Magic Spoon Cereal

Cereal sales have surged in recent months as people continue to seek comfort food a trend started during the Covid-19 pandemic. There is a growing number of professional, financially stable, college educated, Gen X and Millennial consumers looking for food that offers comfort and nostalgia. Cereal is in that category, but many of the options out there aren’t very healthy making them unattractive to these health-conscious, active groups.
One company that has benefitted from the increased demand is Magic Spoon, a direct-to-consumer (DTC) startup that offers cereal that specializes in "high-protein, non-GMO, gluten-free, grain-free, soy- free, wheat-free, nothing artificial, childlike cereal for grown-ups".
Launched in early 2019 by Gabi Lewis and Greg Sewitz, Magic Spoon was inspired by the flavors and nostalgiaofSaturday-morning-cartooncerealbutupgradedfora21st-centuryconsumer. “Whenwe started, big food manufacturers told us that cereal was a bad idea. It’s a declining market and the retail aisles are controlled by huge brands, making it hard to get shelf space” says Lewis. In the first three years since it launched, Magic Spoon has built a strong brand with an engaged and loyal consumer base, reported to have reached one million customers.
The average American eats 100 bowls of cereal a year, and kids are one of the largest consumers. The global cereal market is valued between $35B-$40B and in the United States, 2021 revenue in the Breakfast Cereals segment totaled US$19.76B. The market is expected to grow annually with a compound annual growth rate (CAGR) of 2.33%. The market is currently dominated by General Mills (Cheerios), Kellogg (Frosted Flakes) and Post (Honey Bunches of Oats). In addition to the cereal market, Magic Spoon has additional growth opportunity as it is also a potential substitute for protein bars and supplements. The protein bar market is projected to reach USD $7.03 billion by 2027 with a CAGR of 5.6% whereas the Protein supplement market is expected to reach USD $26.05 billion by 2028 with a CAGR of 8.4%.
Available via the Magic Spoon Web site, the cereal is available in a 4-box pack or 6-box pack and retails at just under $10 USD a box and have a 4-box minimum order for $39.00 USD (4 x 7 oz boxes, $1.03/oz, direct). While this is pricier than their competitors, the company offers an innovative subscription service that features a discount, free shipping and 100% risk-free guarantee Competitors include the Forager Project who offer a 4-pack of their “Sweetly nostalgic, organic, gluten-free” cereal in for $29 (4 x
Questions:

1. Perform a CD-STEP (AKA: PEST(LE-C)) analysis for Magic Spoon. Include a minimum of 3 external factors that have affected Magic Spoon and their marketing decisions. Include at least five (5) relevant points from the case or current events. [8 Marks] *
2. Create a SWOT for Magic Spoon that includes at least two (2) points for each area. [8 Marks]*
3. Which of the following Targeting strategies has Magic Spoon used? Qualify your choice with two (2) well explained points. [4 Marks]
   a. Mass or Undifferentiated
   b. Differentiated
   c. Concentrated
   d. One-to-One or Micromarketing
4. Pricing is an important (if not the most important) part of the 4P elements and the most misunderstood in terms of execution. Magic Spoon Cereal is priced at a premium than its competitors due to the use of high-quality, Non-GMO ingredients. There are four different approaches to setting an approximate price level for a product. Identify the one selected for Magic Spoon when it launched. Briefly explain your choice using appropriate terminology and facts from the case. [3 Marks]
5. The DTC distribution model of Magic spoon has been a unique differentiator for the brand since its launch in 2019. Despite swimming against the current on traditional placement and availability strategies used by established brands in the category, what made it fly as a new entry into an otherwise declining and cluttered category? Use the elements of the 4P’s to differentiate it from competition (refer to the case text, it’s in there! and explain each using your own words. [8 Marks]
6. Assume that Magic Spoon is performing research to help them choose between two different flavors for a new cereal release. Describe how they might use Primary and Secondary Data in this process. Describe one (1) Qualitative and one (1) Quantitative method they could use to collect each type of data. [4 Marks]
7. Briefly explain how Magic Spoon’s Direct to Consumer sales model might positively or negatively affect their target market during the Purchase Decision stage of the buyer’s decision-making process. Answer with at least two (2) well explained points. [4 Marks] *
8. Describe the Target Market for Magic Spoon cereal. Include a minimum of one (1) point for each of the four (4) segmentation criteria. Make sure you have 6 points in total. [6 Marks]*
9. Describe 2 (two) features of the Magic Spoon product and connect their advantages and benefits to needs or wants of the Target Market you described above. [4 Marks]
10. You learned about different marketing reasons for new product failure. Identify three (3) reasons that Magic Spoon could have encountered and briefly explain how it could have affected their success. [6 Marks]