Guide 1: The Ultimate Food Money Machine
The Food Money Machine
For example, while most food entrepreneurs are aware of these key issues, many tackle them in the wrong order. Often, they will focus on product development ahead of gaining a thorough understanding of the target consumers, determining the right food product promise, and selecting an effective food distribution channel. They make these mistakes and wonder why their food company isn’t growing. Again, the details matter.
In this recipe book for success, I’ll provide an overview of the key concepts based on my experience.
The Target Customer
The foundation of a Food Money Machine is a target consumer who:
1. Has a problem.
2. Is aware of this problem.
3. Has the ability and desire to pay to solve this problem.
If they have the problem and don’t recognize it, there is no sale. You can’t sell artisan grass-fed beef to consumers on a vegan food regimen. You can participate in multiple market size exercises to determine the size of consumer markets for almost any problem today, and you can extrapolate with market forecasting models to predict how many consumers will likely have the problem in the future. These are actions you should be taking, but for our Food Money Machine, you have to remember this: no problem, no sale.
The second hurdle is your target consumer’s level of awareness about his or her problem. Consumers don’t spend money solving a problem they don’t even realize they have. Natural Products Expo happens each year on both coasts, and every state between them is littered with food companies that crashed and burned trying to solve a problem that their target customer didn’t realize they had.
It’s twenty times easier to solve a problem people already know they have than to solve a problem they don’t realize they have. The reason is financial. If your consumers aren’t already aware of their problem, you have to invest your marketing resources to teach them about the problem, which leaves you no resources for convincing the shopper to buy from your company.
The third hurdle is finding out if the consumer cares enough about the problem to pay to solve it. If the shopper doesn’t care, they won’t buy. You can try to make them care, but if, at some fundamental level, they just don’t—there’s nothing you can do about it. Go find another consumer segment to target or a different problem to solve.
You’d be surprised how many startup food companies, and product launches of larger companies, fail to overcome this basic hurdle. They decide to try to brilliantly solve a problem the customer ought to care about—without appreciating the fact that, just because a consumer should care, doesn’t mean they actually do. Again, details matter.
Along these same lines, you must consider if the market dynamics will allow you to introduce your product to the category, solve the problem and make a profit. Is there space in the market and can you economically succeed serving the consumer in your chosen category?
Consumers have to pay to play. If they aren’t willing to pay money for your food or beverage item, then you’re out of luck and will not experience growth.
The Promise: Is it Credible, Compelling and Unique?
The second component of a Food Money Machine is the promise you make to consumers to get them to buy. This component is frequently overlooked, or its importance grossly under-estimated. The way to get a shopper to buy is to offer a promise that is different (or at least different enough) from the competition, and one that provides a genuinely compelling benefit. In addition, this promise must be credible.
The promise is what gets the consumer to buy. Most people (especially chefs) find this idea troublesome and are conflicted by it. Don’t consumers buy because of the flavor and product nutritionals? At the end of the day, a consumer doesn’t really want nor need a particular food product; they only buy based on the promise of how they’ll benefit from the food product.
For example, nobody buys a dozen eggs because they want eggs—they want a satisfying breakfast or a delicious cake to share with friends and family.
The Mom who invests in the nutrient-rich formula for her baby is not buying the formula because she likes it; she’s buying it because she needs to know her baby is receiving the best nutrition possible and promotes great health. The truth is she won’t know if the product is really a better purchase. So, she buys on the promise of a perceived health and nutrition benefit for her baby.
This quote sums up the point: “The role of the promise is to get customers to buy. The role of the product is to keep the customer satisfied after the sale and to keep you from being called a liar.”
This is the underlying reason why an inferior tasting product will often outsell a superior one (much to the frustration of the food makers who created the better tasting item). Consumers often don’t know the difference between two products unless they buy and use both. Since most consumers only buy one product, they never experience for themselves which one is better. Instead, they simply choose whichever company offers a better price, familiar brand, or a more credible promise.
If You Don't Reach Customers, Everything Else Is Irrelevant
Once you have a target consumer in mind and have found a promise that works, you’re ready for the next step in creating a Food Money Maker. You need to find or create one or more distribution channels that you can use to reach your target shopper.
How you intend to distribute your food product needs to be determined (or at least considered) prior to product development. You will likely need to modify your product to make it more compatible with your chosen distribution channel (i.e., club stores, convenience stores, restaurants, retail stores, stadiums, online channels, direct, and natural channel).
Here is a simple example: Your initial food product along with production and the various flavor variations and recipes can be packaged for a variety of channels and retail environments. If the product will be sold in club stores, we know the buyers will demand special packaging and a display pallet that markets your brand. In convenience stores, the product will be single portion and for immediate consumption. Does the consumer prefer shelf-stable or a refrigerated, fresh option?
Another example comes from an incredibly talented chef, holder of a Grand Diplôme® from Le Cordon Bleu in Paris, France with homes in New York City and Beverly Hills. It wasn’t until I recognized we needed to change the name from Charlie’s Fine Foods (Long story, but Charlie was not his name) to a more brand congruent message that we gained national television exposure and he commercially published a recipe book with Penguin Random House bearing the new name.
In short, they built their product before they figured out their distribution channels and the consumer. They ended up building a very useful product that they could not deliver to their target customer.
In the end, too many food companies crash and burn, in spite of having a better product. They design food products that aren’t compatible with the distribution channels they attempt to use. As a rule of thumb, you can’t just build an easy-to-use, great tasting product. You must also deliberately make your food product so that it will be easy to sell through the distribution channels you select. It’s a small, but vital, detail.
The Food Product
Now it’s time to create a food product or beverage. Once a customer buys on the promise of a major benefit, it’s the role of the product to deliver on that promise and to create a happy customer.
In the Food Money Machine process, the product development step occurs late in the process for a deliberate reason. The product must be designed to meet the promises made to consumers that generate revenues and to be compatible with the distribution channel needed to reach the shopper.
If you start the product development process too early, you don’t yet know which promises consumers are willing to pay for and which distribution channel factors you need to consider.
This is a significant departure from how product development is approached in many food startup companies. In these companies, you’ll hear a lot about features, ingredients, and specifications. In most cases, these requirements have to do with how the product will be used by the consumer. My argument is that development efforts should include meeting the requirements of the selling channel and not just the product usage process.
Sustainable Competitive Advantage
Creating food revenue growth doesn’t mean you will sustain that growth. Generating extreme revenue growth has a habit of getting the attention of prospective competitors, and it encourages them to come and compete with you as evidenced in Spins or IRI scan data.
The lifespan of a Food Money Maker depends entirely on what competitive advantages your company possesses and uses in conjunction with that particular growth engine. A competitive advantage is a physical or intangible asset that gives you an advantage over the competition.
A physical asset might be having the largest sales force, direct-to-store distribution network, or in-market warehouse network in your segment. Intangible assets are things like a rare food patent, brand reputation, or an exclusive partnership with a much larger CPG company.
The more difficult an advantage is for a category competitor to duplicate, the more sustainable the advantage. By deliberately linking a growth engine to one or more competitive advantages, you’ll be able to sustain revenues from that engine for a longer period of time and is not easy in the food space.
Creating a New Growth Engine with Minimal Effort
When you put these five ingredients together in a food business—a target consumer, a company promise, distribution channel, a product, and a sustainable competitive advantage—you have a Food Money Maker. Too many food leaders in the product-centric food world tend to equate food revenue growth opportunities with a product development project. The only problem with that approach is that it leaves so much money on the table. Often, it’s much easier to make simple adjustments—to your target consumer, to your promise, or to your distribution channel—than it is to change your one item with your food product.
Here's an example of what I'm talking about in building a Food Money Maker but not focusing exclusively on developing a new food product. Jell-O has been around for more than 100 years and you can find in most stores that sell food. Founded in the 1800’s, the product is little changed from its origin and few new flavors have been added over the years.
Lime Jell-O is considered the best-selling flavor and can be found on the shelves of Dollar General and grocery stores for under a $1 for the ubiquitous 3 ounce box. Kraft Heinz Company changed the container size and label to create an entirely new product – Jell-O Unicorn Slime in a 14.8 ounce resealable container and retails for $5.49 per unit.
Maker, Kraft Heinz Company, has applied some creativity and with a simple change to promise and label, moved the product from food into the toy and gift channel! The sales have been dramatic for this edible gelatin mix that is primarily a new colorful label and in a round container while raising the retail by almost 500%!
Distribution isn’t a key concern because Jell-O knew they could leverage their existing supermarket relationships to get a “slime toy” offering on the shelves, giving them a competitive advantage.
In manufacturing, they use the same lines that make the Jell-O product. The only difference is in the very last step of the manufacturing process. They simply change the container and label on the product to one that now feature the new Unicorn and ship in the new master case.
One more example, a consumer packaged goods example to again illustrate this point. Several years ago, heart disease researchers discovered that taking a baby aspirin every day could significantly reduce chances of a heart attack (this is, of course, not providing you medical advice.)
Armed with this knowledge, Bayer decided to create a growth engine to capitalize on this opportunity. They decided to target consumers concerned about their heart attack risk. This wasn’t the same audience as those concerned about getting rid of headaches, aches, or pains. So, the first step taken in creating this new growth engine involved targeting a different type of consumer.
They simply had to make a new type of promise in their advertising and on their product label. They promised that taking a low-dose aspirin every day could reduce the risk of a heart attack backed by the research.
Next, they introduced a low-dosage aspirin they described as the “exact same dosage” used in the clinical research that demonstrated that a small dose of aspirin every day reduced the chance of heart attacks. In reality, all they did was take the baby aspirin product and change the label to support this new promise. No new production changes, no product research or manufacturer development work was required.
Even though the original research on using aspirin to prevent heart attacks was first published in 1989, the product is still on the shelves of my local supermarket and drugstores nationwide resulting in millions of dollars in sales. That’s pretty impressive revenues from just changing a label, isn’t it?
These examples illustrates that by simply tweaking the recipe of one or more of the five Food Money Machine ingredients, you can create a new growth engine for your company.
© FOOD MONEY MACHINE 2021