Winning with Insights in the Next Normal

Winning with Insights in the Next Normal

Winning with Insights in the Next Normal

Introduction

Long-held beliefs about the CPG industry have been flipped on their head since consumers rushed to stockpile essentials in March to deal with COVID concerns and restrictions. Big legacy brands, long seen as destined for permanent decline while smaller challenger brands drive growth, have enjoyed double-digit growth as consumers prioritize familiar staples and non-perishables. In just one example of a major reversal, canned soup sales jumped 26% after years of decline.

In response, Big CPG has optimistically declared that it is “back”. ConAgra CEO Sean Connolly said of the company’s sauce and frozen foods portfolio, “Products like ours are getting levels of trial that were not anticipated and that could turn into consistent users over time.”

However, as consumer needs evolve beyond dealing with immediate COVID-19 impacts, future growth is not guaranteed—or straightforward to predict. Looking ahead, canned soup demand is expected to soften to its previous trajectory. Meanwhile, other categories are poised to take a different course: translating COVID-19-induced sales spikes into sustained growth by tapping into long-term consumer trends.

 

Example: Canned Soup Projected Revenue Growth

In order to realize transformational, enduring growth from consumer changes initially sparked or accelerated by COVID-19, it is critical for brands to take a consumer-first approach, developing predictive insight to understand how consumer needs will continue to evolve and what this means for their categories in the Next Normal.

Consumer Behavior Model
Is your brand’s growth a result of pandemic panic, or tapping a long-term growth driver?

We take a structured, consumer first approach to understand how needs and demand have been impacted by COVID-19, and better predict which will be “sticky.”

Applying the approach across categories reveals opportunities for brands and retailers to better meet consumer needs and clarifies which opportunities will endure in the Next Normal.

How should brands and retailers respond?

It is important for brands and retailers to use forward-looking insights to understand why consumers are making decisions and anticipate how their needs will evolve in the Next Normal.

Brands and retailers should take the following steps to capture consumer demand in the next normal:

1. Map your brand’s value equation: Identify whether it will remain relevant in addressing underlying consumer needs & pain points beyond immediate COVID impact

2. Learn from the leading edge: Know which consumers represent the future of your category and prominently feature them in your research efforts

3. Stay connected: Continue to track consumer behavior & attitudes closely as they evolve; talk to consumers about their anticipated changes

4. Keep your eye on the horizon: Build conviction in where your category is headed, and don’t let short-term disruption sway long-term strategy

Reach out to the Seurat Group for additional information on ways to build the forward-looking insight foundation and organizational conviction needed to support strategies that delight consumers in the Next Normal.

Connecting the Dots Webinar Recording: The Secret to Successful Innovation

Connecting the Dots Webinar Recording: The Secret to Successful Innovation

Connecting the Dots Webinar Recording: The Secret to Successful Innovation

Why does most innovation fail? More important, what makes the tiny minority succeed? Seurat Group Managing Partner Jill Brant and Principal Adam Gold held a virtual discussion to discuss insider tips behind the CPG industry’s most successful new products.

View a recording of the conversation below.

7 Habits of Highly Effective Innovators

7 Habits of Highly Effective Innovators

7 Habits of Highly Effective Innovators

Lately it seems innovation has earned its own 24-hour news cycle.

Corporate earnings reports and mission statements are littered with the term, and it’s perpetually the topic of books, newsletters, blogs, LinkedIn articles, moderated panels and industry conferences. A Google search for CPG innovation returned more than 5.7 million results. And yet, despite the vast amounts of time spent researching, analyzing, and pontificating about innovation, the CPG industry – big CPG, in particular – has a woefully poor track record.

Harvard Business School professor Clay Christensen famously estimated that of the more than 30,000 new products introduced every year, 95% of them fail1. A large study of the packaged food industry found that only 25% of new products were still around four years after launch2. By some estimates, as much as $35 billion is spent annually on failed innovation.

What gives?

Plenty of industry veterans have conducted post-mortems on CPG innovation, and most cite some combination of risk aversion, unrealistic goal setting, slow product development cycles, insufficient sales & marketing support, and general bureaucracy. We could add to the list – missing a human insight, over-relying on market intelligence, failing to plan for commercial viability – but in the end it’s easier to point the finger than articulate how to innovate successfully. Over the years Seurat Group has benchmarked hundreds of brands, from emerging challengers to billion-dollar blockbusters. We recently conducted an analysis to identify why certain innovation succeeds and identified seven habits of highly effective innovators.

For many CPG brands, innovation is a foregone conclusion – a templated box on the annual plan – rather than a deliberate strategic choice. But the most successful innovators are those who take a much more purposeful approach. That means starting by clarifying the role of innovation within the company. (Are you trying to increase household penetration? Participate in more “jobs”?) A sharp innovation strategy also articulates a clear financial goal. (Should innovation drive 5% of growth or 50%?) Answers to these questions are of critical importance in driving organizational alignment and decision-making.

Drinks on a shelf

A ready-to-drink nutrition manufacturer had a hero SKU accounting for roughly 90% of sales. The team saw that the core product was driving household penetration but servicing a very limited range of consumption occasions. Thus, their innovation strategy became about driving buy rate and extending to new jobs. A financial goal of $100MM in incremental sales within three years ensured the team stayed focused on big ideas and had clear metrics to evaluate success.

In many cases, innovation is regrettably fueled by capability rather than insight. Product designers and
engineers, eager to pounce on the latest advancements, are all too willing to use some new technology, process and/or capability to justify innovation – often with little regard for the end user. Consider the curved panel TV, debuted with great fanfare in 2013. Samsung, Sony and LG were eager to get in the game, excited by what promised to be a revolution in the viewing experience – only to have it widely panned as a gimmick. Why? Curved panel innovation stemmed from access to a new technology, not user research; the claims about a more immersive experience were simply to post-rationalize and justify an exorbitant price premium. As one ex-Samsung employee put it, “they were borne out of a capability, not a user need.” Similar examples abound in CPG, from product formulations to packaging technology and other novel advancements.

In addition to being strong general managers, the best innovators are experts in consumer behavior. They are not only dialed into the needs of consumers, but also actively evaluating how those needs are evolving to ensure innovation designs for the future, not the past 52 weeks.

When conducting research with leading-indicator consumers, belVita found consumers were “hacking” breakfast foods to feel more energized and sated without being weighed down. The insight drove Modelez to formulate its breakfast biscuits with “slow-release carbs,” communicating “4 hours of nutritious steady energy” in its marketing. belVita continues to find impressive, consistent growth in an otherwise struggling category as the brand blows by annual sales of over $350MM3.

Most new products wind up as line extensions or variants that are different but not necessarily better. By contrast, the most successful innovators recognize the importance of elevating the value equation – in other words, identifying areas where existing products can be improved. While that can occur in the denominator (i.e., providing the same benefit at a lower cost), more often it manifests in the numerator, either through (1) solving pain points or (2) creating delight opportunities. To do this well, innovators identify a clear foil: an incumbent whose value proposition they can meaningfully disrupt and from whom they can source volume.

In 2019, Smucker’s Uncrustables was humming along, a nearly $300MM business4 built on taking the effort out of no-crust PB&J sandwiches for kid lunchboxes and other on-the-go occasions. In 2020, along came Chubby Organics, directly attacking Uncrustables with its nut butter & superfood sandwiches marketed this way: “Chubby Organics offers the same indulgent sandwich experience as the leading PB&J brand, but we swapped out the JUNK ingredients so you can eat our good-for-you sandwiches without the guilt5.” With ingredients like chia seeds, Medjool dates and camu camu, Superfood Sandwiches may not be for everyone – but for those who prioritize a cleaner panel, they represent a significant improvement in the value equation – and enable Chubby to command a ~7x price premium6.

Plenty of brands do the hard work of mining legitimate consumer insights and identifying attractive profit
pools – only to fall down in understanding their right to win. Enticed by the next “bright shiny object,” brand leaders are quick to extend into new spaces without regard for where they can have a unique advantage. Burt’s Bees did a commendable job building equity in natural skin care – and then in 2016, overextended with a fumbled launch into pea protein powder. As one former Clorox leader reflected, “We had built this great equity in natural ingredients, but consumers knew us for skin care, not protein.”

The best innovators scrutinize why consumers choose their brand over others, and where the brand over-delivers relative to alternatives. Thinking this way allows for purposeful exploration of innovation spaces that build upon a brand’s unique right to win.

Kodiak cakes, best known for its protein-packed flapjack and waffle mix, has nearly doubled sales every year and is on its way to being a $100MM+ brand7. By building empathy for its most loyal users, Kodiak discovered its right to win wasn’t protein – a major packaging call-out and often-cited purchase driver – but rather convenient, nutrient-dense breakfast. Thinking that way enabled the team to explore a host of product categories and executions, and ultimately inspired the launch of toaster-ready waffles and microwaveable flapjack cups – both of which improve on the convenience and portability of the signature mix8.

Several companies have built successful businesses helping manufacturers evaluate new product concepts and gauge “launch readiness.” Unfortunately, in addition to being extremely expensive, these testing methods are limited in that they (1) tend to place outsized weight in stated interest and purchase intent (how many respondents say they are ‘interested’ and/or would ‘probably buy’); (2) lean heavily on historical benchmarks, which can be notoriously inaccurate for new-to-world products; and (3) are highly sensitive to manufacturer-provided inputs (e.g., projected % ACV). By contrast, great innovators take a more holistic – and flexible – approach to evaluating innovation.

A global beverage manufacturer was exploring ways to drive category penetration through innovation across its portfolio of brands. After using ethnographies to identify consumer pain points and develop hypothesized innovation platforms, the company fielded a quant study to validate and prioritize opportunities. In addition to asking about purchase intent, the study probed on brand fit, expected purchase frequency, projected incrementality and willingness to pay a premium over existing products. The resulting data, when layered with category analytics, enabled the team to scorecard each platform holistically and prioritize innovation spaces. To further refine the propositions, the manufacturer tested different versions of Facebook ads to gauge consumer responses to packaging design and pricing – all before R&D began the product development process.

Many CPG companies struggle when it comes to commercializing innovation, in part due to what is
frequently a linear, sequential process. In a typical situation, a marketing and/or insights lead partners with an outside agency to commission a study. Results are then presented to marketing, which spins a story and briefs a product development team, which then enlists supply chain, finance, legal and other stakeholders to make the product a reality. At that point, some poor soul is sent off to pitch the idea to sales and obtain a volume forecast. This process leads to inefficiencies and encourages a “CYA” mentality. By contrast, the most successful innovators recognize it takes a village to raise a new product and wire for success by engaging cross-functional stakeholders early and often – and providing ample opportunities for feedback and iteration.

A large dairy manufacturer set out to build a long-term innovation pipeline with the goal of reigniting interest in a declining category. Notably, the project was managed by a cross-functional team with representation from insights, sales, marketing, R&D, finance, supply chain and project management. When it came time to prioritize concepts, there was no need to “get sales on board” or “ask supply chain if they could actually produce it.” Leaders from each department had been heavily involved throughout, making commercialization smoother and integrating seamlessly into the annual planning process.

Another common innovation pitfall is relying too much on existing models and capabilities. Big CPG companies spend countless years and dollars building scale and efficiency, ultimately creating perverse incentives to blindly leverage those efficiencies when new models are needed. Consider Campbell’s Sauces, a modern take on the category General Mills pioneered with Hamburger Helper in the 1970s. While the insight territory is rich – consumers want convenient solutions that work with existing tools (skillets, slow cookers) to make dinner easier – Campbell’s lacked the conviction to challenge its go-to-market model, leaving retailers to decide where to shelve the products. Today the bulk of the brand’s website is dedicated to explaining to consumers where to find the items at every major retailer: Microwaveable Meals at Acme, Marinades & Sauces at Giant Eagle, etc.9

By contrast, the sharpest innovators flex the go-to-market model to best suit consumer and customer needs. Think of it as capital ‘I’ vs. little ‘i’ innovation. Examples include:

Licensing: Leading household product licensers capture upwards of 5% of their revenue from licensing and partnership strategies

Direct to Consumer: Blueland, the makers of environmentally sustainable cleaning products, have leveraged a DTC model to enter five household categories within the first 15 months of selling

Community Selling: Leading beauty & personal care brands use consultants and the 1:1 interaction of community selling to recognize virtually overnight success with new products – in stark contrast to the slow and steady model of building awareness and trial in traditional retail channels

Influencer channels: An increasing number of brands are curating breakthrough innovation in authentic channels where target consumers can more easily discover it. Oatly launched first in Intelligentsia coffee, building credibility with baristas and creating awareness among coffee enthusiasts. Similarly, for years RXBAR sold exclusively through CrossFit gyms, rapidly iterating on the product and packaging before finally entering Natural Grocery.

Ready to rethink your approach to strategic innovation? Contact us as info@seuratgroup.com.

Winning Omnichannel in the Next Normal

Winning Omnichannel in the Next Normal

Winning Omnichannel in the Next Normal

Does your organization have a strategy to gain share in an omnichannel environment turned upside-down by COVID-19?

A significant shift occurred in the consumer packaged goods industry over the past few years as leading organizations adopted an omnichannel approach to consumer demand generation and selling. These companies moved away from a siloed, ‘push’ approach to mass marketing and acknowledged the realities of a complex consumer / shopper journey along with the need to make brand connections in a more relevant, meaningful way. Those that made the shift realized significant growth as the majority of industry growth shifted to sources outside the traditional brick and mortar world.

COVID-19 heightened the importance of taking an omnichannel view as consumer points of influence and purchase rapidly shift. It also revealed the need to re-visit what we mean by the term omnichannel, given three new realities:

1. Omnichannel is bigger than we thought
2. Consumer / shopper journeys are dynamic and rapidly changing
3. Last year’s playbook no longer applies

Omnichannel is bigger than we thought

Do you know where your core consumer personas are making brand decisions and shopping? That question is increasingly difficult to answer, as the majority of CPG spending now falls outside of ‘traditional’ sources tracked by syndicated data.

Both brands and retailers now compete against a broader set of options that threaten to supplant their offerings with more compelling value propositions. A broader framing also makes it increasingly difficult to influence consumers as they move along the purchase journey.

Example: Functional Water

Brands and retailers must recognize that consumers do not think in terms of ‘channels.’ The imperative is to conduct regular, far-reaching assessments of where and how consumer personas are fulfilling their needs—or risk losing market share to unseen or untracked competitors.

Consumer/shopper journeys are dynamic and rapidly changing

Consumers are changing more quickly than ever. Gone are the days when brand owners and retailers could comfortably develop annual plans followed by a period focused on execution. The disruption and changes ushered in by COVID provide an important lesson on the need to adapt quickly.

While COVID is clearly disruptive, brands and retailers need to be vigilant and agile at all times. For example, the Pet category experienced tremendous change when Chewy.com and Amazon provided a much more compelling total value equation for pet parents that caught many brands and retailers flat-footed.

Brand owners and retailers need to efficiently focus resources on consumers that represent a disproportionate share of business. But rapidly changing consumer behaviors reinforce the need to also deploy forward-looking insights to identify future sources of growth or disruption, and proactively nurture these spaces before competition arises. This requires brands to develop rapid “test and learn” capabilities to create conviction and action new learning. Otherwise, business owners find themselves chasing new sources of demand and struggling to close a widening gap.

Last year’s playbook no longer applies

In this fluid landscape, it is increasingly challenging for brands and retailers to stay visible and trigger connections at the right time. In the Next Normal, brands can no longer be passive influencers of the experience at the shelf or rely on basic ecommerce search.

Example: Impulse triggers have shifted

The need to connect with consumers at the right time, in the right way, with the right message is even more important given that only 8% of today’s consumers consider themselves brand loyalists, and are highly willing to switch brands or retailers when they see a better offer.

It is critical to understand the relationship between your brand offer and your consumer’s lifestyle. Leading brand owners and retailers are using forward-looking journey insights to map where and how to best sway consumers through brand messages and value added experiences.

How to drive change

Brand owners and retailers need to take action now to ensure they are equipped to win in the Next Normal and beyond. As we’ve seen, the only constant is change: the CPG industry has changed as much over the past three months as in the prior ten years. Four key steps are recommended to configure for an omnichannel Next Normal. Each step is illustrated based on a case example from a leading personal care company that successfully unlocked new pathways to omnichannel growth.

Seurat Group is an insights-driven consumer packaged goods consulting and private equity firm whose mission is to delight consumers. We create for our clients the clarity to act & invest in a better future.

Reach out at info@seuratgroup.com for additional thoughts on building a consumer/shopper insight foundation and omnichannel growth strategy for the Next Normal and beyond.

Webinar: Igniting Sales Strategy That Fuels Brand Passion and Accelerates Growth

Webinar: Igniting Sales Strategy That Fuels Brand Passion and Accelerates Growth

Webinar: Igniting Sales Strategy That Fuels Brand Passion and Accelerates Growth

Building strong, sustainable brands today is inextricably linked with choices about where and how to sell. Getting discovered inside a traditional retail outlet is almost impossible as brands compete with 40,000 SKUs. This challenge in discovery combined with the reality that since 2016 more food and beverage transactions take place outside of traditional retail presents a quickly shifting market for challenger brands.

One of our managing partners, Jill Brant, was invited to lead a discussion with industry experts on how leading edge brands build insight on their consumer journey and then position their products for sale with customers that create the opportunity to generate brand passion. These brands understand that where you sell can become a source of advantage and a marketing strategy to drive outsized growth across the entire demand landscape.

View a recording of her presentation below.