Cranfield Inc Case Analysis

Cranfield, Inc. is a leading producer of fresh, frozen, and made-from-concentrate cranberry drinks. The firm was founded in 1949 by Charles Ahab, an Air Force veteran who returned to Nantucket and went into business after World War II. The Ahabs were long-time residents of Nantucket, and they owned several cranberry bogs. When Ahab returned to the island, the family business consisted primarily of harvesting and selling cranberries to wholesalers for distribution to grocery stores. The business and its cash flows were necessarily seasonal. Based on his conviction that there was a growing market for cranberry juices and cocktails, Ahab decided to expand the scope of the business. Accordingly, he joined several other growers to form Cranfield, Inc., which processes its own juices. The company purchases concentrates of apple, orange, cherry, and raspberry juices, and it markets a whole range of cranberry cocktails. With its skilled marketing and strong emphasis on product quality, the company has prospered. Today its brands are sold throughout the United States, with cranapple cocktail being its most successful product.

Cranfield’s management is currently evaluating a new product, lite cranapple cocktail. A test marketing program carried out in 1995 at a cost of $150,000 showed enthusiastic acceptance for the product, which would cost more than regular cranapple but offer 30 percent fewer calories. Maria Lopez and Robert Walker, recent business school graduates now working at the firm as financial analysts, must analyze this project and then present their findings to the company’s executive committee. Assume that you work for a consulting company that Cranfield uses to help with decisions such as this, and you have been assigned to work with Maria and Robert on the analysis.

Production facilities for the lite cranberry product would be set up in an unused section of Cranfield’s main plant. Relatively inexpensive used machinery with an estimated cost of only $400,000...