STRATEGY/MARKETING CONSULTING SKILLS

389803063.doc

MEMORANDUM

To:   BioCo CV Nutraceuticals Team

From:   Your Engagement Director at Max Impact

Subject: CV Nutraceuticals Engagement Background

Date: April 10, 1997

Welcome to the BioCo client service team!

This memo provides some background on the client, our past work with them, and the CV 
Nutraceuticals engagement that you will be working on.  Note that BioCo expects a final strategy
presentation from us in 14 weeks – in time for a presentation that the Nutraceuticals Division
leadership needs to make to the BioCo CEO on their division’s strategy.

I am excited about launching this study and look forward to working with each of you!  

Client

BioCo is a Fortune 500 company that is a powerhouse in developing and commercializing

biotechnology in the agricultural and pharmaceuticals markets. It has recently formulated a
long-term vision to become a broader “life sciences” company addressing a range of human
health and nutrition needs, and is exploring different directions for growth consistent with this
vision.

Nutraceuticals opportunity

One high-potential growth opportunity that has been identified through recent work with Max
Impact is the emerging nutraceuticals market. Nutraceuticals are foods that have been enhanced
with nutrients that have specific health benefits – for instance, to reduce the risk of osteoporosis.

Nutraceuticals are viewed as a high potential growth opportunity for BioCo for several reasons:

 Market potential: The aging of the baby boom generation and other demographic trends in
the US and other developed countries are fueling a rapid growth in certain health problems
such as obesity, diabetes, high cholesterol and osteoporosis. And consumers are increasingly
showing interest in nutritional approaches to health, from both a curative and preventative
standpoint.

© Hitendra Wadhwa, Columbia Business School, 2004
STRATEGY/MARKETING CONSULTING SKILLS
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 Scientific advances: Recent scientific advances had enhanced the prospects for nutritional
approaches to disease management – i.e., for nutraceuticals. There is growing evidence,
backed by drug-like clinical trials, of the positive effect of specific nutrients in mitigating
certain diseases. Progress has also been made by food scientists in enabling the delivery of
these nutrients via traditional food products without substantial compromise in taste or
convenience.

 Regulatory developments: Recent government actions suggest an open ness on the part of
regulators for manufacturers to make health claims on food products that are adequately
supported by medical evidence. A recent Act passed by Congress (DSHEA) has allowed
manufacturers to make health claims on dietary supplements without FDA approval – though
food products still require FDA approval. Sales of dietary supplements have exploded, with
a proliferation of new products that lay claims to a host of health benefits, such as cholesterol
reduction, mental acuity and anti-aging. The FDA has also recently allowed Quaker Oats to
make a specific claim about the effect of their product on reducing cholesterol, based on
results from scientific studies, and this is reported to have had significant sales impact for
Quaker.

 Fit with BioCo: BioCo’s management expects the company to be well-positioned to bring
innovative nutraceuticals to the market by pooling its know-how in the areas of food science,
disease/health management and the FDA drug approval process. In contrast to the
lightweight research and limited support from health experts behind most dietary
supplements, BioCo expects to conduct rigorous research and back its nutraceutical offerings
with stronger evidence, claims and expert support.

With a view to developing and executing a nutraceuticals growth strategy, BioCo has recently set
up a separate Nutraceuticals Division within its organization. The division is jointly led by two
BioCo executives, one with a general management background and the other with a biotech
background. The executives report directly to the CEO of BioCo.

Cardiovascular (CV) nutraceuticals focus

Earlier this year (1997), the executives launched a study with Max Impact to identify a suitable
portfolio of nutraceutical areas for BioCo to invest in. A team of consultants from Max Impact
has been on the ground investigating a number of areas, and they have shortlisted a few for R&D
investment and potential commercialization. One such area is cardiovascular health (CV). The
team is interested in this area because of two factors:

 Market potential: CV disease is a major cause of death in the US, and consumers have
become increasingly sensitized over the last decade to the need for managing their “bad”
cholesterol level.

 Advanced state of R&D: BioCo’s research team had identified certain nutritional
compounds that they expect to be effective at cholesterol-reduction and these have shown
success in preliminary trials. With additional work, these could be developed into
ingredients that can be added to different types of foods such as shakes, bars or ultimately

© Hitendra Wadhwa, Columbia Business School, 2004
STRATEGY/MARKETING CONSULTING SKILLS
389803063.doc
fortified foods (e.g., cereals and yogurt). While more research is needed to validate and
quantify their efficacy, BioCo’s research team is optimistic about the outcome of this work
and feel they had an edge in the marketplace with their unique know-how.

Not surprisingly, BioCo is not the only company who is seeing an opportunity in nutraceuticals,
and in CV health in particular. Kellogg has recently announced a $50 million investment in a
new “Functional Foods” unit. Campbell Soup has been test marketing a line of food products
called “Intelligent Quisine”, targeted toward diabetics. Rasio, a company in Finland, has
introduced a margarine with a nutritional compound called Benecol for reducing cholesterol.
Benecol had become very successful in a very short span of time among Finnish consumers.

While the Nutraceuticals Division executives are intrigued about the CV-nutraceuticals
opportunity, they want to more rigorously assess the attractiveness of this market for BioCo
before moving forward. Could a CV nutraceuticals program create substantial value for BioCo
in the long term? If so, what kinds of CV nutraceuticals would they introduce? How would
these products be marketed?

So BioCo has retained Max Impact to develop a strategy for a cardiovascular (CV) nutraceuticals
product. Max Impact has been asked to deploy a team for 14 weeks to focus on these questions. 

© Hitendra Wadhwa, Columbia Business School, 2004