It’s About Food – But Also Disruptive Business Models

By: Mark Baum, Senior Vice President, Industry Relations and Chief Collaborations Officer, Food Marketing Institute

Food, beverage, and related product preferences are still the key draw, but today a company’s business model also figures into consumer purchase decisions. That’s because grocery business models are being reinvented in ways that provide specific benefits to customers.

Some examples are:

• Subscription programs that enable easy replenishment.
• Meal kits that offer convenient culinary cooking adventure.
• Direct-to-consumer delivery enables consumers to skip trips to physical stores.

Retailers need to understand each model and the relevance to different customer need states. For example, some of the models aim to make the lives of time-starved shoppers easier, while others offer a culinary experience. Understanding these insights can help retailers consider how incorporating these different business models into traditional food retail can lead to business growth. It’s also important to consider collaboration opportunities with trading partners so food retailers can begin to diversify their offerings to shoppers. Below are three new business models to consider:

Reinventing Frozen Foods

“How many of you are busy?” asked Rachel Drori, founder and CEO of Daily Harvest, who outlined her company’s model during a presentation at Grocerytalk. “You may want to eat clean foods, but life is busy.”

Daily Harvest is a startup that uses a direct-to-consumer subscription and delivery model for its nontraditional frozen food line of products. The company aims to present frozen foods in a new “superfood” light by offering items rich in produce and nutrients. It emphasizes ease of preparation and superior health benefits compared to a wide variety of “hyper-processed” foods on the market. The brand’s items, ranging from cacao and avocado smoothies to blackberry and majik parfaits, are delivered to consumers’ homes along with simple preparation instructions.

The business model is especially geared to a new breed of consumers who want to know more about product ingredients and attributes.

“By owning the supply chain, we can have full transparency from beginning to end,” she said.

Here we have a new spin on a traditional product line, which is an interesting way to re-introduce products to your shoppers. What product lines in your stores could be reinvented in a similar way? Which trading partners might you partner with to pilot a similar business model?

Retooling Meal Kits

Other companies are putting new spins on already popular models, such as meal kits. These kits have enjoyed significant growth over the past few years. A young meal kit company, Chef’d, has been attempting to differentiate with some new elements. These include:

• Avoiding an emphasis on subscription programs, in contrast to many competitors, in order to promote flexibility.

• Offering a wide range of options with “thousands of meal kits from renowned chefs and food brands from around the world.”
• Emphasizing easy reorders and personalized recommendations.
• Taking an omnichannel approach by making products available in multiple places.

The Chef’d founder and CEO, Kyle Ransford, said meal kits are positioned to surge at retail.

“Retail is where meal kits will grow at an incredible rate in the next 24 months,” he said. “The retail vertical is going to be as big or bigger this year for us than the online vertical.”

While there is opportunity for meal kits at retail, the right business model is still being determined and there is not a “one size fits” all solution in this space. Food retailers are experimenting with different ways of offering meal kits to shoppers, while stratifying their need for convenience and food exploration. It will be interesting to see which food retail meal kit business models become the most successful moving forward.

Snacking With Subscriptions

Subscriptions may not be important to some companies, but they are essential to the strategies of others.

KIND Snacks, a high-profile brand in the snack bar industry, is growing its business with a subscription concept that offers convenience and builds loyalty.

The KIND Snack Club is a subscription and delivery program that enables customer replenishment at desired intervals without the need to visit a store or execute regular online purchases.

The club’s benefits include discounts, surprises that include free food, early alerts about new products, and the ability to suggest new flavors and items.

The club model helps to underscore the brand’s positive messages, said Jarid Lukin, vice president of e-commerce, KIND Snacks.

“People buy KIND partly because of what it stands for. So we integrate that into a subscription experience,” he said. “Who wouldn’t want to belong to a club of kindness? You need a strong brand message or you’re just a commodity.”

Food retailers should ask themselves what products or categories might lend themselves to this type of a subscription model. The focus on snacking subscriptions meets a specific need for shoppers, but there could be a way for a traditional grocery store to offer a subscription model that satisfies similar or other consumer needs while growing basket size.

Take Advantage of Changing Business Models in Food Retail

Whether delivery, meal kits or subscriptions, each of these nontraditional business models tap into specific customer needs. Food retailers have always been adept at identifying and incorporating emerging trends into their own platforms. Retailers need to fully investigate the range of nontraditional models so they can determine how to respond to these market shifts and emerging business models as well as offer new models of their own. Should they partner with upstart companies? Should they introduce their own unique spins on these new and emerging models? It starts with understanding the new landscape, and then developing an action plan geared to a retailer’s specific customer base. It’s an era of experimentation and I can’t wait to see what happens next.