Market Study of Sattvaponics Pvt Ltd.

MARKET STUDY OF

SATTVAPONICS PVT Ltd.

Submitted in partial fulfillment of the requirements of the course

Marketing - I (2018-2020)

Submitted to

Prof. Dr. Soumya Mukhopadhyay

Ms. Binal Joshi

By

Study Group A11

Akil Pulavwala - 18052

Aparnaa Ramanathan - 18014

Kishan Kumar Soren - 18031

Pratyusha Chayani - 2018026

Soumya Khushwaha - 18073

On

September 04th, 2018

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Indian Institute of Management

Ahmedabad

PGP 2018-2020

Industry Analysis- ‘Nutraceutical’ meaning ‘nutrition+ pharmaceutical’

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1. Threat of Potential Entrants- LOW

There are barriers to enter the industry due to intellectual property protection to inventors in the field of medicine and stringent government regulations on the offerings of nutraceutical companies. This adds to the cost of introducing a new medicine to the shelves i.e. ~$2.7 billion1.

1. Bargaining power of suppliers- HIGH

Currently, the scattered suppliers fail to command high bargaining power. Most of the nutraceutical companies depend on farmers or cooperatives for sourcing raw material, facing problems of substandard raw material. Thus, bargaining power of few dominant suppliers in the industry catering to specific demands of drug makers is strong.

1. Bargaining power of buyers- LOW

Buyers command a low bargaining power due to the very nature of the product. If a buyer needs a specific drug, his/her demand is usually not substitutable. In an industry where there aren’t many reliable sellers throughout the value chain, bargaining power is rendered further weak.  

1. Threat of substitute goods- LOW

The demand for these products is continuously growing with rising health concerns among people. Global market is predicted to reach $278.96 billion by the end of 20212. Global market is projected to display a robust growth represented by a CAGR of 11.95% during 2018 – 20233.

1. Power of complementary goods or service provider-LOW

Nutraceutical products, like other drugs, could be complements to food items. But that fails to bear much impact on their demand because if someone is prescribed the drugs, he/she will consume it even if it requires some additional complements (which are mostly substitutable).

5 C Analysis

Company

Company’s prime offerings include supplying raw materials (concentrates from crops) to extract manufacturers and formulators.

Sattvaponics offers cultivation of crops and extraction of concentrates/ raw materials. They have a Make to Order service where they do precision farming customized to requirements. Currently, their first product – ginger extract is under development. Company is currently in R&D phase.

Sattvaponics plans to launch 2 new crops for commercial cultivation from April 2019.

Industry Growth Rate - 7% CAGR

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Company is expected to grow at a higher growth rate as it has a clear advantage in the raw material supply chain (industry growth rate is at 7% CAGR).

Company objective: Solving impending problems faced by the organized manufacturers and formulators in sourcing contaminant-free raw materials with high bio-active content.

Customer

Customers are extract manufacturers and worldwide. The company operates a B2B model and plans its cultivation based on the order received from the manufacturers.

The basic value that the buyer needs in this segment is the quality (high bio-active content) and certainty of the product and price. The sector is plagued with highly contaminated raw materials containing high levels of metals, pesticides, low quality (low bio-actives) and inconsistent availability.

A significant point to note here is that customers are concentrated geographically – most of the Indian customers are in the state of Kerala and customers in the USA are in California and New Jersey.

Competitor Analysis:

Sattvaponics is currently involved in the first two steps of the neutraceutical industry viz. cultivation and extraction.  It serves businesses which manufacture ingredients as well as formulators of supplements.

Currently, there are no direct competitors in this segment.

Indirect competitors i.e. alternative options available for customers to source extracts for ingredient formulation are:

1. Contract farming: companies enter into contracts with Individual farmers for required crops.
2. Mandis: Mandis where a large number of farmers sell their produce is a major source.
3. Cooperatives:
4. Organic farmers: The value proposition offered by organic farmers is low contamination. However, they are inconsistent in terms of availability and bioactive content.

However, they now have to perform the extraction on their own which adds to cost. Sattavponics thus has a clear competitive advantage in the market once it starts producing its first product – Ginger Extract in December 2018.

Context Analysis:

There are two major external factors that impact Sattvaponics’ business model:

1. Regulations: The nutraceutical industry has very strict regulatory norms on contamination levels in products. Regulatory bodies like FDA (USA), EFSA (Europe) and MHLW (Japan) have issued strict compliance norms. This translates to high rejection rates.

For instance, FSSAI (India) has taken measures to strengthen the regulatory environment through the Food Safety and Standards Regulations, 2016.4

1. Increasing levels of consumer awareness: Another important factor directly affecting Sattvaponics’ business is the proactive attitude towards healthcare among end consumers. As consumers have become highly sensitive to possibility of contaminants and pesticides in dietary supplements, derived demand increases. Emphasis placed by end-consumers on traceability of quality of ingredients provides a positive impetus to Sattvaponics.

Collaboarators:

Main collaborators of Sattvaponics include:

1. Suppliers of technical equipments like sensors etc.
2. Seed manufacturers: Sourcing seeds of good quality is of utmost importance considering their emphasis on contaminants.

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Product:

1. Extracts according to specifications complying with all national and major international norms.
2. Invariable production schedule (unaffected by weather
3. High bio-active content
4. Extract free from contamination like pesticides, heavy metals, hydrocarbons etc.
5. Sattvaponic can exploit its R&D capabilities by providing consultancy services to its customers. It can suggest the appropriate variety of extract according to the need of customer. This assistance provided to the customers will contribute to the overall value of the service.

Price: 

1. To project the brand as a premium brand, Sattvaponics will charge premium prices on small and medium sized orders.
2. Large orders received with a long-term supply contract can be given discounts to increase market share.

Place:

1. Sattvaponics will also see the logistics of products for the customers and hence will provide more value to the customers.
2. Timely delivery of product according to the production schedule of customers
3. Undertake logistic operations of the raw material of the customer.
4. This will help the customers to concentrate on their core competencies and will incentivize them to switch to Sattvaponics from their original suppliers.

Promotions:

1. To kick start the promotion campaign, business leaders from industries can be brought together by organizing conventions to introduce the products of Sattvaponics.
2. Sattvaponics operates in a B2B domain and hence its promotion campaign should be aimed at increasing awareness in the industry specific domains namely pharmaceutical and food industry. It must also prepare to promote the company in trade shows and conventions like VitaFood, Ingredia etc. to reach global industries.
3. Sattvaponic can leverage the development made in R&D in promoting its brand by publishing the results in reputed research journal. This will spread awareness among the industry experts and will strengthen the brand value.

Target customer segment:

1. Premium functional ingredient manufacturer
2. Natural flavors, colors and fragrance industry
3. Processed food and fresh food industry

Value Proposition: