Question

What’s for dinner? Sprig would like to play a part in a health-conscious customer’s answer to that question. Sprig is an on-demand delivery restaurant that offers balanced meals which are fully prepared and delivered in 15 to 20 minutes. The company focuses on using the freshest ingredients to create innovatively delicious food that supports a healthy lifestyle. Its target market includes those who have busy schedules and desire meals that include servings of fruits, vegetables, proteins, and other nutrients. Sprig’s website claims, “We use the best ingredients to create dishes that are high on flavor and low on butter, oils, and sugar.” Customers have a choice of ordering meals via the Internet or by an app.

CEO Gagan Biyani realized as he worked at ride-sharing company Lyft that when he ordered on-demand meal delivery he was relying way too much on unhealthy options like pizza. So in 2013 he created a company that gives the health-conscious consumer better choices without compromising speed or convenience. Jessica Entzel, executive R&D chef and Biyani’s first employee, manages Sprig’s menu development. She teams with Nate Keller, a former executive chef for Google, who develops relationships with local farmers and manages the company’s sustainability efforts. Keller has a great deal of freedom and a large budget to experiment with recipes and then test them with a host of eager tasters. Sample menu selections include grilled jerk chicken with habanero slaw, beef keema with roasted red potatoes and cabbage, and truffled mac and cheese with cauliflower béchamel.

Sprig uses data continuously collected from customers to refine the menu and ensure consistent delivery of desirable, innovative meals that offer high value. Entzel studies customer feedback on each item to see if it meets and exceeds customer expectations. When the ratings are not as expected, she digs deeper into the responses to discover ways to fix the problem before including that item on the menu again. She also makes sure the presentation of the meal is first-rate, a difficult task to accomplish consistently in on-demand delivery. Hence, the meal development process takes into account how to transport the food without it arriving to the customer as an unattractive mess.

The on-demand delivery segment of the restaurant industry is developing and attracting attention from many new players. Munchery delivers fresh-food entrees, sides, desserts, drinks, and kids’ meals in San Francisco, New York, Los Angeles, and Seattle. It offers ready-to-cook meals that are delivered with directions on how to successfully complete the dish. Postmates operates a network of local couriers to deliver meals through a service called Pop that promises food delivery in 15 minutes or less. Pop is fast because it eliminates the pickup leg. Rather than spending time traveling to a specific merchant location or waiting for the food to be prepared, Postmates drivers who participate in Pop carry an inventory of freshly made items ready to drop off immediately. Even Uber is in the market with UberEats, its own on-demand meal delivery service that uses existing Uber technology and customer relationships for competitive advantage.

So what’s next for Sprig? Are they on the right track targeting only the smaller health-conscious segment of on-demand delivery? Biyani expects the on-demand delivery market to experience shake-out among competitors similar to what was experienced by the search engine, social media, and other tech markets—that is, a shake-out of initial providers with only a few remaining competitors today. How does Sprig become one of those few that survives?

You Make the Call

1. 7-30. What is the decision facing Sprig?

2. 7-31. What factors are important in understanding this decision situation?

3. 7-32. What are the alternatives?

4. 7-33. What decision(s) do you recommend?

5. 7-34. What are some ways to implement your recommendation?

Answer 1

Ans 7-30

The decision of whether or not to expand beyond the smaller health conscious segment of on-demand delivery.

Ans 7-31

• Customer tastes and preferences (researching the popular items on demand, customer types, sales types etc.)
• The competitive landscape (research on the most effective business models for on-demand delivery)
• Costs of production
• Logistics infrastructure
• Overall Finances
• Potential growth in on-demand deliveries
• Politico-legal landscape
• Stakeholder interests

Ans 7-32

Sprig could consider-

• Growing within the existing segment (e.g. by finding more health conscious customers etc.)
• Experimenting with standard, popular recipes besides newer recipes
• Entering new markets (e.g. markets for scheduled and subscription deliveries)

Ans 7-33

The choice between expanding beyond the existing segment and growing within the "health-conscious" segment isn't easy. While the latter option will sustain Sprig's uniqueness of being a health-conscious brand, its market size will remain small and restricted. Thus, if Sprig's concerned about the "shake-out" - it should ideally diversify its product. The higher its market share (consumer base) - the better will be its chances of survival.