market.
- Growth is healthier in the health foods and beverages market.
III. Competitors
Information that can be shared on the interviewee’s inquiry:
- Total revenues in the vitamins market are $3.3 billion.
- Total revenues in the health foods and beverages market are $20 billion.
Share Diagram 2 & 3 with information about the market shares if inquired by the interviewee
Main conclusions
- The health foods and beverages market is very fragmented.
- The largest player in this market has 15% market share.
- VitaCo is the only company operating in both markets. (could be used as a benchmark for entering the food market)
IV. Operation
Information that can be shared on the interviewee’s inquiry:
- There are no possibilities for synergies. (current facilities have no equipment to produce drinks/food)
- Multifit has enough capital to invest.
Share Table 1 with a detailed overview of the operating statement if inquired by the interviewee.
Main conclusions
- Costs for sales and marketing have increased without resulting in an increase in revenue.
- Multifit’s revenue growth is below the average industry wide level of 6%.
V. Conclusion
The final recommendation should include:
- Multifit should enter the market due to:
- Stagnant revenue and declining profit margin in the vitamin market
- Low growth in the vitamin market
- Assumed high profitability in the food market
- Fragmented market in the health foods and beverages sector
- Risks could be:
- Risk of overpaying: Look at all the players and try to find a low performer with high potential.
- Risk of a bidding war: Other competitors from the vitamin sector could try to enter the food segment.
- Next steps:
- Access of capital to finance expansion
- Find the line of products that are most profitable.
- Analyse the vitamin segment of Multifit to find out why the growth
is lower than the market average.
- Try to find methods for expanding/growing the business.
Difficult Questions
How should Multifit enter the market?
Possible answers:
- Multifit should acquire a competitor as this is the fastest and easiest way to enter the market and there would be no synergies in the company.
- The best suitable competitor would be VitaCo:
- They are small enough for Multifit to potentially afford them.
(10% market share in vitamin and 5% in health foods segment)
- The acquisition will drive growth in the vitamins segment, which
is stagnating at the moment.
- Other options would be a small player in the “Others” category.
More questions to be added by you, interviewer!
At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).
