ECO / 561
May 5, 2014
Beechnut baby foods have recently marketed and launched a new product line. After years of the decline in baby food products, Beechnut realized that many moms in this millennium have begun to make their own baby foods. This trend was reflected in the opposition to purchasing concentrated and processed foods from popular baby brands. As a result, Beechnut developed a new line of 100% natural products. The catalyst for this new product was the extreme drop in ounces of baby food that a baby had in 2012 versus 2005. According to Beechnut's research and interviews with new moms, these consumers believed that the homemade food was the best and healthiest option for their baby. Furthermore, the multitude of books and blogs stressed and instructed the importance of moms making their own baby food. Moms want to know what is in the baby food. In addition, moms and dads could experiment with new healthy combinations which have not been seen in the previous store bought baby food. For example, quinoa, kale and apple, four bean lentils and vegetable, etc. To adapt to this business, Beechnut revamped its line of baby food, adding hip ingredients like pomegranate and quinoa and producing all natural, organic baby food (Ellet, 2014). In the beginning Beechnut reflected an Oligopoly, which is a business run by a small number of firms that together controlled the majority of the market share. In the United States, the food market for baby food in jars only consisted of three competitors. Gerber who was number one and had a market share of 65%, Heinz with a share of 17.4% and Beechnut with a 15.4% market share (Strom, 2014). However, with the influx of natural food and organic baby food trends, Beechnut can also be defined as a Monopolistic competition. This is an imperfect competition that has many producers which sell products that are differentiated from one another either from the branding or quality and, therefore, do not render perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals and ignores the impact of its own prices on the prices of other firms (Stroux, 2004).
Before, the elasticity of the product is discussed, it is important to discuss the concept of diversification. The introduction of Beechnuts all natural baby foods are a corporate strategy to increase sales volume for new products and new markets. Diversification is often the expansion into a new area of the industry (here organic baby products) that the business is already in, or investing in a promising business outside of the scope of the existing business According to Igor Ansoff's Product Market matrix,
Here, the first three concepts often are pursued with the same technical, financial, and merchandising resources that are used for the original product line. However, as in Beechnuts new scientific process that eliminates absorbic acid in its baby food products, it is a form of diversification. Diversification usually requires a company to acquire new skills, new techniques and new facilities.
In terms of the price of elasticity for Beechnuts all natural baby foods, they will only be considered to be elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. These kinds of products are readily available in the market and may not be needed in daily life. As seen in the recent trend of baby food, many families are opted to make their own baby food as opposed to buying baby food that is not "natural." Furthermore, there are other products that promote the processing of baby foods in the home kitchen such as the baby bullet. In other words, elasticity will vary among consumers, because some products may be more essential to the consumer. However, many mothers love other organic baby food products such as Ellas because the pouches are great when you are on the go, but they are more expensive," As...
References: $$Ellet, J. (2014). “Beech-nut Takes Transparency to New Level with Launch of 100% Natural Food for Babies.” Forbes. From: http://www.forbes.com/sites/johnellett/2014/04/30/beech-nut-takes-transparency-to-new-level-with-launch-of-100-natural-food-for-babies/ Retrieved on May 5, 2014.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill Irwin.
Strom, S (April 25, 2014) “As Parents Make Their own Baby Food, Industry Tries to Adapt.” New York Times. From: http://www.nytimes.com/2014/04/26/business/as-parents-make-their-own-industry-tries-to-adapt.html . Retrieved on May 4, 2014
Stroux, S, (2004). US and EC Oligopoly Control. Kluwer Law International. Volume 14 of International competition law series, ISSN 1569-2817
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