Chicken Soup for the Soul – in soup form

Remember those Chicken Soup for the Soul books — and the many variations?

Oh, there’s Chicken Soup for the Couple’s Soul, Chicken Soup for the Teenage Soul on Tough Stuff, Chicken Soup for the Grandma’s Soul, and, of course, Chicken Soup for the Prisoner’s Soul.

And now, there’s Chicken Soup for the Soul … Chicken Noodle Soup!  Why did it take so long to come up with this idea? 

I love this brand extension and hope it does well.

Food is about to get more expensive

Yes, it’s the drought’s fault.  But, it’s not connected to food prices in the way you probably think. 

The Midwest U.S. drought seems to be hitting the corn crop quite hard, with production estimated to be at least 16% lower than originally forecast for 2012.  Other popular Midwestern crops like wheat and soybeans will also be damaged, but they may not have as significant an impact on overall food prices.

Corn is a crucial ingredient in many things we eat.  It’s the basis of corn syrup, both the high fructose and regular fructose versions, both of which are in virtually every processed food we eat — and especially sodas and snacks.

What’s not so evident is that prices for meat and dairy products will rise, too. Farmers use corn-based feed for their animals, and meat and dairy products all come from those animals.  As those costs of input rise, so will prices.  (It gets more complicated than this, with some farmers culling herds because the cost of feed is too expensive, so that increases market supply.  But, anyway…)

Put it all together, and the USDA was estimating food prices would rise 3 to 4 percent. 

And corn is also part of the gasoline we use in the U.S., too.  The federal government requires that corn-based ethanol be added to the gas we all buy to make up about 10% of its volume.  This year, high corn prices are affecting gas in about the same way high crude oil prices are — instead of the idea that corn ethanol would help alleviate gas prices.

Food only makes up 10 percent of U.S. spending these days, compared to 22 percent in 1949 — and more than 50 percent in poorer countries.  We’re fortunate that the impact will be minimal on our budgets, but do keep your eyes on price tags during the next 12 months.

There IS innovation in food!

Every year, the Boston area’s Mass Innovation Nights hosts a special edition just for the food business.  The founder, Bobbie Carlton, asked me to serve as an expert advisor at last week’s event. 

By popular vote, four products presented their food industry innovations at the event:

Pipe Dream Cupcakes: A cupcake truck! This totally takes the food truck trend to a new level.  I know, this probably exists in Brooklyn already – but this truck serves suburban Boston.

Stump Chunks Fire Starter: These tree trunk shavings and pieces are the best way to start a fire (for a barbeque or otherwise), according to Stump Chunks.  I’ll be trying my sample this weekend.

Bell Tower Mobile Mart: It’s like an ice cream truck for groceries. (To be seen whether they will serve Pipe Dream Cupcakes!)  They are just about to get started in some Boston neighborhoods, and they’ll deliver healthy food to areas that need it.

EarthHook: Made for grocery carts, this hook allows a shopper to hang their reusable bags outside the cart so they don’t get smooshed up.  And the thing that holds on to the cart has room for an ad, too.

Ten other products were in the running, from roasted chick pea snacks to meal & recipe kits delivered with fresh ingredients. Full event info and a recap is at http://mass.innovationnights.com/events/august-8-2012-mass-innovation-nights-min41-foodie.

What I love about the event that Bobbie hosted is that it shined a light on bootstrapping entrepreneurs trying to break into the food world rather than the innovation led by big R&D budgets that I’m used to seeing.  It’s hard to innovate without that big company backing, and there were a lot of smart people working at it.  There’s room for a lot more of this.

I spy on what you buy

People outside the grocery business are usually shocked at how much data we have available to us.  Likewise, those in the business often forget how lucky we are.  Those who transition to other industries have a hard time conducting analyses, simply because they don’t have enough information available to them.

As a basic level, most CPG manufacturers can see detailed information on what sells in their categories, in most U.S. supermarkets and a smattering of other retailers (including Walmart, as this spring), broken down weekly, and spanning 50 to 100 metrics.  This includes their items, plus their competitors items, and more if they decide to buy that data.

It’s an amazing business. Two companies in the U.S., SymphonyIRI (formerly Information Resources Inc.) and Nielsen (same company that does TV tracking) buy data from most supermarkets in the country.  That data represents every item that scans through a cash register at a supermarket that’s part of the network.  SymphonyIRI and Nielsen process the data, enhance it, and resell it to hundreds of manufacturers. Generically speaking, we refer to this as syndicated data.

Why in the world would a supermarket part ways with one of its most precious assets, its sales data?  Well, it’s worth some money to SymphonyIRI and Nielsen.  I don’t have details on the exact arrangement, but there is some revenue sharing back to the retailers who provide the data.  Also, SymphonyIRI and Nielsen provide data services that might be hard to do in-house — plus data on what’s happening in the retailer’s aggregate competitive market, without detailing any specific competitors.

One of the few restrictions is that competing supermarkets are not allowed to see one another’s data.  Manufacturers are required to withold data from competing chains.  If I go to visit Ahold (owner of Stop & Shop), I can’t share Shaw’s data with them.  But for my own internal use, it’s all fair game.

And this, I suspect, is why Walmart was out of the game for about a decade.  Until this spring, Walmart did not provide data to the two big data providers.  Rightfully so, I suspect Walmart was suspicious that their sales data would end up in the hands of its competitors.  And as the biggest guy in the game,they could do what they wanted.

They provided data through their own proprietary portal, RetailLink (and still do) at no cost, but they were very selective in sharing it and restricted its use.  Walmart has started sharing data again, which really changes the analytics game — and I’m still curious as to why they made that decision.

Aside from the two big providers who cover most of the U.S. supermarket business, there are some specialty data providers.  A division of Nielsen provides special analytics for fresh categories, like produce and deli, that don’t always scan through registers in uniform weights and have other idiosyncracies.  Specialty and natural/organic/health food stores have special services, too, provided by SPINS.

A colleague from a specialty manufacturer asked me to give an opinion on how useful this data is.  It’s expensive.  Very expensive.  And the data isn’t perfect.  We sometimes see things that look a little funny, and it’s hard to know if it’s right or wrong.  But it’s an incredibly valuable read on what’s happening with the business, even if it’s simply used to understand your business’s general direction rather than sales down to the penny.  Many small manufacturers hire outside organizations to help with this work, and it spreads out the cost dramatically.  Brokers are commonly used for this help.  And if you’re not familiar with what brokers do in the grocery business, more on that soon.

Related:

Wednesday Word: ACV

Target Knows You Are Going to Have a Baby

Transforming a Quarter Pounder

McDonald’s Canada gives us a look at the difference between a Quarter Pounder bought in-store versus one styled for photography.

[youtube http://www.youtube.com/watch?v=oSd0keSj2W8&w=560&h=315]

Found via Kottke.org, which notes, “the burger at the restaurant is optimized for eating and the photo burger is optimized for looking delicious.”

Wednesday Word: Private Label

Remember the generic brands stores like Pathmark used to sell?  A white label with black letters boldly announcing the product inside?

Those store brand products are known as “private label” inside the industry, or sometimes a “control brand.”

Years ago, private label products were a simple way to provide very affordable goods to a store’s shoppers.  Hence, the very generic and sometimes very low quality products.

Nowadays, private label products are often as good as — or better than — many national brand products.  Retailers like Wegmans have put focus on developing high-quality offerings that aren’t even necessarily available from any of the major manufacturers. 

Trader Joe’s takes this to an extreme, offering almost exclusively items made just for them.  Ahold (owner of Stop & Shop and Giant) has a wide variety of its own brands that barely seem like store brand offerings — names like Nature’s Promise (organic and natural), Guaranteed Value (low-price offering), CareOne (health and beauty), Simply Enjoy (speciality), and several more.

In the middle of the twentieth century, some supermarket chains owned factories and manufactured many of their own private label products.  Notably, A&P owned dozens of factories, as told wonderfully in Marc Levinson’s The Great A&P and the Struggle for Small Business in America.

Nowadays, though, almost all private label manufacturing is contracted to specialized manufacturers, who produce goods without any marketing or sales costs, allowing products to be sold affordably on shelf.  Manufacturers are often happy to take the business, as it allows them to use excess plant capacity.

There’s some great info in the private label Wikipedia entry if you want to learn more.

The Dented Can Store is closing

Locals know Petrik’s Discount Groceries in Bradenton, Florida as the Dented Can Store.

Known in community as “the Dented Can Store,” Petrik’s specialized in slightly damaged or near expiration products ranging from tomatoes sauce and tea to baby diapers and pet food.

Perhaps this is a sign of an improved economy?  People aren’t as willing to buy damaged goods just to save a few bucks?

Or, maybe it’s competition:

The proliferation of Wal-Mart and other discount supermarkets has caused patronage at Petrik’s to drop. It’s the same trajectory that led Albertson’s this year to close its two Manatee County stores.

“There’s more Save A Lots and Wal-Marts, and a lot of good deals now even at Publix,” Petrik said. “There’s just too much competition.”

Read more here: http://www.bradenton.com/2012/06/05/4064960/bradentons-petriks-discount-groceries.html#storylink=cpy

It’s increasingly hard to compete against large chains on the low-end, since they have such incredible buying power and efficient supply chains.  Are there any examples of others out there who buck the trend?  Leave a note in the comments.

Read more here: http://www.bradenton.com/2012/06/05/4064960/bradentons-petriks-discount-groceries.html#storylink=cpy