Eighty percent of the carrots in the US are produced by Bolthouse and Grimmway Farms. It is a billion dollar business. Moving from one duopoly to another, the new CEO of Boltway, Jeff Dunn, is a former Coke executive. Life is sunny and profitable in a duopoly but every business has its cloudy days in the current recession. The declining sales of baby carrots are blocking out sunshine in the carrot duopoly.
“Baby” carrots are just adult carrots whittled down to baby size. A farmer can plant more seeds per acre and get more yield growing baby carrots. They also sell better so demand is higher. Baby carrots are the “cash cow” of carrots. It turns out they are a “normal good”: demand declines as income declines. Regular carrots on the other hand seem to be an “inferior good”: demand is stable or even increases during a recession. But they are less profitable.
How should the farms reshuffle sales back towards baby carrots? To a Coke executive the idea comes easily: market them like junk food and de-emphasize the health benefits. So,
Display ads, printed up for supermarkets, presented baby carrots as “the original orange doodle,” and billboards suggested never fear carrots and beer. Maybe most provocatively, Bolthouse installed baby-carrot vending machines, wrapped in eat ‘em like junk food graphics, at a pair of high schools.
For this and more read a great article in Fast Company.