Assignment
Case Study
Louisa and Conrad Ferrel (husband and wife) were traveling in Asia when they discovered kombucha for the first time and became hooked on its health benefits. When they returned home, they started brewing kombucha and offering it to friends and family members to try. On the side of their 9-to-5 corporate jobs, they sold their kombucha at farmers' markets as a fun hobby. Both Louisa and Conrad had jobs in accounting, but they wanted to pursue something they were passionate about. What they truly desired was an opportunity to enrich the health and happiness of consumers; their focus was to help communities they cared about and impact the planet positively. Conrad moved to the business full time and convinced Louisa to also do so by promising her they would donate a portion of profits to community projects they cared about.
The founders rented commercial kitchen space in a curling club in Alberta that provided them with enough space to start brewing more kombucha. This made True Büch the first commercial kombucha brewer in Alberta. Today, True Büch's mission is to "make the most delicious probiotic drinks for people looking to add a healthy boost to their daily lives." It aims to be the local market leader for kombucha while having a minimal impact on the environment, supporting its employees, and investing a portion of the proceeds into non-profit projects that the company is passionate about. True Büch makes environmental- and community-conscious business decisions that are showcased through producing a gut-healthy product that is brewed truthfully and authentically. Most importantly, its kombucha is craft-brewed in small batches with high-quality and organic ingredients. Recently, True Büch was named one of the Top New Growth Companies by Maclean's and Canadian Business, making it the first kombucha company on this Startup 50 ranking.
After starting out as a draught provider of kombucha, for operational and environmental reasons, True Büch has recently increased its focus on the production of single-serve bottles. To offset a portion of the impact of each bottle, it donates to eight community partners year-round, which includes working to offset carbon emissions with Bullfrog Power and planting 1,000 trees a year with TreeEra. In addition, production is currently 10,000 to 12,000 bottles per week, with a target to increase to 30,000 to 50,000 in 18 months. The kombucha must also be kept refrigerated. True Büch kombucha's flavor profile is less vinegary and more palatable than other brands. It is slightly carbonated and contains mostly organic ingredients that are mainly locally sourced. The main ingredient (tea) is from Naked Leaf, which True Büch secures from a local supplier. It makes new flavours every single month by draught and continuously tests new ones. True Büch also has released single-serve collaboration bottles with retail partners, including Freson Bros., Sunterra, and Community Natural Foods.
Kombucha is a quickly growing and evolving category. As recently as 2018, you could only find it in health food stores, and now it's in pretty much every grocery store across the country and most 7- Eleven's. That said, the company considers health-conscious, middle-income, and above people, aged 20 to 50, to be the target market. Internal metrics show that the majority of its customers are female and also fit that description.
True Büch carefully considers new product introductions in its organization. Initially, the company conducts some informal market research on trends in health foods and botanicals that are gaining popularity. It also has someone in the brewery who leads flavour development and creates new products based on seasonal flavours that are available and new teas from suppliers. From there, True Büch conducts taste tests as a team and performs shelf-life testing before deciding to offer a flavor as a new product. This is continually ongoing for draught flavors so it can continually offer something different with draught. One of its most popular and successful promotions is with Mealshare, in which anytime someone buys or refills a bottle of the flavor of the month, True Büch donates a meal to a youth in need. This pairs with the ongoing flavor development and retailers fully support the program because they like the cause and know that their customers seek it out to participate in the program.
True Büch had a competitive first-mover advantage, being the first company to offer draught kombucha commercially in Western Canada. Having relatively no direct competitors, the company was able to grow very quickly and set prices at the rate desired. However, this has since changed, and in summer 2015, its first local competitor came out with a very different taste and process. Today, there are at least eight small brewers in Alberta and over three national brewers in Canada, along with three to four international competitors coming into the market. Some companies in this space include GT'S Kombucha, RISE Kombucha, Master Brew Kombucha, and Brew Dr. Kombucha.
True Büch is aware that the industry is becoming saturated and wants to stay at the forefront of the market. To do so, True Büch must consider the larger market dynamics. As individuals are becoming more health conscious, companies are promoting their products' wellness benefits. Indirect competitors that provide healthier products, such as tea, matcha drinks, turmeric drinks, water, and milk alternatives, are becoming stronger. The carbonated soft drinks category is declining in popularity, while bottled water has grown 6.2 percent. Research suggests that tea is the second-most consumed beverage, after water.
Kombucha is a fizzy, fermented, non-alcoholic tea. It provides benefits to one's digestive system through probiotics, enzymes, and amino acids. Kombucha contains antioxidants that fight free radicals (molecules that can damage cells); studies suggest it can kill bacteria and may help prevent diseases. Kombucha is created by fermenting organic tea and organic cane sugar with a symbiotic culture of bacteria and yeast (SCOBY). The SCOBY is made up of good bacteria and is fully organic and compostable. The SCOBY turns the cane sugar into good bacteria (like probiotics and enzymes) by feeding on it, but kombucha will still have traces of remaining sugar in it (approximately 5 to 7 grams per 8-ounce serving). To create authentic kombucha, it should not be pasteurized; when it is, it loses its naturally occurring probiotic content.
As part of their growth strategy, the Ferrels partnered with Zenabis Ltd. (Zenabis), a licensed producer of cannabis located in Vancouver. Zenabis quickly became a leader in the cannabis industry and is one of the largest cannabis producers in the world based on growing capacity. The company is currently awaiting edible legalization in Canada to start creating and distributing infused cultured tea beverages with CBD (not THC). The strategy is to leverage True Büch's expertise in cultured teas and align with Zenabis' expertise in cannabis to penetrate the new, growing infused food market.
Both this acquisition and the goal to grow its core Kombucha business aggressively introduce numerous strategic challenges and decisions. With True Büch's tight-knit family of co-workers, it is worried that plans for expansion may disrupt its family dynamic in the workplace when bringing in new employees. The biggest challenge faced by expansion is maintaining the quality and values they pride themselves on..
Task
1. What type of innovation is True Büch Kombucha: a minor innovation, a continuous innovation, or a radical innovation?
2. What stage in the product life cycle is True Büch in introductory, growth, maturity, or decline?
3. Which group of consumers is True Büch targeting with its CBD-infused Kombucha drinks: innovators, early adopters, or the early majority?