|Muesli with a mouseclick: new approaches to successful direct-to-consumer business|
|Wednesday, 30 May 2012|
Food and beverage companies around the world – from the largest to the smallest – are experimenting with new ways to reach consumers, to bypass supermarkets and keep more margin (see Micro-Trend 7 in New Nutrition Business's NB 10 Key Trends 2012).
The cause is the growing dominance of a handful of supermarket chains – and their increasingly narrow and short-term perspective.
Supermarkets squeeze supplier margins. They challenge brands with low-cost private label (which has a 50% market share in some markets, such as the UK) and they often lack the patience to wait for slow-growth innovations to become blockbusters.
As is often the case with significant new market shifts, the leadership and the best pointers towards success are coming from entrepreneurial companies, rather than from global giants.
Management at the biggest companies has expectations of high sales, rapid growth – and a self-damaging impatience with anything that fails to get past their perception of being “too weird” or “too niche”. There are too many senior executives who have failed to appreciate two significant shifts in the world of food that are both creating opportunities – while also threatening to slowly erode established business models.
• The fragmentation of food markets into a wealth of niches. We have already seen the growth of profitable niche brands in health areas such as gluten-free and cholesterol-lowering. The same is happening in a wealth of other health concerns, such as lactose-free, a highly profitable, super premium-priced, high-growth niche. Few dairy companies have had the vision of Danish dairy group Arla and Finnish dairy group Valio, who have blazed the trail in this market.
• The effect of the net, social media and the fragmentation of media communications, which has created new ways of communicating and serving customers at low costs. Intensive use of social media and a willingness to communicate openly with the media, responding quickly to all media enquiries, are key to the success of innovative new brands. Take the case of one of the new start-ups that is exploiting these shifts, MyMuesli.de. Based in the city of Passau, Germany, it has created a successful business delivering customized muesli to consumers all over Germany and it has also taken the concept into other markets, including Austria, Switzerland, the Netherlands and the UK.
My Muesli’s success:
• exploits the flexibility of grains, dried fruits, nuts and other ingredients to enable people to create highly individualised products
• connects to consumers’ desire for newness and a sense of control, coupled with their wish to have foods that – in this age of “I-Nutrition” – cater to their specific and individual health interest
• is based on using a product that has a long shelf-life and is easy to ship – no refrigeration is needed
• is made possible by the versatility and low cost of internet ordering
• and can be delivered thanks to flexible and highly efficient logistical systems that can handle very small packages that would have been uneconomical in the past.
My Muesli is about fun, flexibility and control – and people reward the company for giving them this by paying a 100% price premium. My Muesli’s sales have grown even as sales of muesli in German supermarkets have declined.
Not content to rest on this success the founders of My Muesli have begun to look at other areas where they can apply the above factors. You’d think it would be tough to create a home delivery business in the orange juice market – but the founders of My Muesli are giving it a try.
“Everyone loves freshly squeezed orange juice but nobody likes to carry oranges home from the supermarket,” says Stephan Schwarz, a 25-year-old MyMuesli employee. “Besides, most supermarkets don’t sell particularly good oranges”. “My idea was to use the existing logistics and software created by MyMuesli to deliver fresh, premium-quality oranges on a regular basis, like a magazine subscription.”
The business – Oh!Saft (www.oh-saft.de), which roughly translates as “Oh Juice! – sends each client a box of 30 fresh oranges every two weeks, including a free orange press with the first order. Two oranges per day are enough to make one portion (200ml) of home-pressed orange juice for 15 days before the next box arrives. Oh!Saft has three order options:
• Oh Box is a single delivery containing 30 oranges for €14.90 plus €3.90 for the postal cost.
• Oh Ja is a bi-monthly delivery of 2 x 15 oranges for €29.90 including delivery and free orange press.
• Oh My is tailored to companies’ needs with larger delivery quantities.
According to Schwarz, the pricing was developed so that the client pays less than €1 for each glass of freshly pressed orange juice. Compared to the average retail price of €0.50- €0.60/litre for the orange juice concentrates sold in German discount supermarkets, Oh!Saft is nearly 10 times more expensive.
“Yet you cannot compare fresh oranges to bottled juice concentrates containing mostly water and sugar,” Schwarz claims. “Our promise to Oh!Saft customers is to provide premium oranges the whole year round without fluctuations in price or quality.”
To source the best products, Schwarz has teamed up with a German fruit merchant, Robert Eder. Oh!Saft oranges currently arrive from Spain, Morocco, South Africa or Argentina depending on the season. You may think that selling fresh fruit with home delivery has its challenges, but Schwarz says that 95% of the orders are DHL-delivered within 24 hours problem-free.
“Naturally we might have some delivery issues in the wintertime when the temperature hits minus 10 degrees, but in general the whole logistic process runs surprisingly smoothly.”
Reliable service and convenience are undoubtedly the two key benefits that attract most Oh!Saft clients.
“Approximately half of our clients are companies who order large quantities of oranges to their personnel. The other half typically consists of health-conscious individuals living in big cities, with high disposable income and high education level – pretty much the same customer profile as what MyMuesli has,” says Schwarz.
“We actually started the marketing of Oh!Saft in October 2010 by simply sending a newsletter to all MyMuesli clients. That worked fantastically well.” What also worked well was a 30-second TV commercial (you can see this at: http://www.youtube.com/watch?v=BHlLkg41SYc) which ran for a month on national television in August 2011. The Oh!Saft commercial was developed by the London-based art director Mark Lindner who has also worked for McDonalds and Nestlé.
Brands such as My Muesli and Oh Saft, while still small in size, are becoming more numerous. In dairy, for example, the EasiYo brand appeals to people’s desire for customisation and home preparation. The EasiYo system is basically a home yoghurt maker, a machine that comes with dedicated supplies of yoghurt powder (which contains genuine probiotics), fruit additions and other inclusions. The customer can only use EasiYo ingredients.
Retailed in Italy, the UK and New Zealand through internet stores and channels like the QVC TV shopping channel, it by-passes traditional supermarkets. Remarkably, it has become a €16 million ($20 million) annual sales business in just a few years and is still growing in double digits.
Seven lessons are emerging– so far – from the online food start-ups:
1. Use all free social marketing channels to your advantage: Facebook, Twitter, blogs, YouTube and Search Engine Optimization are some of the ways to get your message across without a penny spent in advertising.
2. Serve the media proactively: Provide plenty of press-related information and illustration on your website to increase the chances of free PR. Respond quickly and helpfully to all media enquiries.
3. Think seasonally: Christmas is an excellent occasion to win new clients through gift vouchers. For both Oh!Saft and MyMuesli, December brings the biggest turnover.
4. Target B-2-B customers: Advertising agencies, new media companies and law firms can become loyal customers.
5. Charge a premium price: As we have seen again and again in every market, the most health-conscious consumers –– who are at most 25% of the population – are willing to pay premiums for something that is fun, interesting and meets their needs.
6. Select a product offering with a long-shelf-life: The additional cost of refrigeration seems – so far – to be a barrier to fresh and chilled products working for homedelivery. But that problem is also an opportunity for someone.
7. Give the consumer a sense of involvement, control and customisation In the age of iPhones and iPods, being able to offer i-Nutrition is one of the most powerful things you can do.
Innovation in food and beverage can take many forms. Up to now, companies have shied away from innovation in distribution. As a result, big companies spend their days looking elsewhere for giant “game changer” innovation opportunities. Meanwhile entrepreneurs are busily experimenting with ideas that would fail the “too weird test” and the “too niche test” inside most corporates – ideas which may yet become the real game-changers in our industry.
First published in NNB's February 2012 Newsletter
About New Nutrition Business
New Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.
The strategies and success factors it has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the United States to Australia and from Sweden to South Africa.
New Nutrition Business is headed by executive director Julian Mellentin (right), one of the world’s very few global specialists in the business of food, nutrition and health.
He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace. See www.new-nutrition.com