Guide 2: Consumers Define Innovation
The Food Money Machine is the foundation of all food growth. A revenue growth engine is a specific market opportunity combined with your company’s innovative approach to capturing it.
The consumer is always left out of building new food products. Many food companies rely upon technology, ingredients, and packaging to highlight and drive innovation resulting in failure after failure. The University of Toronto highlights this fact in the failure rate of 80% of new food products introduced into the market.
The Food Money Machine Consists of Five Key Components:
The first step in creating a Food Money Machine seems simple. Start with the person who has the money: the shopper. Figure out what the consumer wants, but is not getting elsewhere, and give it to him or her. A slightly better tasting product will not carry the day for building a new food business or drive extreme food revenue growth.
However, just because something is simple does not always mean it is easy to do. The failure rates drive this home. In this article, we examine the common problems related to identifying and knowing your target food shopper and will use real-world food examples to learn how to tackle these challenges.
All of the problems listed in the troubleshooting section of this article result in a common, highly visible symptom: No revenue growth.
While the lack of revenue growth is a single, visible symptom, it has dozens of potential causes.
A small sample of the most common problems, and their solutions, are listed on this page.
#1: Consumer Target Failure
You’re Guessing (Incorrectly) About What the Target Consumer Wants
A common problem that occurs in most startup food companies, and in new divisions of larger food companies, is that the company does not have a clear understanding of the target consumer. I have a simple acid test that I use to determine how well an organization knows their target shopper: I ask them to show me a listing of consumers that have purchased or trialed the product and their responses or feedback.
You’d be surprised how often I am unable to get any consumer feedback reference the new food product. I use this test because the attempt to create a new revenue growth engine is often based on incorrect information. If you don’t have accurate information about what you’re aiming for, you can’t possibly hit the target. The bigger the company, the bigger the mistaken features of innovation. Here’s the key to getting accurate information about target consumers: Talk to them and the more the better.
One of the reasons I enjoy working with small food entrepreneurs is I get to interview and ask them how they came about starting their business and marketing their best products. The responses instantly scream to me the winners from the losers. I’m searching for those products and leaders that have market success regardless of the size or scale. If they have one successful location of shoppers we often can land 1,000’s more.
One of my retail clients, a top 10 global retailer, struggled repeatedly with a new product category in dairy. They had been introducing a niche product with a significant lack of success and downright product failure. It was expected the product would be a big hit with shoppers.
At my urging, they accepted a less technically different product but one that more precisely mirrored what shoppers were looking for in the category. The buyer listened to what shoppers were buying in other categories and adjusted their innovation to consumer tastes and expectation. Sales were explosive! The product went on to more than $100 million in sales. The change was minor and actually was only 1% different in product formulation from the earlier version.
While the company had achieved some revenues, it had not maximized its revenue potential. It pays better to know what your target consumers want than to guess.
#2: Consumer Target Failure
Target Shoppers Don’t Want to Buy What You Want to Sell
Another very common problem is that the target shopper doesn’t want to buy what you want to sell. Ironically, this really isn’t a target shopper problem—it’s your company’s problem.
At the end of the day, you can’t make your consumers want something they fundamentally do not want or need. When there is an underlying desire, you can use sales and marketing to sharpen demand and increase the customer’s sense of urgency for solving their problems. But, no matter how savvy you are, you cannot make customers want something they just don’t care about.
There’s a saying: “A great salesperson can sell ice to Eskimos.” I may slip and call it idiotic marketing, but it’s actually just the facts. A great marketer or food marketing entrepreneur realizes it’s much smarter to sell hot soup or coffee to Eskimos than ice.
Ask yourself if you currently have food growth engines in your portfolio that are metaphorically attempting to sell ice to Eskimos. Remember, food companies exist to supply products and services that consumers demand. Unfortunately, it does not work so well when you try to supply food products you hope customers will demand.
#3: Consumer Target Failure
Target Consumer Has a Problem, but Not a Severe Problem
Sometimes a target consumer has the problem you thought they did, but the problem is not severe; the target customer has no sense of urgency with regards to solving the problem.
This is a tougher case because you have to make an assessment as to whether the urgency is likely to increase (e.g. future demand for vegan ice cream) or if the problem is fundamentally not that important to the shopper.
If the customer’s problem will forever be modest in nature, this caps the revenue potential of the food growth engine you’re considering. What you decide to do next is somewhat dependent on the other growth engines you have in your portfolio, their maturity level, and the resources required by each one. Generally speaking, I would suggest that you start looking for alternative growth opportunities.
#4: Consumer Target Failure
Failing to Recognize that Adjacent Shopper Segments Are Growing Faster than the One You’re Currently Targeting
Most food categories are fairly dynamic and continually evolving, and it’s often difficult to spot the completely hidden growth opportunity. You must not only see it before anyone else does, but you must also capture it ahead of the market. People do it, but it’s tough. (Fortunately, my clients are often champions in this regard.)
Equally important, but much easier, is recognizing when a competitor has successfully tapped into a new consumer segment adjacent to the one you’re targeting.
An example of this comes from the apple sauce category. Manufacturers did not recognize the early trend of portable foods. They could not see Moms were spending more time commuting with kids and eating in the car. GoGo Squeeze recognized the trend and built a portable apple sauce solution that sells over half a billion pouches each year.
Over a decade ago, in the yogurt category, competitors failed to recognize how Chobani had built an entire segment disrupting business with their Greek yogurt offering. It was a fast-growing segment missed by the other makers—until many years later and Chobani was a billion dollar player.
Here’s the lesson: You must pay attention to your competitor’s growth engines—particularly the ones that work—as a way to identify potential growth opportunities for your company.
#5: Consumer Target Failure
Not Recognizing that Your Existing Shoppers May Be Different from the Newer Shoppers You Want to Target
For companies that have been around for years, you’ll often find that buyers of legacy branded food products aren’t always the same buyers of future products. It’s important to keep the two distinct, particularly if your company has gone through some major product evolutions. If you look at the market results, it’s not happening.
An example of this is realizing that your legacy branded ketchup buyers may not be the same buyers for your natural hummus dip. Or, a more recent version of this is recognizing that your Oreo and Tang buyers might not be the buyers of plant-based all-natural protein bars.
Here’s the general rule: Yesterday’s target consumer may not be tomorrow’s target consumer.
All target consumer problems discussed in this article result from not knowing your consumer well enough or not realizing that a new type of shopper is emerging. At the end of the day, the consumer is the foundation of all successful food businesses, so you need to think about them early and often.