The Foundation of a Successful Food Business

Your Product is Great, but…

It takes a great product and a compelling business opportunity to survive and thrive. Data helps you do this.

Data Requirements for Your Business

• Macro trends in food• Target customers• Target geographic markets and channels of

distribution• Customer feedback on your specific product,

packaging, labeling, positioning• Competitor products• Business benchmarking and financial metrics

Trends, Conventional Wisdom,& Business Opportunities

• Local food is better for the environment – 2015 USDA ERS Report on Trends in Local Food http://www.ers.usda.gov/media/1763057/ap068.pdf

• Local food is better for the economy – Freakonomics – The Hidden Side of Everything -http://freakonomics.com/2011/11/14/the-inefficiency-of-local-food/

• Environmentally sustainable farming always lowers food production - https://www.fieldtomarket.org/fieldprint-calculator/

• Millennials are the key to food company success

The Lifecycle of Brands is Accelerating

Local / Artisan Saturation

The 100,000-Foot Opportunity in Food May not be Local

# 2014 # 2013 Company HQ Country Dairy Sales(Billion USD)

1 1 Nestle Switzerland $28.32 2 Danone France $20.23 3 Lactalis France $19.44 4 Fonterra New Zealand $15.35 5 FrieslandCampina Netherlands $14.96 6 DFA USA $14.87 7 Arla Foods Denmark/Sweden $12.58 9 Saputo Canada $8.89 8 Dean Foods USA 8.610 12 Yili China $7.6

Rabobank, “Global Dairy Top 20”, 9 July 2014.

Why Consolidation?The Industry• Dairy markets in developed

world are mature – 3% annual growth

• Higher growth rate only possible through acquisition

• Industry still fragmented below top 20

• Rise of the Chinese/Asian dairy consumer

The Financial Climate• 124 dairy acquisitions in 2014 –

historic high• Food investments performed

comparatively well in recession• Money for acquisitions is cheap• Expect slowdown as the

number of targets is shrinking and multiples are rising

• More joint ventures

The data are similar in all food sectors. What does this mean for your business?

Trend Data Sources -Trade Association Reports

• Organic Trade Association (OTA) Industry Reports https://www.ota.com/resources/market-analysis

• International Dairy Deli and Bakery Association (IDDBA) “What’s in Store” and Industry Reports http://iddba.org/store/Product.aspx?ProductId=101

• National Restaurant Association Industry Reports http://www.restaurant.org/News-Research

• Specialty Food Association Knowledge Center https://www.specialtyfood.com/knowledge-center/

• The Progressive Grocer - http://www.wholefoodsmarket.com/company-info/investor-relations/interactive-data

“To a worm in living in horseradish, the world is horseradish”

Where to go to find ideas for your “perfect Pepsi's”

The biggest industry trade shows are still the most efficient way to do this

• Natural Category – Natural Products Expo West http://www.expowest.com/ew16/public/enter.aspx

• Gourmet/Specialty Category – Fancy Food New York https://www.specialtyfood.com/shows-events/summer-fancy-food-show/

• Mainstream Retail – IDDBA http://www.iddba.org

• Food Service – National Restaurant Association, Chicago- http://show.restaurant.org

Defining Your Target Customer

http://www.lohas.comhttp://www.experian.com/marketing-services/eating-habits-segmentation.htmlhttp://adage.com/article/news/psychographics-taste-beer/140106/https://segmentationsolutions.nielsen.com/consumeractivation/Default.jsp?ID=quick-market-solutions&menuOption=learnmore

You can’t sell expensive products or products that are inconvenient to use to people who aren’t motivated enough to buy them. Focus on segments that are already motivated.

The Locavore’s DilemmaTake grass-fed beef…

• 568,593 - 2010 Madison Metro Region Population• 240,343 - 2010 City of Madison Population• 58.4 lbs/yr per capital consumption of beef• 14,036,031 lbs/yr market in Madison• 3% of beef consumption US = grass-fed• 421,081 Lbs/yr; 7210 people = Madison grass-fed beef market• 580 lbs/animal average yield• 726 animals/yr – 29 local herds of 25 animals• 60% of beef consumed is ground that can come from dairy culls so number of beef herds significantly less• 15 animals/day – rate small scale slaughter• 48 days of slaughter/yr

A market the size of Madison is not large enough to sustain many economically viable local food businesses.

Your Target Consumer - Geography• Where do your target

customers live?• How do they buy your

product?• Who distributes

products like yours in your target markets?

• How can you get to enough of them to build a viable business?

Your best target markets may not be local or even regional. The largest markets for high quality, high priced foods are on the coasts. The best markets for nutritional supplements are on the west coast.

Positioning Versus Competition – Features and Benefits

Strong brand recognition, higher quality, certifications, & higher promotional spend support higher prices. Different target markets value different product attributes differently. To compete, local food companies have to have premium products.

Getting Direct FeedbackConsumers • Sell at farmer’s market• Do product demos in

stores• Use student focus group

opportunitiesBuyers • Talk to store buyers• Talk to category buyers at

distributors• Talk to brokers from

target market• Give samples to chefs and

get their feedback

Keys to Effective Customer Feedback• Do this in your target market NOT in your home market• Enlist impartial help to conduct interviews and/or focus

groups– local College, University, Tech school students taking business school classes, local marketing firms

• Ask a few open ended questions and LISTEN• Get feedback on your product, packaging, label, and

competitor products• Give people options to try, best case in a venue where

you can sell your product to them• Always include pricing as part of the testing of your value

proposition

Buy Brand-Level Data It’s THE BEST business investment you’ll ever make:

• SPINS http://www.spins.com/applications/reporting-analytics/ - Specialty, natural, organic brand level data by category, geography, distribution channel

• Food Marketing Institute – Industry wide data http://www.fmi.org/research-resources/fmi-research-resources

• MINTEL – Worldwide market research data - http://www.mintel.com/food-market-research

• Whole Foods http://www.wholefoodsmarket.com/company-info/investor-relations/interactive-data

How to Leverage Your Data into a Compelling Business Opportunity

• Quantify your business plan – who you are going to sell what to, how much, where, and at what price.

• Use competitor matrix to hone your value proposition and your pricing.

• Set quantitative goals for how big you need to be to become profitable and to reach positive cash flow. Manage your business to quantitatively exceed these goals.

Numbers are the language of business. Using data enables you to speak persuasively to lenders and investors, while driving you toward building a profitable business.

Questions?