Innovation is a great word and people in the food industry can get very excited when they believe they are bringing innovation to the market. It is important to take a moment to ensure customers and consumers are going to give you credit for the effort and resources you invest to deliver innovation. They have different needs and it can be beneficial to consider them when deciding where to deliver innovation. Google can provide definitions, but it does not always help you understand the importance of the term or perhaps even a specific meaning in our industry. We are going to share some food and beverage industry terms and explain how they can benefit or impact your business.
Innovation is an improvement or a change that delivers more value to customers and/or consumers, based on their needs, not yours. It is most valuable when the customers and/or consumers confirm the value has been created.
Our food and beverage industry is full of innovation
It never ceases to amaze me that we continue to introduce thousands of new items every year in this industry. Food has been around for thousands of years and just when I think I have seen it all there is a new idea, flavour or product that catches my attention.
Producers and processors can get very excited about innovation. Most of them like to grow and make things. That is why they do what they do. The passion they bring to how products are produced is admirable. My challenge to producers and processors when they are deciding to make investments in innovation is take a moment to quantify the return on your investment. The fundamental question for me is:
What change will the innovation bring to your cost of goods or your selling price?
I would agree there are other reasons to introduce innovation like employee satisfaction, food safety or to position the business for future growth.
The reason I would encourage you to think about the material change to your cost or selling price is because many times I see producers and processors get excited about innovation that will not be perceived the same way by customers and/or consumers. It is rare either of these groups get as excited about the innovation as the producer or processor. If they are not going to really see a material difference then is it really innovation? You might get excited about it but they do not.
Innovation for customers
When you consider the priorities of retailers that might lead you to some innovation that will resonate with them. Retailers are focused on:
- Driving sales
- Delivering profit
- Service level
- Operating stores that deliver their format positioning. This is different for conventional stores, discount stores etc.
- Offering food safe products to their customers
- Reducing shrink
- Get credit for supporting local and sustainable initiatives
- Managing controllable expenses such as labour, utilities, supplies etc.
- Improving their online offering
- Managing their listing base to ensure they have the right assortment of products to satisfy consumers in their target market
It can be a challenge for suppliers to deliver innovation that will really impact these priorities. An innovative change to your process that improves the flavour of your product does not really hit the radar screen for your customers. Yes, if you can prove you will sell more, they will be interested but they hear that all the time and it does not always happen.
One of my favourite examples of innovation that resonates with your customers are the coffee pods. That is one category where we have seen tremendous change at the shelf. More than 50% of the category is pods and they have only been available for 10-12 years.
Yes, coffee pods appeal to consumers because they are convenient, the coffee that tastes the same every time and they do not see any waste. Those really do not hit that radar screen of retailers we referred to earlier.
Coffee pods resonate with retailers because they drive better sales per consumer and more margin per cup of coffee. When you calculate the retail per cup of coffee pods vs. ground coffee there is usually a considerable difference. Consumers are willing to pay more and retailers benefit from this. That number of cups of coffee in a package of pods is significantly less. The margin per cup is much higher with pods. Retailers like coffee pods because they deliver higher sales and better margin.
Innovation like compostable pods are another example of innovation that did appeal to retailers. They are looking for credit on sustainable initiatives so they would put these products on the shelf and in the ads.
Innovation for consumers
The examples of innovation for consumers are more abundant. The needs of consumers are defined by the target market. Some consumers are looking for innovative products to meet a certain diet like gluten free, lactose free or plant-based protein.
In our house, lactose free butter was an innovation we were excited about. One member of our house needs to be on a lactose free diet and we would prefer to use butter.
Prior to lactose free butter, we were using margarine for anything we would all be eating. We were in the target market for lactose free and that butter is in our shopping cart each week. Retailers like the product because it delivers a higher sales per unit than other butter, not because it is lactose free.
To ensure your innovation will resonate, consider your target market and make sure they will give you credit for the innovation you plan to deliver. Make a list of their priorities and needs to confirm your innovation will deliver the return you need.
I was thinking about innovation because next week we will be back in Montreal April 20-22 to attend SIAL. Looking forward to see many display s of innovation in our Canadian food industry. If you plan to be there let me know and it would be great to see you.
For those of you celebrating Easter-Happy Easter! Did you know the Thursday before Good Friday is the busiest food shopping day of the year. Overall the Christmas holiday selling period is busier but this is usually the single busiest day of the year.
If you have any questions or require help deciding if there will be a return on your investment for innovation, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
Hostess Chips back in Loblaw stores
Apparently Hostess and Loblaw have been able to find some common ground and Loblaw shoppers will be able to buy their Ruffles and Lays chips again. It was close to two months that Hostess refused to ship to Loblaw. It would be very interesting to know what happened to Hostess sales during these two months. If their brand was really strong perhaps consumers were willing to switch stores? We will probably never know the details of the issue but it certainly would have been interesting to be in on those conversations!
Your next loaf of bread could have a more sustainable clip
Bimbo Canada announced they will be introducing 100% recyclable cardboard clips for their bread products. They will start in N.B. at their bakery and have all of their bakeries converted by June 2022.
Sustainability continues to resonate with customers and consumers. This is an example of innovation that will appeal to both groups. Retailers will reinforce their position to support sustainable initiatives and consumers will feel better they are not adding to the landfill. One would expect to see Weston Bakeries and other companies explore similar options.
When is Peter speaking?
Consumer claims you can take the the bank panel. With Canadian food innovation network.
SIAL in Montreal April 21st
Food and Beverage Atlantic
Sobeys pitch planning- Apr 25
Learnsphere Supply chain 1-2-3 Food & Beverage Manitoba
Sell successfully to retail- May-June
Association of Municipal Administrators of NS- Jun 16
With the Kilted Chef
