Thursday, August 20, 2015

It's a long shot for Nature's Bakery and Danica


Photo courtesy naturesbakery.com
Just this week, The Stewart-Haas NASCAR racing organization made a big announcement. It had accomplished the formidable task of replacing exit-sponsor GoDaddy with a new primary supporter for Danica Patrick's racing team in the top tier Sprint Cup Series.

The sponsor? Reno, Nevada based Nature's Bakery.

Motorsport media is hailing the announcement as a great fit and sign of new growth in the sport. However, it's also akin to David stepping into the role of Goliath.

There's no disrespect meant, none whatsoever. I'm a fitness athlete and have purchased Nature's Bakery fig bar products. Good stuff and good content. But it's the size and magnitude of the business that brings some concern. News reports and some web searching indicate the company was founded in 2010, has approximately 500 employees, and has attained fairly good national distribution of product across retail chains. It has also been reported that the food manufacturer stepped in to sponsor the majority of Danica's NASCAR events in 2016 and has committed to the primary sponsor asking price that hovers near the $20 million mark.

It's always fun to play with some math. According to Amazon.com, consumers can purchase a 12 pack of Nature's Bakery fig bars for $14.91. Now, let's consider the possible profit back to the company on that sale. According to Timothea Xi in a Demand Media article, we can learn more about gross margins across bakery venues. Xi writes "According to the Retail Owners Institute, gross margins for retail baked goods stores have been fairly constant from 2008 to 2012, ranging between 53.7 percent and 57.7 percent. For in-store grocery bakeries, gross margins were 47.2 percent in 2012, up from 46.8 percent in 2011."

Let's suggest Nature's Bakery carries a 56% gross margin. So for that $14.91 Amazon sale, it will retain $8.35. This is just one way of looking at it, but based on a $20 million sponsorship, Nature's Bakery will need to sell 2.39 million 12-packs of fig bars in order to earn its ROI at break-even point.

This is the hard reality of sponsorship. The company will have to use the Danica marketing machine to move a huge incremental amount of product. Can it happen? Will NASCAR fans - and other Danica supporters - step up at that magnitude, wallets open ready to buy?

I hope it's so, but this is a big reach for a small company. Let's wish them the best in this exciting and somewhat risky endeavor.

4 comments:

  1. Now that's a lot of fig bars! However, according to Sporting News, Danica Patrick is one of the three most important NASCAR drivers - not due to her performance on the track, but because she is Danica Patrick, the only female full-time Cup driver. She is a marketable asset. Let's hope she is the marketing asset Nature's Bakery is looking for!
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  4. With all my family home this weekend, we knocked this around one evening after dinner. The general consensus was that Nature's Bakery might see a slight increase in sales at the onset, but the venture will likely not prove to be a good investment in the end. One daughter commented that on her college campus someone is always passing out free Kind bars, and those that drink Red Bull can get a free one almost any time. Perhaps it would have been a better investment of $20 million for Nature's Bakery to pass out free bars and a coupon on college campuses where students might be more likely than race fans to buy something they can toss in their book bags for a nourishing snack and energy boost.

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