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Protein Case

Open Posted By: surajrudrajnv33 Date: 05/05/2021 Graduate Rewriting & Paraphrasing

First, read the Marketing a Cricket Protein Brand that you purchased with your Harvard coursepack. 

Then, answer these questions in a Word Document. Please double-space your text and use Times New Roman 12 point font. This should be 3-4 pages. If you cite the book, simply put (Lamb, Hair, & McDaniel, pg. XX) after the quote/paraphrase, and you don't need a sources cited page. Please do include a sources cited page for any other sources you use. 

1. Assess Exo's brand equity (e.g. consumer awareness, quality, loyalty, and unique brand associations). Compare and contrast Exo's brand equity with that of Aspire's Aketta brand. Compare and contrast the brand equity before any mergers.

2. As Aspire's CEO, how would you position the newly acquired Eco brand? Which consumer segments are most attractive? Consider the competition in formulating your response.

3.Based on Exo's positioning, what is the appropriate marketing mix (e.g. product, price, promotion)?

Category: Accounting & Finance Subjects: Accounting Deadline: 12 Hours Budget: $120 - $180 Pages: 2-3 Pages (Short Assignment)

Attachment 1

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W20670

ASPIRE FOOD GROUP: MARKETING A CRICKET PROTEIN BRAND

Professors Miranda Goode and Emily Moscato wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to [email protected]

Copyright © 2020, Ivey Business School Foundation Version: 2020-08-24

Mohammed Ashour, chief executive officer (CEO) and co-founder of Aspire Food Group (Aspire), was in Boston to attend the 2017 Forbes 30 Under 30 event and had a half-hour coffee meeting with a colleague on his calendar. He was meeting with Greg Sewitz, co-CEO and co-founder of the protein bar company Exo, who had also made the Forbes list in 2016. Aspire and Exo were in the same small but growing sector of the food industry: edible insects. Still in its infancy in North America, the edible insect market involved players who were open and willing to share information. Because the idea of insects as food was not the easiest concept to sell to Western palates, those in the business knew that the category as a whole needed promotion and acceptance in order for their companies to succeed.

The meeting with Sewitz was not what Ashour had expected: during a two-hour walk around downtown Boston, Ashour learned about an opportunity to acquire Exo, makers of cricket-based protein bars. Although Exo was growing at a good pace, its board had decided to find a buyer who would focus on developing the consumer packaged goods side of the business. Aspire’s own consumer brand, Aketta, did not have the same brand recognition as Exo, and Ashour saw the acquisition as a two-for-one deal that offered both Exo’s brand equity and its development of a protein isolate. Aspire was positioned in the emerging food sector as a producer of ethically raised, high-quality crickets, and this made it a compelling prospective buyer. By the end of their meeting, Ashour and Sewitz had an initial understanding for the acquisition, and by March 2018, Aspire had acquired Exo.

Aspire’s acquisition of Exo’s assets came at a crucial time: demand for insect-protein products in the United States was expected to reach US$1,336 million by 20251 Exo had focused its marketing on competitive athletes and “weekend warriors,” who were interested in nutrition as part of their training program. While these consumers sought a natural performance edge and other functional attributes of insect protein, the lower environmental impact of its production did not rank as highly for this segment. “But what about other potential segments?” wondered Ashour. “There are consumers interested in a Paleo diet—who already buy Aketta products. There are environmentally conscious consumers, a growing flexitarian market, and the broader segment of millennials as an age group. We even have the opportunity to introduce Exo to children as a healthy snack.”

1 Cision PR Newswire, Global Insect Protein Market Forecast to 2025: Focus on Food & Beverages, Animal Nutrition, Pharmaceuticals & Cosmetics, Research and Markets, accessed, accessed July 8, 2020, www.prnewswire.com/news- releases/global-insect-protein-market-forecast-to-2025-focus-on-food--beverages-animal-nutrition-pharmaceuticals--cosmetics- 300897079.html; All currency amounts in US dollars unless specified otherwise.

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Following the acquisition, Ashour and co-founder and Chief Operating Officer Gabe Mott met in the conference area of their Austin, Texas, headquarters. Behind the windowless interior wall of their office was the cricket production operation: a state-of-the-art facility that followed clean-space food safety protocols and far surpassed regulation requirements. Here, they not only raised and processed the micro- livestock but also used data analytics to develop and test best methods for humanely and efficiently farming crickets while limiting resource consumption. At its 2,323-square-metre farming facility, Aspire raised 22 million crickets each month, producing about 15,875 kilograms of cricket protein powder annually.

Ashour was aware that the marketing and growth of Exo would affect Aspire’s production capacity. The two founders—who six years earlier had been graduate students at McGill University, conjuring up the business plan for Aspire—now needed to discuss a revenue growth strategy for their company’s newly acquired Exo brand of cricket-protein-based products. “Which consumer segments should we target for Exo, and what should our marketing plan look like?” asked Ashour.

THE MARKET FOR INSECT PROTEIN

The global insect protein market was forecast to grow about 28 per cent per year and to achieve estimated sales of $213 million by 2023 and $8 billion by 2030.2 The United Nations and other organizations were promoting entomophagy (eating insects) as a sustainable alternative to consuming traditional livestock protein and a way to feed the world’s growing population. Among societal issues surrounding sustainability, food security posed a significant challenge as the world confronts growing global population, inefficiencies in food production and consumption, and the influences of climate change. The consumption of edible insects offered one solution by providing a high-protein, nutritional, and safe food source with a low environmental impact. Insect protein had the advantages of aligning with consumer values that favoured clean ingredients and minimal processing.

Insects were more efficient at converting food (energy) into protein than traditional livestock such as cows, pigs, and poultry. There were over 2,000 varieties of edible insects found on earth.3 Commercialization had focused primarily on crickets, grasshoppers, and mealworms/buffalo worms in North America. Insects could be raised in smaller spaces, where food, water, heat, and air could be controlled for maximum efficacy. Aspire’s research found that raising beef required 38 times more land, 23 times more water, and 12 times more feed and produced 1,815 times more greenhouse gases than producing the same amount of insect protein. A gram of crickets delivered more protein than a gram of beef. In a comparison of insect and beef protein, 30 grams of Aketta crickets would provide 20.0 grams of protein, 43.0 milligrams of calcium, and 2.3 milligrams of iron, while the same amount of beef protein would yield 8.0 grams of protein, 3.6 milligrams of calcium, and 1.0 milligram of iron.4 Insects were also a safer protein source, with a much lower risk of transmitting zoonotic diseases to consumers. In recognition of these lower risks, neither the United States nor Canada regulated edible insects as meat products—i.e., edible insect products were not

2 IndustryArc, Insect Protein Market: By Type (Beetles, Caterpillars, Moths & Butterflies); By End User Industry (Food and Beverages, Biogas, Food Industry); & By Geography, December 12, 2018, accessed March 20, 2019, https://industryarc.com/Report/17780/insect-protein-market.html; Meticulous Market Research Pvt. Ltd., Edible Insects Market by Product Type (Whole Insect, Insect Powder, Insect Meal, Insect Type (Crickets, Black Soldier Fly, Mealworms), Application (Animal Feed, Protein Bar and Shakes, Bakery, Confectionery, Beverages—Global Forecast to 2030, www.researchandmarkets.com/research/xrqhr7/7_95_billion?w=12, cited in Emily Morrison and Hiral Patel, “Insect Protein: Bitten by the Bug,” Barclay Market Research, November 2019, accessed July 7, 2020, www.investmentbank.barclays.com/our-insights/insect-protein-bitten-by-the-bug.html. 3 Yde Jongema, “List of Edible Insects of the World (April 1, 2017),” Wageningen University & Research, accessed July 7, 2020, www.wur.nl/en/Expertise-Services/Chair-groups/Plant-Sciences/Laboratory-of-Entomology/Edible-insects/Worldwide-species-list.htm. 4 Aspire Food Group, “Nutrition vs Environment,” Aketta, accessed July 7, 2020, www.aketta.com/.

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subject to regulation by the United States Department of Agriculture or the Canadian Food Inspection Agency, so they had lighter compliance requirements and did not require additional processing inspections.

In the global North (e.g. Europe, United States, Canada, and Australia), most consumers were unfamiliar with cuisine featuring insects, which was associated with a learned “ick” factor. No traditional European dishes contained insects, yet an estimated 80 per cent of the world’s people purposefully ate insects— whether in special-occasion dishes or as part of their weekly diet.5 For example, chapulines (dry-roasted, seasoned grasshoppers) were a popular snack and component of dishes, especially in Oaxaca, Mexico, and insect dishes were included in the diets of many North America Indigenous communities.6 It was also commonly noted that almost all of the world’s population unwittingly ate insect parts in products such as peanut butter, tomato sauce, and chocolate; the levels in these products were controlled by government food standards, mostly for aesthetic reasons.7 Against this backdrop, entrepreneurial companies faced a challenge in attempting to move consumers’ responses from “eww” to “ooh!” when introducing edible insect products that supported trends in consumer values and lifestyle choices.

Consumers commonly asked if edible insect products could be part of vegetarian or vegan diets.8 Vegetarians typically did not eat meat or seafood but consumed animal by-products such as eggs, milk, and honey. Vegans did not eat any animals or their by-products. While insects were living creatures, vegetarian and vegan labels were self-applied and might be defined differently by each individual—for example, some vegetarians ate fish, and some vegans consumed honey. Many vegetarians and vegans were willing to try insects; based on its experience with sampling events, Aspire estimated these people represented around 40 per cent of such consumers.

COMPANY HISTORY

Aspire Food Group and the Aketta Brand

In 2012, Ashour conceived the idea behind Aspire Food Group after learning of the Hult Prize, which challenged master of business administration (MBA) students “to solve the world’s toughest issues by empowering them to make money, do good and make life better for millions of people through the creation of for-good for-profit businesses.”9 The focus of that year’s prize was food insecurity, and a conversation with a friend on the subject of edible insects prompted Ashour to work with Mott and three other McGill MBA students to compete. Along the way, they incorporated a company and travelled to Thailand for field research. The team won the $1 million Hult Prize on September 23, 2013.

Ashour and Mott moved their headquarters to Austin and established operations in the United States, while another co-founder, Shobhita Soor, moved to Ghana to produce a variety of micro-livestock, including palm weevil larvae. Aspire’s approach to solving food insecurity and sustainability was to apply technology and automation to farming insects. Because they understood the barriers to acceptance of edible insects among customers, Aspire created the consumer-facing brand Aketta to help build marketplace awareness (see Exhibit 1). The name Aketta was derived from the scientific name for the house cricket, Acheta domesticus,

5 S.K. Srivastava, Naresh Babu, and Hema Pandey, “Traditional Insect Bioprospecting–As Human Food and Medicine,” Indian Journal of Traditional Knowledge 8, no. 4 (2009): 485–494. 6 Donald Callaway, Joel Janetski, and Omer C. Stewart, “Ute,” in Handbook of North American Indians: Great Basin, Volume 11, ed. Warren L. D’Azevedo (Washington, DC: Smithsonian Institution, 1986), 334–367. 7 US Food and Drug Administration, “Food Defect Levels Handbook: Levels of Natural or Unavoidable Defects in Foods that Present No Health Hazards for Humans,” FDA, accessed July 8, 2020, www.fda.gov/food/ingredients-additives-gras- packaging-guidance-documents-regulatory-information/food-defect-levels-handbook. 8 “FAQs,” Exo, accessed July 8, 2020, https://exoprotein.com/pages/faqs. 9 “Intersection of Purpose and Profit, Hult Prize, accessed July 8, 2020, www.hultprize.org/why-hp-2/.

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which was used in the micro-livestock production. Knowing that the majority of people in North America currently resisted the idea of eating insects, Aspire sought to popularize the name Aketta as an alternative to “crickets” when referring to the protein source. This paralleled the terms used to describe other animal proteins, as Ashour noted: “We eat beef, not cows; pork, not pigs. Using Aketta helps consumers distinguish carefully sourced cricket protein from the broader category of insects.” In reflecting on their position in the food industry, Ashour also noted,

When we initially started, we focused on supply chain, but it quickly became apparent that if we really wanted to seriously grow this industry, we needed a voice in front of consumers to educate consumers—and to make greater, better products available. I think part of the criticisms that we have had, and generally speaking of the industry, is that the quality of products historically hasn’t been the greatest. Ultimately we are selling food, and food is a very emotional experience. And the experience has to be excellent.

Aketta offered products in three forms: cricket powder; whole roasted cricket, in various flavours (including bestsellers sour cream and onion, sea salt, and sriracha); and granola protein bites made with cricket powder, also in various flavours (e.g., maple cashew, nutty chocolate chip, and pumpkin spice). Each of the products provided an excellent source of well-balanced protein and nutrients. Additionally, Aspire highlighted its innovative farming techniques: compared to conventional livestock, crickets were safer to consume, allowed for better animal welfare, and had a lower resource impact.

The Aspire team reviewed its sales efforts for the Aketta brand and identified elements of marketing that could be improved:

Perhaps our product format could have been improved. Perhaps we could have gone after another consumer group. We were predominantly focused not so much on getting these products to gain traction in the market; we were using them to create awareness in the market and to educate consumers.

Ashour pointed to the popularity of sushi in North America as an example of a foreign delicacy that was adopted over time. He continued,

Sushi, 20 years ago, was a foreign concept to most Americans. In fact, the very idea of eating raw fish, for a lot of people, was border-line offensive. Yet what happened was that you had a very clever chef in LA who was able to infuse his passion for this really wonderful Japanese cuisine with an American style. He came up with the California roll. This was, essentially, the gateway product that allowed Americans to taste and experience sushi—even if we can all agree that California rolls aren’t really sushi in the traditional sense. So for us, the question, historically, has been this: “What is the California roll for the cricket industry?”

Ashour recalled that the Aketta line of products represented the company’s attempt to do some rapid prototyping and to test market responses to a variety of product formats. “I don’t want to give the impression that we invested a tremendous amount of time and resources into those products being launched, because that is not really what happened.”

The Exo Brand

With the Exo opportunity, Aspire decided that its Aketta products would be rebranded using the Exo name, and the Aketta name would be used for educational purposes. Exo’s cricket protein bars (see Exhibit 2)

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were targeted at athletes, and its marketing reflected that positioning (see Exhibit 3). Ashour added, “Exo’s target audience is predominantly a US, millennial, CrossFit, and Paleo audience. What matters to this group is that they know their product includes clean ingredients, it is ethically sourced, and there is a very transparent supply chain. But the key benefit is ‘clean ingredients.’” Exo sold its bars primarily through e-commerce channels and through its website, and it dedicated marketing resources to maintaining a social media presence. The US snack, nutrition, and performance bar market was worth $7.0 billion in 2018 and forecast to grow to $7.7 billion by 2023.10 The average performance protein bar had a retail cost of $3.00. With retail margins at about 35 per cent, Exo’s wholesale revenues per bar were $1.95. Exo’s cost of goods sold was about half of the wholesale selling price.

Throughout the strategic discussions for the brand, one thing remained consistent: Aspire’s dedication to its founding principle of fighting food insecurity. As Ashour said,

Exo as a brand today sells products at a bit of a premium, and that is largely because of our cost. As an industry, farming crickets is something that has only been around for a few years, and despite our tiny size as a company, we happen to be a global leader, which just tells you how much more we have to go. Unlike the cattle and poultry industries, which have had hundreds of years to hone and refine their practices and achieve efficiency, we are still in the very top of our cost curve. So unfortunately, for a few years, the cost will be high; but if we achieve our objectives, which we fundamentally believe we will, this will become one of the most affordable sources of protein in the world, and hopefully our products will become a lot more widely available to every type of social economic bracket, not just people who can actually afford a $3 bar.

COMPETITION

Competition in the insect protein food sector came primarily from entrepreneurs in two categories: wholesale farmers and brand manufacturers. Millennial-driven start-ups such as Aspire and Exo; family farms, including Entomo Farms in Canada; and venture capitalists had jumped on the opportunity to be involved in this nascent market. Aspire had the advantage of vertical integration. Most other entrepreneurial food companies were reliant on insect protein suppliers, such as Aspire, Entomo Farms, or numerous overseas operations. Ingredient sourcing had been an issue for smaller brands, creating inconsistency with supply and various quality concerns.

Because of North American consumers’ lack of familiarity and negative associations with eating insects, brands strove to deliver insect protein in familiar formats. The edible insect industry had been primarily focused on the snack category, specifically the protein bar category. Insect protein bars from brands such as Chapul (from the United States), which was featured on the show Shark Tank; Landish (from Canada); Näak (from Canada); Eat Grub (from the United Kingdom); Jimini’s (from France); and Wholi (from Denmark) were currently competing on the market. Importantly, these brands were competing not only among themselves but also with established companies and brands such as Cliff Bar (see Exhibits 4 and 5).

The majority of competitors focused on crickets, but other insects such as mealworms, buffalo worms, and grasshoppers were also used to create bars, snacks, centre-of-the-plate proteins, and powders. In North America, products included protein powder (e.g., Crik Nutrition), tortilla chips (e.g., Chirps Chips), snack mixes (e.g., Don Bugito), pasta (e.g., Bugsolutely), snack bites (e.g., Seek), jerky (e.g., Rocky Mountain Micro Ranch), and cookies (e.g., Cowboy Cricket Farms). In Europe, supermarket chains sold a variety of

10 Mintel Group Ltd., Snack, Nutrition, and Performance Bars—US, Industry Report, Mintel, February 2019, accessed July 7, 2019, from Mintel academic database.

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insect products, notably burger patties from brands like Insecta (the Netherlands) and Bold Foods (Germany). A number of brands had also entered the market but not survived. The website Bug Burger listed over 90 “insect startups that disappeared” from around the globe; these included Canadian companies Coast Protein, which made cricket energy bars, and C-fu Foods, which created Bolognese pasta sauce with textured protein made from crickets.11 The future of brands like Chapul was unclear. Ashour and Mott had seen numerous competitors come in, make a splash, gain investors, and fizzle out, and they were determined to achieve wider distribution with their eyes open.

CONSUMERS

Attitudes, Motivations, and Behaviours

Consumer attitudes and preferences in the insect market were tricky to assess, as Ashour pointed out:

The challenge is, our industry, first of all, consists of a lot of first time entrepreneurs: not just food entrepreneurs, but just entrepreneurs, period. You’re talking about people who are learning and having to come up with a food product and how to incorporate the new, novel ingredient into a new food product and then how to market that new food product with the novel ingredient to a new market. That’s a lot of layers of challenges to ask of any seasoned entrepreneur, much less of a first-time entrepreneur. So, there were clear gaps. There was an experience gap and a product-development gap as well as the consumer-product-market-fit gap that we saw. For example, you have companies that are making chips using cricket protein. Is there a lot of data indicating that chips are a robust protein delivery system? Because if people aren’t buying into this concept, how can we really conclude that they are not interested in crickets? Maybe they just don’t want chips, and it is the fact that you are using protein in chips that is the wrong decision, not the crickets themselves.

Research on motivations and attitudes revealed that 67 per cent of consumers in the United States were driven by flavour when choosing their snacks, followed by 33 per cent who were driven by the lowest price, 30 per cent who were driven by calories, 27 per cent by brand, 27 per cent by natural ingredients, and 26 per cent by protein content. A total of 66 per cent of consumers wished for more healthy snack options, and 52 per cent also believed taste was more important than health when eating snacks.12

Consumer Segments

Research showed that the snack bar market within the United States continued to be strong, with more than two-thirds of adults reporting that they ate bars. The most popular type of bars was snack bars, which had a 48 per cent penetration, followed by nutrition bars (40 per cent) and performance bars (11 per cent). The majority of bar eaters were under the age of 45, and both men and women equally likely to eat bars.13 However, men made up a significantly larger share of performance bar eaters. In considering which segments the company should go after, Ashour noted that the current Exo target was the sports individual who valued performance and nutrition, above all else. He added, “This is the endurance, CrossFit, weight- lifting, weekend warrior crowd. They are willing to pay a significant premium to get an edge in their competition or in their lifestyle. There isn’t an X-factor for this group because fundamentally they are functional eaters. They’re not gourmet eaters.”

11 “Insect Startups that Disappeared,” Bug Burger, accessed July 7, 2020, www.bugburger.se/foretag/the-eating-insects- startups-here-is-the-list-of-entopreneurs-around-the-world/#gone. 12 Mintel Group Ltd., US Snacking Motivations and Attitudes, Market report, Mintel, January 2019, accessed July 7, 2020. 13 Mintel Group Ltd., Snack, Nutrition and Performance Bars—US, op. cit.

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Aspire estimated that the sports performance crowd represented 4 per cent of the market and consumed about five bars each per week, while weekend warriors, who comprised about 3 per cent of the total adult US population of 254 million people, were each eating one to two bars during weekend activities.14 About one in 20 within this segment and the sports-performance segment could be persuaded to buy Exo bars on a regular basis.

A second target segment was made up of eco-conscious consumers who were looking for a sustainably produced protein source. “You can call them ethical vegetarians. You can call them flexitarians,” said Ashour. “Basically, these are people who are trying to limit meat in their diets, and they are looking for creative, exciting food to replace …