Transcript of Food & Restaurant Marketing Podcast – Episode: How Long is the Long Tail in CPG Product Innovation
Daniel Santy: Good afternoon or morning depending on what time you’re listening to this.
Adam Pierno: We can’t control that, can we? We’re just happy people are listening. Thank you for that. This is a very interesting topic and it is– this is much more of a philosophical discussion I think, than some of our other topics and some of the research that we cover. It’s based on an experience that Dan had at the grocery store, and we’re really [laughs] focused on CPG but it goes into customer segmentation, it goes into understanding your audience, is really can apply to anything, but the focus is on CPGs, and what we want to know is, where is the limit to the proliferation of consumer packaged goods products? How would I say? How long is the long tail? Where does the money stop there?
Dan: Right before we got started, I was mentioning to Adam, I said, “I hear about new products all the time.” Obviously we all do and that’s why obviously we’re talking with proliferation of CPG, but you never hear about a product that dies very often, so–
Adam: Have to think pretty hard.
Dan: Yes. The grocery stores aren’t getting bigger, so as these new products come in, some prize have got to be exiting, but anyway just–
Adam: We are going to get into that in a minute, so don’t you dare jump ahead. This comes from a story that Dan had experienced, and when we think about these new products you know and there’s infinite new products every year, we go to shows and we see this product after product being rolled out. What’s very interesting is, each one isn’t just dreamt up as it wouldn’t be cool if I just made this. Each product comes out of someone’s imagination applying to an audience or trying to solve a need, a gap in the market. Well, there’s flour, but I’m going to find this organic flour and I’m going to make it with these ingredients instead of these ingredients because people have these allergies or because people have told me this one doesn’t bake as well or whatever. It all starts from a point of need or a space in the market that the inventor or creator of that product or at least that the person bringing into market, that feels it exists.
Dan: Yes there’s a there’s a recent example of that with sriracha, and now there is sriracha ketchup which I was very fascinated by. Because about two years ago, I was having breakfast with a friend and he got some ketchup but he got some sriracha and he mixed them together, and I’m not a big sriracha fan by itself. When I saw him do that, of course I tried it and I loved it because it made it more mild for my palate and now lo and behold to your point Adam, there is now sriracha ketchup I don’t have to [unintelligible 00:03:38] do that anymore.
Adam: Who is it with? Is it with Heinz or–
Dan: Oh. That’s a good question, I–
Adam: Those guys of sriracha are the masters of Licensing. Every concept that I can think of from a restaurant standpoint has at some point had a sriracha item on the menu for some LTO or some period of time though, they have just figured out how to milk every nickel out of that brand name. They’ve done a great job. They haven’t done too much expansion in the grocery space but that is a great example. We know what the US audience size for ketchup is, it’s essentially every single person in America, and now, how many people would like it spicy? Some percentage. The question is, that is created for a niche. Is every niche as viable as that one? That one I instantly go, “Oh man, home run.” Right? That’s going to sell.
Dan: Right. Yes.
Adam: I didn’t know it was on the shelves on the way home tonight, I’m stopping and getting some. That is amazing, but for the people that are delving into allergy related products, or other types of these products. Is every niche viable? We know the answer is, that they can’t all be.
Dan: Right. All right. It’s that whole hunting down and down and down to a point where there’s 12 people that might be interested in a product that well defined because of their diet, or because of their taste preferences, or what-have-you, so it is, it’s a philosophical question and we’re going to find out what the answer is here shortly.
Adam: Yes. So Dan, why don’t you tell them the story about your grocery experience [laughs], because I think understanding, hearing that story illuminates the challenge that we’re up against.
Dan: Now don’t judge [laughs], no don’t Judge. My experience with grocery stores I do the lap, what I call the lap. I’m on the outer edges of the store typically when I go to the store.
Adam: Healthy guy?
Dan: Yes. Going through the deli, getting the deli meat and going through the meat part, what is it called? The meat department [laughs] and then obviously produce, and so the other day Liza wanted to make– Liza is my beautiful bride, married five years tomorrow, Adam, just to mention that. Yes, yes.
Adam: I’m getting you.
Dan: Please do. Silver is the–
Adam: I’m done.
Daniel : That’s modern. If you want to go traditional as Wood. Anyway, I digress. I had to go pick up a number of items for a dish that she wanted us to make. We were going to make a sauce for this fish, and this one particular item I had pick up was honey, and I thought that’s a pretty conventional item, right?
Adam : Should be easy to find.
Daniel : Yes. I did the store the way I typically do and no one [unintelligible 00:06:28] to figure out I’m going to leave honey to the last shot and I made a guess on an aisle where I thought it would be and so I go down that aisle and I’m looking, and I’m looking, I can’t find anything so they are all, oh try another aisle. I finally broke down. Most men aren’t willing to do this and I went and I asked I said, “Hey, where’s the honey?” She said, “Well, it’s on aisle three.” Or whatever aisle it was, down on the right, and so I started–
Adam : You were so brave. I would have never– I would ha been in that store for three hours [laughs]. There is no way I would.
Daniel : [laughs] I know. Well, I didn’t want to go home to my beautiful bride empty handed [laughs]. That’s the other–
Adam : Yes. You are a shining example. That’s– you did it.
Daniel : [laughs] Just makes me less dumb. Anyway, I’m going down the aisle, I immediately start looking though at the beginning of the aisle as I entered it looking for the honey, and I’m thinking honey is probably at eye level or maybe slightly below. I walk up and down that aisle three times, I go down the aisle I go back up, And I think, “Okay, well, do it again come on, you’re having a scotoma look for the damn thing.” And slowing the halt I can’t find the damn– I see a garvey. I see some other substitutes for honey that a real popular now and so forth, but no honey, straight up honey. I get to the cashier and they ask the proverbial question, “Were you able to find everything?” Then I said, “No I wasn’t.” She goes, “What’s the matter?” I said, “I couldn’t find honey.” She goes–
Adam : GD honey?
Daniel : Yes. “She’s down on the right.” I said, “Yes, I was told that, but I never found it.” She goes, “Oh. It’s on the bottom shelf.” What the hell is honey– what’s happened is–
Adam : How many facings did you say was?
Daniel : There’s one. Yes one facing. Funny. That means that nobody’s buying honey anymore, that the agave has truly replaced it, but I think it was what– that story was the genesis of this podcast. Is the proliferation of products really necessary and pushing honey all the way down to the bottom shelf is that, make all the sense in the world.
Adam : Honey– Yes. The reason for this conversation we’re having now is, both of us agreed and we are a people of a certain generation, honey is a staple. That would be akin to not being able to find milk to me. It’s so simple.
Daniel : Peanut butter.
Adam : It’s something I’d buy less often, but I need to know that it’s there. It’s a staple of my universe that I just expect to be in the grocery store.
Daniel : Yes.
Adam : his brings us to a question talking about shelf space and if we go to fancy food shows as we are going to do in January, and there’s 500 new products rolling out, each one into the niche. Well, there’s only so much real estate at each of these grocery stores and there’s brands that makes sense to break in and earn a little bit of shelf space, or find an unique way to sell their product and get into a space that hasn’t kind of existed before, or they partner with somebody. For a product like honey to be pushed down– what that tells us is that a garvey must be out selling. With that high position, it must be out selling honey 45 to 1 and no one–
Daniel : Yes. Easily.
Adam : Because the dollar per square foot that those guys need to make to give up that primary real estate, know what’s the next product that will come in to replace it, the agave honey. Who’s going to [unintelligible 00:09:58] that product.
Daniel : Yes. Because
[00:10:00] [END OF AUDIO]
Daniel: Because you know it’s coming, you absolutely know it’s coming.
Adam: What was the grocery store, the Safeway?
Adam: When I think about agave honey, I don’t think of that as a mass seller, I’ve never bought it. Have you?
Daniel: I know we have agave in the cabinet, because I’ve seen it, so — I don’t know what the ACV is on agave. [laughs]
Adam: Or the usage or the sell-through. I wouldn’t think that it is a product that turns and that’s the question. When we say how long is the long tail here, how many variations? Now there’s agave but next year will there be organic agave, will there be some bespoke version that becomes even finer and a dollar more expensive and displaces of the original agave is now on the bottom shelf, next to that poor honey bear. How sad is going to get down there?
Daniel: Pretty sad, I think, pretty sad. I think that this leads us to that question about all these emerging brands. We’re asking the question, “Is the proliferation going to work?” I think it’ll work for those brands that make themselves truly relevant to the consumer today.
Daniel: That goes to that what you and I talked about a great deal and we’re talking to, when we are consulting with our clients and saying, “How well do you truly understand your customer?” What we talk about when we talk about that is, not is it adults 25 to 54 or the proverbial grocery store shopper, which is a woman 35-54, whatever the numbers are these days. You’ve got to be so much more precise today as an emerging brand, to all of you out there that are bringing product to market. Understanding your audience is so critical and making sure though you’re defining that audience geographically, demographically and then psychographically of course.
Adam: I think, not only understanding who your target is, as you’re going into negotiating, pitching to grocers or other retailers, and try to get your product in there, really understanding how does this niche that you’ve envisioned, how does it layer over their existing audience, over the existing shopper at that store? Those stores are selected essentially based on the mix of consumers that live in that area, within a certain radius. We’re doing the project right now where we are looking at different retailers and segmenting each retailer to find out what’s the percentage of the shopper there that our clients’ product appeals to. We see by brand, we can see what their retail strategy we’re using site selection tool, the same one that they use to figure out. This is the average household income of a segment of the shopper there and really doing the research for this product to understand where there’s a safeway, there’s probably 10% of the shoppers matched your key target. You have to understand that stuff. I think sometimes people who create these products are more dreamers, or they have an idea, or they love to cook, or they come up with these ideas for these products, but they haven’t thought through how many other people like me will get this idea and want to buy and where will I sell it.
Daniel: Well, the other thing that’s happening too, Adam, as you know, some major food manufacturers, who are experiencing erosion and growth margin are acquiring these emerging brands.
Adam: Just seen it again with Kellogg’s buying another set of brands in Brazil.
Daniel: There you go, great example. Is Kellogg’s really poised to understand how to take that brand that isn’t on the shelf, or was only on the shelf in certain regions, and help it grow and emerge into a national player. I really do question, because they’re so used to going into the buyer and say —
Adam: “We’re Kellog’s.”
Daniel: We’re Kellog’s and we have this kind of sell-through with you. That model, I hope they understand that they have to play it, or they have to have a much different set of tools to effectively launch a brand, or take a brand that’s emerging and make it go national. I know there’s a couple brands that I respect a lot. Company called Harvest Snaps sells great product called Snapea crisp, and they’ve done a phenomenal job of growing their brand, started regionally and took it national and now are experiencing exponential growth.
Adam: Yes. Back to Kellogg’s. I don’t know if I give them the credibility that, in believing that they are able to take a set of sweeter brands from Brazil and bring it to the US and market. We’ve seen they had some golden products and those have gone out of favor just on trend and the opposite of the proliferation of new CPG products. They have gone out of favor because people are looking for new ways to get protein or looking for things on the go, and essentially the opposite of what Kellogg’s products offer. I haven’t seen Kellogg’s launch a product, I haven’t seen Kellogg’s innovate and create a product or create a brand, besides those brands that, really — a lot of those were before I was born or graduated high school. It will be interesting to see how they do the research we were just talking about of understanding, “Okay, this is what the retailer segmentation looks like and so I can take this part of this new portfolio and insert it here, where there’s a good overlap”.
Daniel: Right. The other thing that they absolutely unequivocally have to understand and listen, there’s a lot of smart people in these companies so this isn’t about not being smart, it’s about experience and being nimble. When you’re Kellogg’s and you’ve got big budgets, and you can roll with TV. A lot of these emerging brands can’t afford TV right out of the box, it’s not possible, so they’ve got to really once they understand their audience from a criteria standpoint, they have to understand where that audience can be reached outside of television in order to engage them, generate awareness so they — people could actually discover the product in an interesting way, which now we’re talking about the digital space, which is awesome, but it’s also terribly fragmented so you can piss a lot of money away, forgive me for saying it, but easily in the digital space if you don’t understand what your customer is doing online.
Adam: True. Even beyon. Before we get into the marketing of the product, let’s go back one step. I think where the brands that really succeed and the new products that come into being, in the hit, either quickly or when they take a little time, they do a good job of understanding why they exist and holding onto that. I think that I said it, the people who create these things can sometimes be dreamers and not in tune with the business side of it. It’s easy for that business side to get rested away and the brand story to get pulled away from somebody because they want to get into a retailer target. They don’t hold on to the core. This is what I’m trying to do, this is the mission of this product, this is why I created it and then therefore the product goes to market, they lose that story, they lose the connection to the target audience, that’s target audience in a literal sense. This is the person this was created for, not the mass marketing target audience, but they lose focus of who that person was in their dream of, this is going to make their life better, this is going to make them happier. They let the retailer run with it and then all of a sudden it’s just this product floating on a shelf. When that happens, when people lose sight of the core mission, the core reason for existing, they just get disconnected from any target audience and they end up — those are the ones that fade away.
Daniel: Right. That’s where a lot of the big brands will try to squeeze margin outright by reformulation and so forth and that’s disingenuous right to your point about the story and the branding fans that got those brands to where they are today. They’ll know the product’s being sabotaged, they absolutely know. Consumers are very sophisticated today and so that margin squeeze that everyone thinks up from because, “Hey, listen, you probably spent a lot of money to buy these brands you got to get margin fast,” and one way to do it is reformulate, make the product less expensive before you even get into one more retailer.
Adam: Right, and then if you’re lucky you end up in a Budweiser situation, when you’re so successful you could just keep on diluting it, and changing it, and watering it down until it is what it is but you still sell millions of bottles a day. This is what happens to most startups that don’t have that luxury, right? They wish they did. We talked a little bit about — Dan touched on digital. I think any owned channel, any channel that the brand owns is a place to reinforce the brand story and it’s really important. Consumers want to understand why to choose one product over another. They’re not going to invest a whole a lot of time. If they do come to your website, if they do, God help us all, if they are looking at you on social, you better be punchy and explain right away in the first 10 seconds what you stand for and why you’re important to be in the cart, because they’re not giving to give you more than that. The second eleven – they’re out. You can look at You Tube, they give you the first 15 seconds for free.
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Adam: There’s a reason why. Because most people don’t stick around for that long. We were talking about packaging, we talk about social, we talk about your website.
Daniel: Yes, and again those owned media though, clearly can be very powerful tools in generating awareness which generates trial which is what these emerging brands need, is trial. Trial is the Holy Grail because once I try it I can make a determination of whether I like the value proposition of what I just paid whatever I paid for it, and you got to be relevant to get people’s attention, you have to be engaging to get people’s attention and it can’t be the old school product attribute it has this and this and this, therefore it’s great. It’s got to be far more powerful than that.
Adam: Yes, some even dream of it.
Adam: With regard to packaging it sounds so easy, it sounds so dumb, oh yes, well of course the packaging has been good. Thanks a lot guys, I’m unsubscribing from this Podcast [laughs]. If it was only that easy. We’ve seen so many superior products with terrible packaging bomb and we’ve seen products with great packaging with products succeed because if you look at a brand like Red Bull, is that product the best formulation of an energy drink? I don’t know. Coke launched a couple, Pepsi launched a couple, Mountain Dew has one they all taste better than Red Bull. That packaging is iconic and simple.
Daniel: Well, and equally important is what Red Bull has done by taking the wings story and making it very, very relevant and engaging with all the events they do and it granted that’s a mature brand now that’s done a great job but they stayed true to their messaging and they don’t have to trick you with their packaging. Keep it simple, you recognize it, you get it and the rest of the work.
Adam: You recognize that and now they can [unintelligible 00:22:05] on it. Now they have a variation of that packaging and you know it’s Red Bull and you still want to try the next flavor, the next variety. It’s so important to spend time again not just having someone design cool packaging but designing packaging that appeals again to that target person that’s your dream consumer that you think is going to get it and then drawing that straight line from your idea to their brain that the package should tell the whole story right on the face and do it quickly.
Daniel: Don’t make me look for it.
Adam: Yes, and we know from our research into the grocery habits today, people are in and out of the store in under an hour. From the time they get in the front door, they touch every aisle they are running through that store quickly so you don’t have a lot of time. They’re not really stopping we know that specifically millennials if they make a list which is more than half they tend to stick to that list and they don’t add a lot of extra items so they’re not perusing and walking and browsing [laughs]. They’re looking for the thing they want and a lot of times they’ll write it down by brand name so you have to have a brand that really stands out in the packaging and is easily explained because they’re not giving you a lot of time.
Daniel: Right. Good point.
Adam: I think the last question that we wanted to talk about, grocery for a lot of brands and I talked about trying to get into places like Target or in a big grocery like Safeway or Albertsons, Publix, is that even the best channel for young upstart brands? We’re working with a couple of brands that we are coaching through e-commerce and finding direct sales channels because through digital marketing as Dan said I can I can super target that person that I think is the person-a person with a gluten allergy for example or a person who’s fed up with box cereals and trying to sell them a better, a more protein rich breakfast for example. I can use extremely tight targeting to reach that person and drive them to a place where I can pay them off and get them to put in a credit card and buy it right there versus trying to stand out on that shelf, get through a buyer, jump through all the hoops that I have to do to get a viable product to retail and then be sold and actually sell through it. It’s a marathon.
Daniel: Absolutely, and millennials especially are so comfortable using their apps, using their phones, using their laptops to go online and shop. Amazon’s trained everybody for a convenience level that we’ve never thought of before. I was even surprised I kept seeing all these amazon packages showing up at my house so I thought, “Liza is buying a a lot of shit,” and it turns out that she has no interest in buying toilet paper and all the staples, and paper towels etcetera when she goes to the grocery store. She wants to go get her food list and that deal with all that bulk stuff and so she goes through her Amazon prime account and boom and there it is.
Adam: It’s all there.
Dniel: It’s all there. Now, what you’re talking about on the e-commerce side though is equally important because if I know I like a product and I want it and I want to stash of it, I can go on to their site I can say, “Hey, send me a case about ten boxes.” Whatever the case is, our situation is and boom, it’s at my door and the brand can create an experience like no other. You can leave a message in that package. You can package it in a unique way, so e-commerce is a huge branding opportunity that I think a lot of people lose sight of that they hear the term e-commerce which means okay let’s sell more shit via this channel, absolutely agree with you, lets build the business but think about that what opportunities you have from a branding standpoint so you get that repeated trial.
Adam: Absolutely, in that environment you control every aspect. You control every aspect if you get someone through a Facebook ad or through an email they come, they click through, they come to your website, they experience that website, they go to your e-commerce, they click “buy”, you get to control what the shopping cart is like. You get to control, you set the shipping confirmation, all the touch points along the way and when I open that thing it can be magical and that doesn’t have to be expensive. I look at — I think the old model, if we think about music, the old model was okay. We’re going to put together a demo and we’re going to go put send this to a bunch of producers and we’re going to try to get a record contract and if we don’t do that, we are sunk and now I can just — the same technology data we’re using right now to record this Podcast we can put out a hip-hop album although it would be awful [laughs]. We could post it to iTunes and we could have a following right using Twitter and Soundcloud and 60 other tools, same thing for CPG products. The long tail keeps getting longer because people cancan set up their own e-commerce. Set up their own production, setup all the things they need to control everything from end to end and essentially use that e-commerce as proof-of-concept. We’re working with consulting a little bit with a concept called Blender Boys where they’re using e-commerce as a proof of concept to bring to retailers and say, “Look at the demand for this. Look at how we’ve been fulfilling it, selling it in to a retailer in an environment cuts the market, gives us more margin because there’s no shipping.” All of a sudden they have a viable story they can tell once they reach a certain sales threshold. You can set it up to prove that your vision is even true.
Daniel: Right, and not be beholding to the grocer and all that’s required to be in the grocery store in the expense that’s associated with that and–
Adam: It’s tooth and nail battle.
Daniel: Exactly and I’ve heard a lot of conversations from a lot of our consumer packaged goods clients about how difficult it is to work with Amazon and granted. The Amazon represents a significant channel for eyeballs to get your product in their hands but man it can be pretty painful and so doing it yourself it’s not necessarily the least expensive but once you get it set up and once you get it rolling, you can really monetize your e-commerce channel.
Adam: If you have control at least you know you controlled it. Whether it works or not. All right well, I think we’ve we discussed this one into the ground. We would love some feedback from anybody listening. People who agree and people who disagree, but mostly people who agree. Please bring us your ideas and your counter points and we would love to hear them. You can tweet at us @fandrm on twitter, you can email us firstname.lastname@example.org or either one of us actually email@example.com or firstname.lastname@example.org. Please subscribe to the Podcast and share this one with your friends and colleagues. Thanks again for listening.