May, 2000

From the Editor

Extending Markets

For both buyers and sellers, it is heavy exhibition season for the deli industry. We just finished up the North East Fresh Food Alliance show in Boston. Then there’s the Food Marketing Institute and National Restaurant Association shows in May, and the International Dairy Deli Bakery Association has its event in June. After a slight lull in the summer we pick up with the Eastern Perishable Products Association show in the fall.

All these shows and many more are venues that aggressive deli marketers use as opportunities to push their products…and that buyers use to seek out innovative products.

Many companies on both sides of the buy exhibit a weakness in that they focus hard on a primary market for a product and neglect secondary uses. This is often a mistake. The business world today requires more creative and flexible approaches to marketing.

Some of this is obvious in looking at the channel-of-sale question. Once upon a time the market may have simply been other supermarkets, and the competitive threat to any supermarket operator was what new supermarket is opening that would steal business. Today, the competition is much tougher.

It’s not so much that a supermarket is likely to be thrown out of business by a new competitor. It is more that the market for food is fragmenting. So the new warehouse club skims off a few percentage points; the new supercenter a few points more; a more upscale convenience store is now inching at the lunchtime sandwich business; the fast food drive-through has a new line of wraps; the local fine dining establishment is trying to do a better job on takeout, and that new delivery service has affiliated with twelve local restaurants. Oh, and by the way the local government office building that drives a lot of lunch trade just did a major renovation of its cafeterias, hired a new company to operate it and is now emphasizing more upscale, fresh foods – at a subsidized price.

These are all headaches for a supermarket chain, a thousand small threats, none capable of delivering a knockout blow but all capable of snatching market share.

Understanding how a product is used is the start of an effective marketing effort. This is why retailers need consumer understanding and why manufacturers need to understand the various venues that sell their products.

Most commodity-type items do double duty, serving both as a food to be bought directly by a consumer – say a chicken breast – and as an ingredient in a prepared offering – say a baked, stuffed chicken breast. Sliced meats and cheese can be sold to stores for resale to consumers by the pound, or the same items can be used as an ingredient in cooking a finished dish for resale, say a chicken breast with ham and cheese. So if volume is to be increased most effectively, the same item needs multiple marketing programs by both the supplier and retailer.

Some suppliers, seeking a premium for their brand have ignored foodservice uses, thinking that foodservice is only interested in a cheap price. Though that can be true, it also is true that the willingness of foodservice to pay a premium for one’s product is a kind of test of the value one’s brand and organization adds to the picture.

Maybe the value is the consumer desire and respect for the brand: That’s why deli cases often will proclaim the mayonnaise-based salads to be made with Hellmann’s or another respected brand. It is also why the most simple hot dog shack may trumpet its offering of Hebrew National franks.

Sometimes the value may come from added services that a supplier provides – training, recipe and product development, just-in-time inventory. Rather than curse the foodservice industry for not wanting to pay a premium for one’s product, each supplier needs to analyze if it can’t do something to increase the value perception of its offerings.

Of course the multiple uses of product are often subtle – sell by the pound and a retailer is selling a commodity product to consumers; offer a sandwich program and the same retailer creates a value-added program.

For smart marketers on both retail and supplier levels, it is this focus on value-added that merits attention. Calavo, the big marketer of avocados and related products used to run ads in foodservice publications that would be a picture of a forlorn-looking chicken breast on a bun and underneath it would be a line that said something like “Chicken Sandwich, $1.99.” On the right hand page would be the same chicken on the same bun, with a smear of guacamole and a little garnish, and the ad would say “Chicken Sandwich Mexicana, $3.49.”

In adding value, two plus two really can equal five. Increasing industry sales and profitability depends upon creating consumer demand. That means suppliers must work closely with retailers to identify opportunities to use products in innovative ways and to promote these innovative products to consumers. That will take new thinking, a process much harder than just making the trade show rounds.  DB