Veritas: The First ''Real Food'' Supermarket Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Veritas: The First ''Real Food'' Supermarket Case Solution

Question 3

Veritas is planning to expand its stores in Madrid but is confused about whether it should open its own store or hold a partnership with Eroski. Taking into account the general market conditions in Madrid, the competition here is quite tough as compared to Catalonia. Several stores are already providing organic products at a reasonable rate and have proven to generate promising revenue by late 2015. An average estimate tells that every new store opens in Madrid in a month that supplies organic products so the competition is quite tough. Companies like Super Sano opened its store in Madrid and proved to be quite successful becoming the largest distributor of organic products in Spain. Other companies like Gran Bibio and EI Vergel also proved to generate reasonable revenue in Spain supplying organic products. In addition, an international supermarket chain Bio c Bon opened its store in Spain and has about 4000 products with 90% of them being produced in Spain. These were a great threat to Veritas's opening in Madrid. (Befort, 2018)

Furthermore, the urban planning of Madrid was quite different compared to other Spanish cities as it was the capital, and people often preferred cars for their day-to-day shopping rather than buying online. Moreover, traditional markets also opened small shops in shopping malls and didn’t allow others to do so. The most important thing was that people in Madrid followed Anglo Saxon model which allowed people to buy products all in a place (like garments, carpets, kitchenware, baby items, etc. rather than moving to different stores.

In light of these, observing the marketplace it was more feasible to open a partnership store with Eroski as people would find products at a place rather than going here and there. Further Eroski had similar values to Veritas as an organic seller brand so much would not be required to spend on advertisements. Tremendous money would be saved on building a store by displaying products on an already existing store that has brand value. Veritas can spend that money on advertising its products to create its name in Madrid as well. People are unaware of this new firm (Veritas) so they need to be made aware. Later on, when they have developed their brand image in Madrid with significant revenue they can open their own stores. But opening them in the first attempt would not prove much significant and more time will be needed to create awareness.

On the other hand, if Veritas opened their own store at first in Madrid, they would have to face serious issues; cost being the greatest of them. The amount needed to build stores, infrastructure, manpower, employment, and then advertisements as well will be a nuisance. Much amount would be needed to be spent on advertisement in a market competitive environment to make people aware that there is a new brand with healthy and nutritious organic products at reasonable rates and how we are better than tough market competition. Its analysis, strategies, and planning would be cost-effective as well. As Veritas has already done in its initial days when people weren’t buying the products they had to spend on strategies, changing store designs, employee’s getup, etc. to attract customers. The main problem is that market is already tough and many different companies have established themselves well so Veritas would have to come up with new ideas to invite people to their stores while maintaining their vision of providing the best organic products to customers. Further, it has its bakery only at a specific place near Barcelona. So its own baked product would have to be frozen before transportation to Madrid which would be inconvenient and cost-effective. Another alternative is to open up a bakery near Madrid to supply fresh products to customers which would not be cost-effective as it would require investments in infrastructure, machines, labor force, etc.

Conclusion

Veritas, an organic product-based company in Spain, was established in 2002 by Silvio Elias. He had a vision of providing customers with nutritious organic products. He also has a family background of successful business as his father was a co-founder of a leading supermarket chain across Catalonia. His company trusted every decision it had made for the firm and relies on his upcoming decisions for expansion in Madrid. But he encountered a problem in which he has to decide whether to open his own store or hold hands in partnership with Eroski.

Taking into account, that the macro environment is quite favorable for Verita’s as the country’s economy shows progress in every aspect. So it would be much more favorable to expand in Madrid. The company’s value chain is also in favor as it is cost focused, providing better at less cost and to a specific niche in society.

The main issue is to whether open stores or display products on Eroski’s shelves. The main solution arising is to display products on Eroski’s shelves rather than opening stores. It would prove much cost efficient since the market is quite competitive in Madrid. On average one store is opening in Madrid in a month. So first displaying products and spending on creating awareness and later on opening their own stores with the generated revenue would prove more effective........................