As Henry Kissinger said, “If you don’t know where you are going, every road will get you nowhere.” But how do we develop an effective roadmap when the industry is in a state of transformation? During our Food Engineering webinar last week, co-host Diane Wolf and I discussed the importance of a strategic plan when preparing for your food manufacturing business’ future.
Technology. Robotics. Mergers and acquisitions. Big Data. These advances have created a constantly evolving market. Understanding industry trends and the market’s health are key to creating a successful strategic plan—and business.
3 questions to facilitate mindful growth
Answer these three questions to ensure your food manufacturing business is capitalizing on industry opportunities and market trends:
1. Are you effectively managing SKUs?
We all know who Nike is, and what the brand represents with their slogan—”Just do it”—being instantly recognizable. Years ago, the company defined their strengths and created a business plan accordingly. The food and beverage industry needs to do the same.
Product knowledge is key as you refine your strategic plan. How can you prepare for the future of your business without understanding your products’ relationship to the market?
By constantly monitoring the health of your industry.
Which products are successful?
Which products are not?
The performance of comparable products can help you determine what SKUs to bring to market.
However, there is such thing as SKU abundance. Technology has contributed to SKU saturation as brands are able to easily add flavor combinations, for example.
For most companies, every pound sold is a good pound. But this doesn’t mean that producing all possible SKUs is the best decision for your growth. Consumers may not be responsive to all products you bring to market.
Evaluate your product mix honestly, and look for ways to prune SKUs.
- Can you pull the lowest performing 20 percent to make room for new products?
- What is the cost to serve new customers if you are to expand your product reach?
- What are new market segments to pursue?
- If a product is seasonal, can you cut it?
- Are specific SKUs marginally more expensive?
Answering these questions can help your business cut down on unnecessary production, and make room for more successful product lines.
2. Can you take advantage of market trends?
Consumer preferences are constantly changing. A few of the most popular trends on the market today are:
- Clean ingredient lines
- Gluten-free options
- High protein
- Low high fructose corn syrup options
Trends are ever-changing, and directly impact the market as they reflect what consumers demand.
Looking at market trends, are there specific areas into which your product(s) can move to attract new consumers?
A good example is Greek yogurt. Many manufacturers were already making Greek yogurt when consumer demand spiked a couple of years ago. As the product quickly became a food trend, these companies were able to take capitalize on consumer interest. By producing dips, sauces and dressings that featured Greek yogurt, multiple brands were able to profit with new products.
Another impact to consumer-buying habits is disruptive innovations, a concept defined by Clayton Christensen. Broadly speaking, a disruptive innovation is as anything that turns the market on its head. Amazon.com’s ability to ship fresh food to consumers is a disruptive innovation for grocery stores. Another example is clean ingredient lines, as companies reconsider production to appeal to market trends. Just like with popularity of Greek yogurt, disruptive innovations are opportunities for food manufacturers to respond to the market.
By keeping a finger on the pulse of your market, your brand can capitalize on relevant trends and potentially appeal to new customers.
3. Can you/ should you restructure for growth?
Food service is diminishing in terms of growth and margin. To prepare your food business for this evolving market and its future, marketing and executive teams must work together to discuss market segments and desired growth. Have an honest, collaborative dialogue around:
- Do you want quick service restaurants (QSR) to go down?
- Why is it going down? What are the drivers?
- Can you move into ecommerce?
These answers provide a snapshot for the team to work from to develop a thoughtful strategic plan.
Look at individual products, and have an asset strategy discussion. If you put your brand name on a product produced elsewhere, can you go to market that way? Does it make sense for your company to share assets? Is it better to co-pack?
These answers will depend on where you want your business to go—an answer you can find in your strategic plan.
John Naisbitt, the author of Megatrends, said “Strategic planning is worthless—unless there is first a strategic vision.”
Use market and industry knowledge to shape your business’ strategic vision for the future.