Imagination Farms, LLC Julie Conn Aiko Therese Landerito Bonifacio Sessa July 27, 2008

Company Facts Committed to: –Health –Quality –Safety Licensees: – Sell and ship product Expenses: – Outside marketing support –Licensing fees –Quality control measures Role: –Support Disney’s social corporate responsibility “To increase the consumption of fruits and vegetables among children” –Innovation –Integrity

Brand Strength Consumers identify branded products excelling in: –Quality and reliability – Design – Prestige Disney Brand –Parents perceive brand as magical, high quality, and trust-worthy –Kids perceive brand as fun and popular among peers Competition can’t match this brand image

Industry Assessment Projected 2008 per capita consumption: lbs 19% of produce was branded in 2002 Major Fruits: Berries, Apples, Grapes in 2006 Major Vegetables: Tomatoes, Potatoes, Onions in 2006 Fresh Produce Market Retail Share

Children’s Health Challenge Challenge: –1/3 of American children are obese or at risk to obesity –Cost of obesity related disease: $117 billion –50% of children’s calories are from fat and added sugar –Top three countries with childhood obesity: U.S., Mexico, United Kingdom Marketing: –Food, beverage, and candy industry annually spends $7.3 billion on direct media advertising –Less than 2% of food advertising promotes fruits and vegetables Response: –5 A Day Campaign –More Matters TM

There is still a lack of consumer awareness

Awareness increasing but not enough action… need more convenience.

Marketing Food to Children Marketing Categories by Population Sizes a – mean servings Approximately 11 servings each day not being met Cases per year: million Sales per year: $4.1 billion License fee at 5%: $205 million Sales volume potential: 10.8 billion lbs GroupAge RangePopulation SizeAverage Consumption VegetablesFruits Infants and Toddlers0-2 year11,416, – 3.5 a (combined consumption) Children3-8 years24,041, – 3.3 a (combined consumption) Tweens9-12 years16, 732, a 1.9 a Teens13-19 years28, 282, a 1.9 a

Marketing Food to Children (cont’d) “There was a gap between the foods children requested and the foods their mothers were willing to buy for them” Dual Marketing Strategy –Children: Attractive packaging Desirable taste Fun –Parent: Convenience Nutritional value Competitively priced Product requested by children Opportunity to engage more aggressively in retail “pull” strategy vs. co-packer “push” strategy

Internal Limited Resources Contract renewal and short term performance focus Small market share Food safety Lack of product visibility and commercial advertising External Market competition Complacent consumer & co- packers Inherent variation in commodity quality Retailer-supplier Relationship Company Challenges

Position Summary Strength – Disney brand & increased concern for child nutrition Weakness – Lack of product visibility & commercial advertising Opportunities – Product differentiation & placement along with potential school access Threats – Contract renewal & competition with other firms and brands

Strategic Recommendation 1.) School / Parent Program –Education packets –Kids Food Calendar / stickers –Parent Shopping list Implementation –Contact school boards about purchasing the packets –Find government grants for product placement in schools –Single serve packaging for school lunches (convenience and peer concept) Pre-packaged & pre-portioned

Strategic Recommendation 2.) Expand Across Disney Company –Provide fresh produce to Parks and Resorts Have Disney Garden cases available at restaurants –Advertising of Disney Garden products to park visitors Implementation –Utilize relationship with Disney for continued support of Disney Garden

Strategic Recommendation 3.) Retail Strategy –Cross-promotional selling –Promote spoilage and labor savings 10% ↓ spoilage = 1.3 to 1.5% ↑ in sales –Price and product differentiation –Widespread product availability –Frequent buyer coupons and contests Implementation –Use PLU stickers as a coupon for another Disney product (value added to fresh) –Focus the main product line on staple products and differentiate the seasonal products –Create a customer rewards card –I-Farms, co-packers should work in conjunction with test stores to identify spoilage and labor cost savings (consumer and retailer)

Projected Inventory Sales using the Concept ProductRank Projected Sales ($millions)ABC $M Tomatoes123.28A Apples Berries Grapes411.60$67.07 Bananas59.62B Potatoes68.11 Lettuce95.23 Carrots Oranges Broccoli Avocados Cherries Pineapple Nectarines231.42$72.11 Grapefruit261.17C Limes Spinach Greens Eggplant340.75$17.32 Totals $ A = 35% of sales B = 56% of sales C = 9% of sales Source: Produce Marketing Association

Future Recommendations Product placement in Disney shows –E.T. and the Reeses Pieces phenomena Food Quality Technology –Packaging –RFID

Strategic Summary 1)Educational based School/Parent Program emphasizing nutrition and convenience 2)Growth into Disney Parks & Resorts 3)Pull Retail Strategy to increase sales volume 4)Consider future recommendations for advertising and consistent quality assurance

Thank you! Questions, Comments

Strategic Recommendation 3.) Retail Strategy –Cross-promotional selling –Promote spoilage and labor savings 10% ↓ (5 – 7%) & 8% = 1.3 to 1.5% ↑ –Price and product differentiation –Widespread product availability –Frequent buyer coupons and contests Implementation –Use PLU stickers as a coupon for another Disney product (value added to fresh) –Focus the main product line on staple products and differentiate the seasonal products –Create a customer rewards card in conjunction with test stores to identify spoilage and labor cost savings (consumer and retailer)

Projected Inventory Sales using the Concept ProductRank Cumulative % of Total Sales Cumulative % of Total Items Cumulative Sales ($million) Projected Sales ($millions)ABC $M Tomatoes110.27%2.22% A Apples218.96%4.44% Berries327.58%6.67% Grapes435.56%8.89% $ Bananas542.97%11.11% B Potatoes650.24%13.33% Melons756.26%15.56% Lettuce965.78%20.00% Carrots %22.22% Oranges %24.44% Broccoli %26.67% Avocados %28.89% Cherries %33.33% Pineapple %44.44% Nectarines %51.11% $ Grapefruit %57.78% C Limes %60.00% Spinach %71.11% Greens %73.33% Eggplant %75.56% Parsnip % $ Totals $ 156.5

RFID RFID – Radio Frequency Identification –Collects readings indicating pH, humidity, and temperature –Monitors food quality throughout supply chain –Helps reduce waste –Large retailers require tags for main suppliers –Retailers testing potential to improve distribution of fresh produce (Publix and Del Monte along with the University of Flordida) –Could help differentiate product through cutting edge technology and aid in food quality measures

80-20 Mathematical Computation Y = [(1 + A) X]/ [(A + X)] (eq.1) Where: Y= cumulative fraction of sales X=cumulative fraction of items A= a constant to be determined by manipulating (eq. 1): A = [(1 - Y) X]/ [(Y - X)] (eq. 2) For fresh fruits, 19% of the items (X= %) results in 56% of the sales (Y=56.7%) A = [(1 – 0.56) 19]/ [(0.56 – 0.19)] = 0.219

If annual sales of I-farm shipment sales volume are expected to be $ millions in 2010, how much inventory investment should be expected from I-farms co-packers? Applying the concept on the Retail Fresh Produce Industry Sales of Sept 2007 for fresh produce items licensed by I-farms: 20% of the items accounts for approximately 65% of the total sales. A= The sale for the first item (Tomatoes) would be found multiplying equation 1 to $ million: Y = [( ) ]/ [( )] * (156.5 million) = $ million, AND given turn over ratios average inventories can be obtained for each product category by dividing the projected sales by the turn over value.

Relationship specific investment between I-Farms and co-packers Define tactics to achieve competitive advantage –Reducing transaction and operating cost –Product differentiation with supply-chain base through technology and innovation Focus on strategic performance measures –Total Cost Acquisition –Market Growth Geographical decentralization of product placement Recall response implementation strategy –Advantage of traceability with branding Internal

Product differentiation –Price and quantity Building good reputation between the supplier and the retailer Long-term commitments –Visible –Understandable –Credible Information Sharing External

FruitsWal-MartHarpsIGA RedDisney Garden ($/lb)No Brand ($/lb) Cherries PineappleDel-Monte (Each)Coast Tropical (Each)Cost Tropical (Each) (whole) GrapeDel-Monte (1-pint)3 Generations (1-pint) Tomatoes Banana Dole ($/lb) Vegetables CeleryTanimura & Antle (16 oz)Ocean Mist (16 oz) (Heart) Spinach Fresh Express (6oz)Dole (6oz) Carrots Baby GGF (160z)Bolthouse Farms (16 oz) Fresh Fruit and Vegetable Price Differentiation Source: Fayetteville, AR

Quantity Volume Approach –Low price to increase the volumes of sales –Cooperation in order to meet consumers preferences –Use of cost cutting tactics through the supply chain –Competitive advantage through cost reduction and by internalize social responsibility – values and environmental issues Strategy Implementation –80-20 concept:

Vegetable as Percentage of Total Vegetable Ads (July 18, 2008) Source: USDA; Agricultural Marketing Service

Fruit as Percentage of Total Fruit Ads (July 18, 2008) Source: USDA; Agricultural Marketing Service

Industry Assessment (con’t) Fresh Fruits Major Fruits(2006): Apples – $4,260 M Berries – $ 4,226 M Grapes – $3,911 M Per Capita Consumption (2005): lbs Projected Production (2008): 22,437 M lbs Fresh Vegetables Major Vegetables (2006): Tomatoes - $4,393 M Potatoes - $3,201 M Onions - $2,336 M Per Capita Consumption (2005): lbs Projected Production (2008): 101,692 M lbs Total Acre Harvested: 1,250,830 acres

Produce Industry Analysis Threat of Entry -Market Share -Brand Strength Internal Rivalry - Price rivalry between firms - Variation between co-packers - Existing number of firms Buyer Power - Retailer and consumer negotiate purchase price Supplier Power -Pricing limited due to availability of substitute -Increase demand for FFV Substitutes and Complements - Pricing should minimize the threat of substitute -Increase awareness to promote fresh produce - Political pressure

Company Analysis Opportunities –International Expansion –Selling out to Disney –Product differentiation –Expansion to Theme Parks/Resort *placement *growing awareness Threats –Brand damage from food safety –Contract renewal –Competition with other firms and brands Strengths –Association with the Disney Brand –Business ethics and child nutrition –Customer driven business model *relationship w/copackers Weaknesses –Limited resources –Small firm compared to competitors –Lack of commercial advertising *visibility

References : Ballou, R. H Business Logistics/Supply Chain Management, 5 th Edition. Prentice Hall Publishing. Besanko, D. et.al Economics of Strategy. 4 th Edition. Dennison, B.A, et.al Fruit and Vegetable Intake in Young Children. Journal of the American College of Nutrition. Vol.17, No.4, Hampl, J.S. et.al Intakes of Vitamin C, Vegetables and Fruits: Which School Children are at risk?. Journal of the American College of Nutrition. Vol.18, No.6, McGinnis, J. M. et. Al Food Marketing to Children and Youth: Threat or Opportunity. National Academies Press. U.S.A. Produce for Better Health Foundation National Action Plan to Promote Health through Increased Fruit and Vegetable Consumption. Produce Marketing Association. Retail Fresh Produce Industry Sales. Story M. and Simone French Food Advertising and Marketing Directed at Children and Adolescents in the U.S. International journal of Behavioral Nutrition and Physical Activity. USDA. Agricultural Marketing Service. National Fruit and Vegetable Retail Report. Vol. 11, No. 29 USDA. Per capita Consumption of Major Food Commodities. Table USDA. USDA Agricultural Baseline Projections to Baseline Report OCE