Which of the options she is evaluating present the best path forward and why?
Hola, Bandida: Launching A Beverage Brand with Purpose *n October 2019, Megan Meza, the Founder and CEO of Bandida, LLC, was in her Brooklyn kitchen, creating the latest batch of Bandida Horchata Cold Brew, imagining the impact her product could have beyond her borough. Méza had recently given up her full-time job as Associate Director of Engagement Planning, Customer Experience Lead at the legendary ad firm Ogilvy & Mather to dedicate her career to launching a socially responsible company that empowered women and diverse groups. Horchata, an authentic Mexican drink, proved the perfect beverage to symbolize Méza's roots and heritage, but often contained high amounts of sugar. It was typically made with rice, sugar, vanilla, cinnamon and condensed milk (see Exhibit 1) and prepared in large batches tu pair with pastries or meals. According to Méza, "It is perfect for hot weather since it is refreshing and cooling - but the spices make it good in the fall and winter, too!" Having a strong focus on health, Meza transformed the classic drink and leveraged better-for-you, healthy ingredients, while continuing to replicate the deliciousness of the traditional drink's taste. Before Bandida, Meza had achieved a successful career, working with leading brands such as Coca-Cola on marketing strategy and customer engagement. She had led and advised multiple Fortune 500 companies through global innovation initiatives, customer research, product development and launches, go-to-market strategies and campaigns, and customer engagement strategies. She was also a student of the International Culinary Center in New York, where she refined her skills in the kitchen as she perfected product formulations and recipes linked to her family's Latino heritage. Now, she was ready to make a life-long dream come true. Méza aimed to make her horchata cold brew widely accessible in the highly competitive ready-to- drink (RTD) beverage segment. While recognizing the competitive nature of the market, she had a set of irportant social goals in mind. "I want my product to be accessible to so many communities," she stated. "Especially when you think about Latino communities, which are twice as likely to develop diabetes compared to white counterparts. Because Bandida uses date syrup instead of refined sugar, being a more healthful product on the market would be incredible" Furthermore, as a half-Mexican female entrepreneur, Méza found herself motivated by her belief in the importance of diversity, equity and inclusion. "I have a tiered approach," she explained. "First, I want to work with diverse women, ORCHA WEBC COL:
women who might not normally get the spotlight. Then I want to work with women, and then diverse individuals. That's the hierarchy of how I choose suppliers, vendors, and everything like that." However, with Bandida's strong feminist beliefs, passion for diversity and comunitment to social responsibility, could the company grow without compromising her beliefs? How mighat Meza commercialize Bandida beyond her kitchen while still maintaining her commitment to helping women and diverse groups break the glass ceiling in business? The Launch of Bandida Throughout her life, Méza often found herself trapped between two worlds. "My mom is white and my dad is Mexican" she explained. "I was raised in a household that didn't get to tap into that strong cultural side. And it was something I was really ashamed of for a very long time Meza recounted feeling like she wanted to cry whenever someone came up to her and started speaking Spanish because she couldn't speak the language fluently. From adolescence, Meza loved cooking different recipes and trying new foods but remained cautious with the ingredients she included in her dishes. Méza described food as the language of love" due to food's power to bring people from all racial backgrounds together. Out of curiosity about her Latin roots, Méza was always intrigued by Mexican-American cuisine specifically. As she grew older, Meza's passion for making food merged with her curiosity regarding her heritage. At Duke University, where she majored in political science and minored in environmental science, she began to explore her identity more and what it meant to be half-Mexican. "That's a conversation I want more people to talk about--the struggle of feeling om between two identities," she said excitedly. She began to dream of introducing a more accessible and healthier product with ties to her Latin roots to consumers throughout the United States. Méza aspired to develop a beverage product that captured her identity: a healthy, energetic, multiracial, coffee lover who cared deeply about women empowerment and minority groups. She had always enjoyed the authentic Mexican drink but found it to contain high amounts of sugar and limited health benefits. Méza stated, "I love traditional horchata, but it feels more like a treat. I wanted an option that didn't have as much sugar or dairy. "Méza realized she wasn't alone in her awareness of food options. She found millennials and Generation Z (Gen 2) to be health-conscious and concerned about the ingredients used in their food and beverages, as well as drawn to companies that used environmentally sustainabie practices. In Nielsen's 2015 Global Health & Wellness Survey', they found that 41% of Gen 2 and 32% of millennial respondents were very willing to pay a premium for sustainably sourced ingredients. Mea while, cnly 21% of Baby Boomer respondents felt the same way. She saw an opportunity for her horchata cold brew to appeal to health-conscious groups and coffee fanatics who enjoyed their coffee without dairy or excessive amounts of refined sugars. Her creation was an homage in der heritage, with each batch created by hand in her home kitchen and made with love." Prof. Violina Rindowa, Case Fellow Rebecca Castillo, and Katherine Lantranki and Allison Monroe, both USC Marshall MS Food Industry Leadership 2020, prepared this case. The authors would like to thank USC Marshall School of Business Fattoate students Yasmine Abdel Sam Frescoln, Alexander Macksoud and Harmon Swartz for their contributions to this project. This case was developed from field research and published sources Cases are developed solely as the basis for class discussia and are not intended to serve as endorsements, sources of primary data or illustrations of effective or ineffective wanap2ent. Copyright © 2021 Lloyd Greif Center for Entrepreneurial Studies, Marshall School of Business, University of Southern California. For information about Greif Center cases, please contact us at greifcases marshall.usc.edu. This publication may not be digitized photocopied, or otherwise reproduced, posted or transmitted without the permission of The Iloyd Greif Center for Entrepreneurial Studies.
Méza worked tirelessly to modify the authentic horchata recipe and create her own vesion that addressed the health issues associated with the drink. She found a way to completely transform the main ingredients of the recipe while still maintaining the same taste, appearance, and authenticity of the drink (see Exhibit 2). "I felt very much like a mad scientist with dozens of mason jars filled with all sorts of nut milks in my fridge," laughed Méza. "I loved the taste test process. I ended up landing on cashew milk for the creamiest result." In addition, dates replaced sugar for sweetening, plant-based milk replaced condensed milk, and cold brew was added for energy. She saw an opportunity for her horchata cold brew to appeal to health-conscious groups and coffee fanaties who enjoyed their coffee without dairy or excessive amounts of refined sugars. Méza was ecstatic about the result of her experiments and began sharing the drink with family and friends. Within months, she saw demand for her recipe grow beyond her close circle. Mexa's experiments with her beverage became more than just a hobby. She conjured up the brand name Bandida, which meant "female outlaw" in Spanish. This represented her connection with her heritage, her passion for women and minority empowerment and her support of the feminism movement. Meza envisioned Bandida as "a strong woman who lives by her own rules and creates the world that she wants to live in." As demand for her beverage increased, Méze found it challenging to balance her full-time job with her part-time passion. Growing demand showed Mexa the potential behind her horchata drink business, and the opportunity to pursue her entrepreneurial dream of mainstreaming a unique coffee drink to the masses. In October 2019, Méza officially left her job to incorporate Bandida, LLC, with the mission to use coffee breaks so that women from diverse groups can break the glass ceiling."Meza admitted she was scared to leave the safety net of her high-paying corporate job, especially as her career in marketing was taking off. I grew up in a lower-middle-class household. My dad was a business owner and my mom was working. We talk a lot about generational financial trauma, bringing forward this idea of what if I ran om of money? Or what if I can't pay my bills So the biggest hurdle for me was mentally taking that leap. That's a challenge that holds a lot of entrepreneurs back, unfortunately, By October 2020, a year after she officially left her job to begin Bandida, Meza was selling her product through holabandida.com, farmers' markets, and local coffee shops in the Brooklyn, NY area. "I would typically be at the farmer's market from about 8:30 AM 1:30 PM and sell 100 or more bottles a day, so that's basicaliya bottle every 3 minutes," Meza noted. "Also, people were beginning to ask for Bandida by name and conse to the market just to buy it." Still, Meza had a long way to go to reach her objective of becoming a recognized national brand in the beverage industry and placing the product at local and national grocers, fast-casual restaurants, grab-and-go partners, and beyond. As Méza brainstormed ideas throughout 2020, she searched for gaps across the industry. She cbserved a lack of healthy alternative beverages to sugary drinks such as soda, specifically in con menities heavily populated by people of color. These areas were often called "food deserts" because of their lirited access to affordable and nutritious foods, which led to high obesity rates. In 2009, researchers coined the term "food swamps, which were similar to food deserts, but used to describe areas with a high concentration of fast food and junk food. "When I was exploring places that I wanted to sell Bandida in New York City, I used a tool available through Brooklyn Public Library where you could identify places that are food swamps," Méza recounted. Once she had identified food swamps in New York, she knew those were the communities where she wanted to sell Bandida. The issue of accessible and healthy alternative beverages did not just affect low-income communities. According to Meza, over 41 million Americans, including herself, considered themselves healthful, dairy-free coffee lovers who did not have many healthy and affordable options to grab off the shelf
S. Right now, in order to make a profit, Bandida sells for $5. When I was talking to mentor, I told them I wanted to lower my price and they were surprised. I want my product to be accessible to so many communities. I want people like me to be able to visit a 7-Eleven or a Kroger with confidence that they can find an accessible healthy beverage option that is dairy-free and contains healthy ingredients. Especially when you think about Latino communities, which are nice as likely to develop diabetes, compared to white counterparts. Because Bandida reses date syrup instead of refined sugar, being a healthy and accessible product on the market would be incredible. The Beverage Industry Ultimately, Méza's goal was to launch Bandida nationally in the highly fragmented beverage industry. Strategizing how to do so was no small task. The United States beverage industry totaled $150 billion in 2019, with average annual gains of 2.9%. While sales spiked ia 2020 due to the effects of COVID-19, they were expected to decline and return to normal from 2021-2024. The U.S. beverage industry was forecasted to reach $173 billion by 2024 (see Exhibit 3). Segments within the beverage industry included carbonated beverages, dairy and dairy alternatives, energy, and sports drinks, bottled and enhanced water, juice, coffee/ready-to-drink (RTD) coffee, and tea/RTD tea.- Retail sales channels were typically supermarkets, health stores, convenience stores, and e-commerce. Growth stemmed from consumer demand for alternative hydration and healthier selections. Within this industry, carbonated beverages remained the leader, representing expected sales of $45 billion in 2024. Energy drinks, sports drinks and boitled and enhanced water were the fastest-growing segments within this industry, projected to grow 6.1% snnually through 2024. In the previous five years, in response to growing consumer health concerns, the industry observed a shift from sugary, high calorie beverages to low or no sagar/no calorie beverages. The coffee segment of the beverage industry was extremely competitive and hard to break into, especially with Starbucks dominating the narket (see Exhibit 4). The segment was broken into two subcategories: traditional brewed hoi cutfee and RTD coffee. Unlike traditionally brewed coffee, RTD coffee was typically an impulse-driven, occasional purchase for consumers. While brewed coffee was typically consumed in the morning, RTD coffee was primarily an afternoon drink, competing with other types of beverages that meet this need (i.e., energy drinks, tea, caffeinated water, CSD, etc.). One of the biggest challenges in the RTD coffee space was that consumption frequency was relatively low and considered a discretionary expense. RTD coffee was mostly popular with Gen 2 and millennial consumers, who looked for more variety in their coffee purchases. An April 2020 Mintel study showed that unique fiavors sein as horchata, lavender, etc., were identified by 41% of Gen 2 respondents and 36% of millennial respondents as the top attribute they would try in their coffee (see Exhibit 5). Benefits such as extra caffeine, reduced sugar, antioxidants, and vitamins ranked highly with those consumer groups as well. In the industry's competitive landscape, firms often found themselves competing for "share of stomach" as consumers would typically only buy one or two RTD beverages at one time--for example, a bottle of water and a bottle of coffee. Businesses had to look across the industry at all beverage brands rather than just within their specific segment to determine how to position themselves differently. Regardless of concerns, the desire and demand for RTD alternative beverages (see Exhibit 6) continued to rise as the pace of life accelerated.
Brands with Purpose While entering the highly competitive RTD coffee space, Bandida was equally for used on ensuring the brand stayed rooted in Meza's mission to empower women and make a positive impact. Her target consumers were millennials and Gen Z, who engaged with brands that gave back and supported social causes. Mintel identified that 51% of millennials said they preferred to buy from companies that spoke up about social issues, and that millennials were more engaged with food and drink than the average consumer. Mintel also reported that 58% of millennial consumers considered themselves "foodies", a term coined to describe a person interested in food as a hobby. Some millennial and Gen 2 foodies amassed hundreds of thousands of followers on their social media platforms for sharing aesthetically pleasing photos of their meals and trying new food trends. Many of these influencers even managed to turn it into a career or side job by getting paid to advertise restaurants and companies on their social media platforms. Méza recounted how, growing up, her mother had taught her to always stand up for what she believed in. This, coupled with her millennial mindset and marketing background that taught her the value and purpose of a mission-driven company, led to her approaching Bandida with a very different mindset than the average entrepreneur. Bandida aimed to make an impact by only working with companies founded or run by women and people of color-but Méza quickly encountered obstacles. Picking the right suppliers has been a really tough decision. I knew going in it would be a challenge, but so much of it has been educacing my partners. The R&D department I'm working with is run by a woman. Co-packers and co- manufacturers--where I'm going to be producing my product--are very difficult to find women-run, but I'm still working on it. And now people point out that only some of my ingredients are women-sourced. I have to remind them that we talked about this at the boginning. It's tough having to decide if I can go to market with a product that's only meeting 60% of my standards. Part of that is being super transparent with my customer. I'm going to put a section on my site to show where all my ingredients are from, who all my companies are, which ones I'm still working on and ask for help to find people to fill these gaps. Meza remained indeterred by setbacks. "You accept that it's going to be an uphill battle from early on," she said confidently. "But maybe there's some access to wins and partnerships that other brands don't get. At the end of the day, it's going to balance out." Mera recouted that many entrepreneurs from underrepresented backgrounds she met while working on Bandida rat companies that were also mission-driven. For example, one friend ran a beverage company that advocated for environmental sustainability by using fruit that would typically get thrown out. They also donated a pound of fruit to someone in need for every case of their beverages sold "The more women and people of color that get into business, the more opportunities we have to create such an incredible world to live in," Meza said excitedly. "When we connect on our missions, we form a true relationship, and we each want to help each other grow." Through Bandida, Méza built a network with other diverse entrepreneurs, providing referrals, advice, and support to each other. More brands were beginning to realize the importance of inserting personality and a point of view that shoppers could recognize and relate to. As she looked to develop the Bandida brand to serve a purpose, and generate profits and revenues, Méza knew it would be a challenge but was inspired by brands who had accomplished the same goals
Ben & Jerry's Ben & Jerry's was one of the first food companies to leverage social activism in their business model. The Vermont startup launched with a $12,000 investment in 1978, and by 1986 they had become a $30 million business in 35 states. In 1988, they started a non-profit with the aim ci redirecting te of the national defense budget toward peace-promoting activities instead."-Ben Coken and Jerry Greenfield, founders of the firm, described their company. “As an aspiring social justice company, Ben & Jerry's believes in a greater calling than simply making a profit for selling its goods." By 2020, the firm had a forty-plus-year history of showcasing their political beliefs, by launching brands thut tied into key issues, such as refugee and immigrant rights, climate change, justice, and racial equity, to name a few. Eventually, the company came to be viewed as a mainstream brand in the food and beverage space. They benefited from aligning to the interests of millennials, specifically with social justice. One recent example of this approach was in the launch of their "PeCAN Resisi" favor in 2018. The brand message stated, "We can peacefully resist the Trump administration's regressive and discriminatory policies and build a future that values inclusivity, equality and justice for people of color, women, the LGBTQ community, refugees, and immigrants." In June 2020, Ben & Jerry s posted a statement to their social media accounts and website denouncing racial injustice, titled, "We Must Dismantle White Supremacy: Silence is NOT an Option." This was largely viewed as the most detailed and powerful message from any corporation during that time. Over the decades, the firm showed that a brand could showcase its beliefs, while simultaneously growing sales and profiti Bandida aimed to forge a similar path within the RTD coffee segment. Patagonia Provisions Patagonia Provisions, a division of Patagonia, Inc., was created in 2012 with the sole focus to fix America's broken food chain. Patagonia built a billion-dollar brand based on sustainable and environmentally friendly outdoor products, mesuraging competitors into following suit. - When Patagonia founder Yvon Chouinard observed salmon fishers weakening fisheries, he decided to start a food division focused on creating and sourcing food from environmentally friendly firms. "I'm not out to make a line of backpacking foods, "Chouinard said. "I want this stuff in every supermarket eventually. I'm out to change the world of food. Palagonia Provisions created food products ranging from canned seafood to soups to snack bars from sources that utilized environmentally friendly practices, rather than modern-day agricultural practices which focused on maximizing efficiency and profits. Chouinard rejected these practices because they often contributed to issues such as soil erosion, climate change, and labor exploitation. Instead, Patagonia Provisions focused on creating products that used regenerative organåt farming practices to restore, rather than deplete, the planet. Bandida aspired to be like Patagonia Provisions a company that defined itself less by its products, and more by the good it strives to impart on tire world. PepsiCo Greenhouse Accelerator Large Timis, such as PepsiCo, worked to identify and support purpose-driven food and beverage brands keeping up with the newest industry trends. PepsiCo was pursuing this via their Greenhouse program, which, according to the company's website, aims to accelerate growth for entrepreneurs who have built purpose-driven brands that are changing the way consumers eat and drink."- Beauty Gourmct was a firm that participated in PepsiCo's Greenhouse program. They launched their first product, Glitter Tea, in October 2019. The firm was a women-owned food and beverage company that had a passion-driven mission to make self-care more convenient for the busy modern woman... and a social impact program fostering fundraising equality for female entrepreneurs." The founder of the arm, Kris Ravenscroft, created the brand to help women with self-care, while simultaneously helping other women advance their firms.
Bandida's Opportunities To Méza, Bandida was not only a new career or a source of income, but a vehicle for social responsibility where she could embrace her heritage and empower women and memories. The Bandida brand was built on the promise of sourcing ingredients from female farmers and produsers worldwide and creating a workplace where women and minority groups were supported. One of Meza's suppliers mentioned When we placed an order for our brand merchandise. I was chatting with the owner of the print shop and she told me how much of a strucgle the pandemic has been because her usual business comes from corporate cuents, all of which were basically canceled in 2020. It felt so good to support a local Brooklyn business rather than a cheaper online vendor. The brand had built a loyal customer following at farmers markets and through e-commerce sales in Brooklyn, NY. In a market test, Bandida sold 1,000 bottles at a price premium ($5.00) with estimated margins of +30%, which was above beverage industry standards of 24%. Bandida's target consumers included health-conscious females with some college education or college degrees, middle-class, single or newly married, ages 25 to 44, belonging to a Latino or mixed race, and living in various diverse states in the United States such as New York, California, Texas, and Florida (see Exhibit 7). Bandida also targeted white females with the same demagraphies, as Meza believed her modified version of a horchata would appeal to non-Latinos "who are curious to try new beverages or who are exposed to or are familiar with Latino culture." As Méza worked to refine her product formulation for her cold brew horchata and define her company's purpose-driven mission, she encountered several unique opportunities with which to capitalize on. First, Americans continued to demonstrate a desire for different and more unique flavors across a wide range of foods and beverages. The trend continued to be driven by the growing multicultural nature of the United States with more frequent travel abroad (pre-COVID), increased social media use, and increased exposure to foods and beverages from around the world at restaurants, food trucks, and other venues. Second, Gen 2 and millennials showed signs of driving the cold brew and RTD beverage industry with their preferences. Lastly, according to the United States Census Bureau, the U.S. Latico population reached 18.5% of the total population in 2019, and according to Brookings, the nation was becoming more diverse even faster than previously predicted. Challenges Bandida was faced with the challenge of production cost. After successfully selling the product and making a name for herself at local farmer's markets, Méza began focusing on growing the company organically through an eCommerce platform and her website, holabandida.com. In January 2021, A 10 oz. bottle was priced at $4-33 and horchata cold brew 6-packs at $26.00 on the company website, but the product was only available intermittently as Méza produced new batches herself. Bandida's product cost stemmed from high ingredient costs combined with shipping costs. Unfortunately, Méza did not have enough demand yet to buy high quantities of ingredients. If she did, this would have allowed her to drive down the raw material price and, potentially, her finished goods price. On top of that, the 2020 United States Postal Service crisis caused backlogs and delays in the delivery of mail, raising questions about the reliability of the service for timely delivery of her orders. While manufacturing the drink by hand led to an intimate knowledge of the product and a clear commitment to quality, the process took more than 30 hours and only allowed her to produce no more than 500 bottles per month. The finished product had a shelf life of two weeks. While the limited availability of inventory and relatively short product life had been sufficient for meeting current
customers' needs to meet increased demand and enter additional markets, Bandida would need to look to alternative processes such as a shared commercial kitchen or partnering with a co-manufacturer. For example, some retailers required a 120-day minimum shelf life while others required a 45-60-day shelf life. -Ultimately, the best strategy for a company was to manufacture products with a longer shelf life because then they had the options of being sold in refrigerated and non-refrigerated sections like Coke and Pepsi. Logistics While the two-week shelf life of Bandida's horchata cold brew presented a challenge in its current state, a unique strength of the product formulation was that it could be stored frozen. This dramatically increased shelf life from 14 days to up to one year. A single pailet of Bandida could hold up to 3.500 glass bottles. Cold storage rates in Brooklyn, NY, at the rate of $150 per month per pallet provided an opportunity to economically produce and store much larger quantities of product, a standard practice in the industry. This would be especially beneficial if Bandida worked with a co- manufacturer and produced larger product runs. While the somewhat limited availability of product had thus far perhaps actually driven demand, for Méza tu realize her vision and goals, she needed concrete production and storage process plans before she could partner with distributors. At the same time, she wondered if different distribution options may require different back-end logistics. The question about the best avenues for distributing the product at scale, especially as she looked to expand outside of the New York City market, loomed large. Initial target accounts for sales included fast-casual restaurants, grocers, e-commerce, and other grub-and-go and convenience store locations. Partnering with a distribution company was another route that would instantly provide access to a large network of grocers and retailers. Working with certain distribution partners would provide an opportunity to reach another large market with more demand for Latino products than other parts of the country Sourcing Plans to scale up also affected soucing options and production costs. Instead of purchasing commodities in bulk quantities at a discounted rate, Meza could only purchase small wholesale quantities for distributors who met her social mission standards. Even though most of the products used in the horchata druck, such as dates and cashews, were non-perishables with a shelf life of 12 months or more, they required efrigeration and proper storage conditions to extend their shelf life. While Méza planned to invest in facilities once the nascent venture scaled, for the time being, she manufactured the beverage out of her home. The limited refrigeration storage capacity she had forced her to purchase 50 lb. boxes instead of 2000 lbs. pallets, the industry standard for commodity sales. Commodity food suppliers or manufacturers would rarely accommodate quantities as small as the ones required by Bandido. Small size orders, like hers, were handled by retailers or distributors who added their distribution, repacking, and relabeling cost to the cost of the raw ingredients. Creating the product by hand in her kitchen also meant that it was an incredibly time-consuming process. "We recently switched away from making rice and cashew milk from scratch, which takes about 24 hours!" Méza exclaimed. "Now we're using Jor's sustainable nut milk concentrates and Suzanne's Specialties for a rice milk powder, and that has been a true game-changer." While Meza was making progress optimizing her workflow, she knew there were still several sourcing and production systems she needed to streamline. Furthermore, agriculture companies that had sustainable practices typically sold their products at a premium price. For example, one of Méza's suppliers was Olam International, an international distributor that manufactured ingredients such as coffee and dairy. Olam's sustainability efforts were
the heart of their business. The company worked on social responsibility projects in over 70 countries that tackled issues such as food waste, clean water, and accessible education for real communities. Méza partnered with Olam because of their efforts to support women farmers and employees across the supply chain, foster diversity and inclusion in the workplace, and provide economic opporænities to rural communities worldwide. Méza was determined only to source der ingredients from similar companies, even if it meant adding additional costs. The increased cost associated with sourcing and production with sustainable, socially responsible firms, forced Méza to charge a premium price and sell only in 6-packs to cover those additional costs. Branding and Identity In addition to the business challenges, Méza experienced challenges as a Latina entrepreneur marketing a brand representing Latin heritage. She described her challenge as an imposter syndrome." referring to her mixed-race ethnicity. As a half-Mexican, Méza sometimes wondered if she was the "right person to be leading a company like Bandida. Méza recounted an experience of having to wrestle with her cultural identity when her younger brother asked for icer advice. He had put together a book of 35mm film photos he had taken in Mexico and wanted to sell them. He called with the same question Méza had been asking herself. He asked ifit was right for him to be telling this siury because he didn't feel Mexican enough. I realized I feel the very same way obout my business sometimes. But we can't discount our experiences. In no way am I saying I am THE expert in horchata. Bandida is horchata through my lens. Horecta cold brew in itself is a mix of two cultures. You've got the cold brein coffee, ach is part of my New York life, versus horchata, which is part of where I grew up in San Diego and my Mexican side. There's often a lot of concern about who's right to tell a story, and I think food and beverage has recently come muer a lot of scrutiny when you've got white- identifying chefs cooking ethnic food. It has a lot to do with respect, too. In the news recently, these tuo women redesigned a mahjong set and are charging $425 for them and didn't really acknowledge the history of mahjong. They didn't really tackle bringing culture into your project in the right way. Many entrepreneurs have been accused of cultural appropriation, often profiting off the labor, talent and creativity of peopie of color. In 2017, two white cooks in Portland, Oregon received media attention for launching a burtito food truck. The pair were criticized for stealing their recipe from Mexican women while on vacation. Méza aimed to set herself apart from entrepreneurs like this by being a mission-driven brand, supporting other diverse individuals, and incorporating her cultural identity in the proces Issues of cultural identity were central to how Méza felt about engaging more directly with the Latino experience and the role that Bandida could play in it. For example, as a healthy and affordable alternative to traditional sugary horchata and as a company that prioritized working with women and people of color. Furthermore, Meza was well aware of the role that Latino community-based strategies rould play in the growth of her company. As part of her target demographic, she knew that Latino consumers would be key in Bandida's potential success. Possible Paths Forward Meza placed her social goals and values front-and-center in the development of her future growth strategy. In particular, she thought about how different distribution channels could help her accomplish her goals while expanding Bandida's reach.
For my business strategy, I am looking to my identity. When it comes to distributors, I know I want to be in Target. Whole Foods would be great, but I want to be in Target, I want to be in something that feels a little more accessible. I just talked to someone who's creating healthy vending machines where you can get fresh fruit and more healthy beverage options. I want to be there. if I could be somewhere luxurious too that would be great, but I really want to be in accessible places first Business to Business (B2B): Retail Bandida's first option included a pathway focused on expanding nationwlly through traditional retail and foodservice channels such as grocery stores, supermarkets, club stores, and convenience stores. "I started to understand I really needed to have a long shelf life, and if I can be non-refrigerated, even better," Méza recounted. Increasing product shelf life was required to meet distributors and retailers' specified shelf life periods to ensure the product successfully transferred from manufacturer to retailer to consumer, with time to spare. A typical solution that beverage companies often adopted to create a shelf-stable product was to pasteurize their drinks by eliminating bacteria through extreme heat. Creating a shelf-stable product would simplify Méza's distribution process, allow retailers to cross merchandise, and place the product at numerous points of sale: middle of the store, check-out coolers, grab-n-go section, etc. Alternatively, if she were to keep her current product formulation, her product would have to compete for refrigerated shelf space. As coolers were the most expensive section of retailers' stores, creating a product that could be placed on the shelf or in a cooler wouli decrease Candida's slotting fees while providing greater opportunity for distribution placement Aside from making adjustments to Bandida's shelf life if she were to pursue a more traditional retail route, Méza also had to consider the product's cost structure (price point, margin, etc.). Furthermore, she had to keep these relative to specific outlets to maximize exposure and sales growth based on the various channels. For example, natural food markets such as Sprouts, a store that mainly sold organic products and practiced sustainability, would require a 43-45% margin. Meanwhile, conventional retailers might require around a 25% margin. Keeping the price point in mind remained crucial to stay competitive in the saturated and fragmented RTD coffee category (see Exhibits 8 and 9). Product size and package offering also likely differed from retailer to retailer. For example, natural grocers like Sprouts desired 8 oz.cans, while specialty markets like Superior Markets preferred larger, half-liter sizes. Pursuing this option Bandida would need to adjust the pricing and marketing strategy from a conventional grocery store to a natural grocery store to a convenience store, as all markets demonstrated varving approaches and designs based on the store type and consumer. The question remained: would pursuing a traditional option allow Bandida to stay focused on "taste good, does good, while meeting necessary price points and margins for retailers? Business to Consumer (B2C): E-Commerce Continuing to use and expand upon an eCommerce platform, such as the existing holabandida.com, could be easier for Méza to maintain her mission of social responsibility. It would allow her to decide how much to produce based on production capacity and availability of ingredients from companies also focused on sustainability and supplier diversity initiatives. This could also make demand-planning more predictable, with orders originating from one centralized location versus meeting the clastic demand of many retailers, restaurants, coffee shops, and others spread across geographically diverse locations
However, running an eCommerce platform could be very expensive, causing large potentiai impacts on Bandida's overall cost structure and overhead business expenses. Depending on how complex the platform became, the costs of web development, web design, and marketing could increase significantly. To help overcome some of these costs, Bandida could consider partnering with existing eCommerce platforms such as Amazon, FreshDirect, or Beverages2U.com.. Whether Méza continued to grow with her existing website or partner with eCommerce platforms, maintaining consistent production and reliable distribution remained significant hurdles to overcorne. In addition, Méza needed to consider how she would market Bandida to a broader audience. How would new consumers find a small brand like Bandida if its products were only sold online? Localized Marketing Farmer's markets and Instagram were Méza's primary ana keting tools for promoting Bandida and sharing the brand's social activism. With her background in marketing and her passion for connecting with her customers, engaging in new ways through small, targeted, local interactions could lead to an increase in the brand's reach with her core consumer target. This route would require involvement in consumer grassroots movements, participation in art shows, health and wellness events, Latino festivals, women's conferences, and other group engagements. During the peak of COVID-19, localized marketing posed a potential challenge but was somewhat offset by sending samples ahead of time or conducting marketing virtually. Following this route could amplify Méza's social media marketing, allowing her to tie in the importance of the Bandida story to diverse communities and social groups. Other beverage brands in the energy drink space, such as Red Bull, had leveraged this approach in the past with significant success. Determining which path to take would guidle Bandida's next phase of development, price point, packaging, and many other variables. With options to pursue retail, e-commerce, and localized marketing emerging as hor best patiis forward, how would she decide which to pursue? More importantly, whichever route Meza chose to expand Bandida, would she be able to continue to stay true to her company mission of supporting women and diverse groups?
Exhibit 1: What is Horchata? so What is horchata? Horchatant beverage traditionally found in Meccanica and Son Bandidas version is most red by a typical of Mexico more cinnamon and typically condensed the monds or chulasare sometimes tended to make it crear and Mwants and melon are used to make more Younding being ved the perfect cong ito counter the ice of Smooth Creamy Refreshing Craveable Sweet Warming spices like Vanilla & cinnamon Source Bandide Exhibit 2: Horchata vs. Bandida Horchata Evolving a classic to make something new SO N Tace Shop Horchata Dery- Swetred hearty with rated 20 und Merchate Color Dairy Lightened with coconut Bote Typical back care some bottled versions exist, but lack market penetration
Exhibit 3: Retail Sales in the Beverage Industry by Category, 2014-2024 (US millions) ABER CAGE 2014 2015 2016 2017 2013 2019 2020 2021 2021 19-24 Total Retail Sale 136.350 319.229 14-AS 242.212 245.546 150210 10.410 359.269 168.0% 122.25 LAN 2.9 Carbonated Beverages 20.070 39,095 29,370 19,220 39,800 40935 193.870 43,755 3.596 4370 45.000 0.33 1.93 Daily & Dairy Ahernatives 25,975 24.000 23.365 23,919 23.516 23.905 25.63 24.355 24 2395 25.095 1.6 1.05 Energy & Sports Drinks 17.505 19,075 10085 20.275 21.750 23,720 24,590 27.225 25.000 30.50 31.900 6 Bottled & Enhanced Water 34,450 15,640 16,810 17,735 19.010 20,045 22,190 22,440 23.815 25,00 26.00 EN GIN 29.060 19.260 1010 38.970 18.500 1853 29.500 1.220 10.06 12.880 17.00 0.7 0.93 Coffee & TD Calle 12.00 11265 13.635 14.050 14520 14.755 15.0 15.5 16.000 16.50 17.250 7 MIN Tea & RDT 7.210 7,515 7910 8.100 8,270 8315 2.995 8.710 8.920 9.150 2819 Note: 2020-2024 estimated Source: Beverage Retail United States, June 2020 Exhibit 4: Market Share of Coffee Drinks 2008-2018 Brands of Coffee Drinks (Bottle/Can) Drunk Most Often by Souseitalok, 2008-2018 (percent of households that drink coffee drinks) 2018 2013 NA 2014 NA 2015 2016 2017 1.4 15 11 1 NA NA NA NA NA NA 3.4 2.7 2.9 28 Brand 2008 2009 2010 2011 2012 uyissimo NA NA NA NA NA Seattle's Best NA Starbucks Doubleshot 19.3 10.9 12 116 Starbucks Frappucino 36.4 36.7 38.2 38.3 38.6 Other Brands 40.9463 47.5 44.1 43.8 Source: Packaged Facts, US Food Beverage Ulook 2019, March 2019 12.9 132 15.2 143 153 15.1 41.6 40.1 45.3 43.8 442 41.2 40.9 53.5 43.7 44.6 44.2 45.6
Exhibit 5: Coffee Attribute Interest by Respondents and Generation, April 2020 so Which of the following attributes are you interested in trying in each of these types of coffee? Pleae select all that apply per type. % RESPONDENTS unique flavors (eg horchata, lavender) Extra caffeine No Suga Antondants 17 Vitamins Single-orgin beans 16 Immunity-boosting ingredients 16 Caffeine free Protein Prebiotk/probiots Collagen None of the above 15 20 25 30 35 40 17 15 14 35 Which of the following attributes are very interested in trying in each of these types of coffee? Pleae select all that apply per type. Gen 2 Millennials GenX Baby Boomers Unique flavors (horchata, lavender) 36 Extra caffeine No Sugar Ardoxidants Vitamins Single-origin beans Immunity-boosting ingredients Caffeine-free Protein Prebiotics/probiotics Collagen None of the above 15 10 15 12 8 14 41 30 16 16 23 15 24 20 23 15 13 26 35 19 23 24 21 19 16 22 15 11 23 29 21 16 19 15 16 15 10 12 11 8 37 9 14 5 7 3 48
Exhibit 6: Growth Rates in U.S. Retail Coffee by Segment, 2015-2025 Po - Roasted coffee -Instant coffee --Single-cup coffee - Ready-to-drink coffee 7,000 5.000 5.000 4.000 S millions 3.000 2.000 1,000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 fest! (fore) (fore) (fore) (fore) (fore)
Exhibit 7: Bandida Target Market: The Conscious Consumer Demographics ar Po MEET OUR BANDIDA SHIA THE CONSCIOUS CONSUMER SIZE: +41 MILLION USA AGE: 25-44 GENDER: Female 73% LOCATION: New York, Texas, California, Florida EDUCATION: Some College or College degree FAMILY: Single or Newly Married INCOME $50-$75K BACKGROUND: Hispanic, White or mixed race
Brande Exhibit 8: Breakdown of Competitor Brands within the Coffee & RTD Coffee Market Marketer Coca-Cola DUNKIN' DONUTS (RTDI, McCall (TO) Danone North America International Delight, STOR As dine Green Mountain, Barista Prime, Café Escapes, Coffee Pepe, W.drich Coffee, Donut House Collection, Donut Shop Laughine Man, Newman's Own, REW. Timothy's World Coffee, Tully's, Van Houette, Forto, High Brew Peer's, Stumptown Coffee Roster, Intelligentsia comer, Krispy Krone, Caribou Coffee, McCafe (Ground - as of 2nd half 2020) The I.M. Smucher Company Folgers, DUNKIN' DONUTS (Ground, Cafe Buntei cat Pilon, kava, Medaglia rore, 1850 Kraft eine Maxwell Houte, Mix, Gevalia, Sank, TASSIO, Tube, AILEYS Massimo Zanetti Beverage USA Chase & Sanborn, Chock full d'Nutt, Master Chel, wa, Hills Bros., KAUA Nee NESCNI.Nespresso, Taster's Choice, Coffeema Natural St, Chameleon Cold Brew, Blue Bottle Starbucks Alliance (Starbucks Sattle's Best Coffee, Verleme, VIA) North American Coffee Partenhip Starbucks/PepsiCo Starbucks (RTD) Tata Global Beverages Light O'Clock VO Source: Beverage Retail: United States, June 2020 Exhibit 9: RTD Coffee New Item Introductions May 2018-February 2019 May 2013 Neste introduced a line of NTD Codlew coffee under a coffee mate natural blius natural coffee creamertine 2.Eleven launched Furies Sparkling Cond Brew Coffin a private label line in sell chilling cans. Starbucks launched Doubleshot Coffee June 2010 Red Diamond Coffee & Tie sunched Riu Cold Brew Coffee into retail Peet's Coffee Peet's True tred spre a line of shelf stable RTD beverages with natural flavors based on the brand's coffee flavors Cuvée Coffee makes we used autorew and added Nitre Hemp Oll Cold Brew to its line NY 2016 Starbucks woduced Belted reppuccino Chilled Coffee Drink with Almond August 2010 Coca Cote per McDonald's launched RTO McCute Frappes Conhece store chain Wwwo added cold brew to its 100 percent Rainforest Alliance Certified tine. Starbucktheit plant based protein coffee, Protein Blended Cold Brew, is made with plant based protein and cold brew coffee la Colombers to its range of iced coffees with the launch of pumpkin spice draftutte ruary 2018 core.Colu's partner Dunkin' Donuts launched Dunkin' shot in the Dark, a combination of the brand's coffee, cream, sugar and espresso Februay 2010 colombe Coffee Introduced cold brew handy lemonade, praefruit and cherry
Which of the options she is evaluating present the best path forward and why?
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