IdeaXchange
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Is the expectation of scale holding you back?

The consumer success model is shifting from products designed to win long-term to a portfolio designed to shift faster and more frequently. Can the food industry adapt?

The food world is being disrupted. Consumer wants and needs are shifting. New products, superfoods, "it" ingredients and brands come and go. But chasing health and wellness trends, and trying to discern what will last and will pass, is very possibly the wrong approach in today’s fast-moving and highly fragmented food market. 

Many large CPGs exclaim that chasing health and wellness trends is risky and exhausting. Companies have been burned trying. Sometimes a bet is placed too early, and a great idea fails to scale to huge national sales volumes. Other times a bet isn’t placed and you find yourself behind, trying to play catch up.

What makes this so challenging isn’t the rapidly changing nature of consumer attention, experimentation and desire (change and shifting markets is natural, after all). Rather, it is the expectation that every product, every line, every SKU you launch needs to reach national scale and become a long-term contributor to your portfolio. We would argue that what holds us back—what causes fear and stifles creativity—is the expectation of scale.

What holds us back are the elements of our business models which require scale—our sourcing agreements; our large-scale, inflexible manufacturing processes; and our distribution systems. What holds us back are our annual planning processes; our slow and inflexible category review process; and our inflexible retail shelf-sets.

What holds us back is our business model which demands scale and stability in an unstable world.

Where can the food industry learn what it takes to be successful in a fast, ever-changing and fragmented world? Where has this already been figured out? Fashion.

Every day, a new story appears about the winners and losers—the winners being H&M, Zara and Uniqlo, whose business models include a rapidly changing assortment of on-trend items and appeal to short consumer attention spans and demand for variety, excitement and new experiences. The losers? Traditionalists like Banana Republic and Gap, which are facing a steep decline to irrelevance and eventual death. Gap has had seven straight quarters of declines and closed 65 stores in 2016. The stock price declined 16 percent in Q3 of 2016. The core issue, according to analysts, is that the once iconic brand is now "bland." The same shirts and jeans sit on the shelf for an entire season, when the consumer expects to see a constant stream of "new" and "variety," the core tenant of fast fashion.

What principles can the food industry take to heart as the success model shifts from creating products designed to win in the long-term versus a portfolio designed to shift faster and more frequently?

Fads and trends come and go, so don’t expect them to last. We have to accept that every fad or trend has a shorter shelf life than ever before. H&M switches out its entire inventory every two weeks, creating an engaged consumer looking for what’s new and interesting. Food manufacturers will need to shift the model and expectations for a product’s life cycle, and create the manufacturing, distribution systems and retail relationships to support an ever-changing assortment.

New choices are available to consumers on-demand through big and small channels. If she wants to find something new, she can.

The speed at which new food options are now available to consumers has exploded. What was interesting two months ago is now old news to the involved, cutting-edge and early adopting consumers, especially in the health and wellness space. There are more small, niche brands using social media as their e-commerce platforms than ever before. The interested consumer can now discover a whole world of options whenever and wherever. Exclusive new products and trends are co-created with the shopper’s influencers.

Retailers and brands are no longer in power. Today, the influential power for what’s purchased lies in the hands of powerful bloggers and vloggers leveraging Facebook and Instagram as their platform for sharing what they know, love and recommend. These influencers allow consumers to buy in to something larger than a brand—they allow consumers to be part of a lifestyle, a conversation, a community with a point of view through highly personal connections fostered by digital media. This point of view, combined with a food manufacturers’ ability to create and scale a brand, is where the potential for magic lies. Today, winning brands have a face, a name and a distinct point of view that consumers want to be part of.

A portfolio strategy honors the lasting classics while showcasing what’s new. 

H&M will always sell a well-made white shirt, black slacks and high-quality cotton t-shirts. Consumers can always rely on Zara for a navy blue suit. But these classics aren’t the end of the story. They anchor the brand’s home base and heritage to create consistent and reliable pieces that will last the test of time. These classics act as the brand’s core promise that never shifts and always delivers. You move away from the core, and the brand stands for nothing. But the core doesn’t get in the way of the fast-moving model. Fresh variety in addition to always-available classics creates a winning formula in both food and fashion. The implication for food manufacturers is to have a steady performer that remains as the classic core of the brand while shifting a hefty percentage of the portfolio to faster moving in and out items.

So, what if? What if the business of tomorrow is one that responds quickly and confidently to changing consumer needs? What if retailers could attract new customers and increase visits with changing shelf-sets designed to engage consumers through variety and novel new products?

What if the manufacturers of tomorrow had a stable of strong, classic products that allowed it to experiment in market with new ideas? What if food manufacturers invested in flexible manufacturing facilities, with smaller production runs allowing for small bets placed fast? What if food brands were better connected to highly influential social media faces and names to create new product experiences that get people excited, versus a national ad campaign?

In the future, the companies who take to heart the parallels between fashion and food will separate the modern-world winners from the traditionalists who risk falling behind or worse—consumer irrelevance. Winners will see trends coming and going as a benefit rather than a risk. Winners will have small batch, experimental product design and manufacturing capabilities ready for e-commerce, social commerce and regional distribution as a way of testing broader appeal. And ultimately, winners will attract raging fans who act as evangelists for the brand because as ever-changing assortment always means there’s something new to try.

What do you think? Can our food system evolve to see the ever-changing dynamics of fads, trends and consumer attention to be an asset?

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