The marketplace and the consumer have changed – forever.
COVID-19 has brought structural changes to where we eat, what we eat, and who we eat it with. For those entrepreneurs that are able to see into the future of these impacts, this is a great time to bring innovation to the marketplace.
For example, many people used to take a protein bar with them to work for an afternoon snack. If they’re working from home, wouldn’t they rather have something else instead of a bar? Wouldn’t they like something less processed but still convenient that they can grab and enjoy?
Along with consumer marketplace changes, there have also been changes to the investment strategies of venture capitalists and private equity investors. Investors are now more cautious, so early stage companies will face a more rigorous due diligence process. These investment firms still have capital to invest, but they are now looking harder at company fundamentals.
Irene Rosenfeld, former CEO of Kraft Foods, once said: “If you don’t have a competitive advantage, don’t compete.”
The question for entrepreneurs is: What is your competitive advantage for getting funding in these times of greater due diligence scrutiny?
Many food and beverage entrepreneurs come from non-technical backgrounds such as culinary or marketing. These types of backgrounds are excellent because these entrepreneurs are typically very creative in identifying and addressing unmet consumer needs. However, having a strong consumer focus can leave the technical fundamentals of the company disregarded for too long. Investors today are less lenient and will no longer accept companies lacking in technical and strategic experience.
This points to a great opportunity and potentially strong competitive advantage for early stage food and beverage companies: have a strong technical basis for your company and talk about it in every networking conversation and in your pitch deck. Addressing the technical basis of your company early on will also set you up for smart growth by eliminating issues early and minimizing the risk of future problems by having structures in place to deal with unexpected technical challenges.
Some basic technical areas to develop include:
- Purchase Interest for Your Product
Using an online survey, you can efficiently measure the “Top 2 Box Purchase Intent” of your target consumer as well as identify the key product features that will drive them to buy your product over the competition. These are the features that you should shout about in your product communication! You can also determine price elasticity and understand whether you can make a reasonable profit at the intersection of the price consumers are willing to pay and the volume of sales you can expect.
- Optimize Consumer Liking
Use statistically designed studies to identify what improves consumer liking and then find the predicted optimal level of ingredients/attributes that will make your product the best it can be. Designed Optimization Experiments are much more efficient and faster than the “scatter shot” trial and error development that is often used. Combining consumer test learnings of key flavor and texture drivers and profiling by trained sensory panelists efficiently translates consumer language into actionable ingredient and formula solutions.
Which certifications are important for your product and consumer? Choose wisely based on your target consumer rather than getting a bunch that don’t contribute to purchase intent. Certifications are resource intensive to get and to maintain so focus on the important ones first!
- Optimize the Package for the Product
Your package design and graphics must be an excellent ambassador for your product and company. It’s the first thing the consumer will see on the shelf and it needs to compel them to pick it up and learn more! Beyond the graphics, the package must do an excellent job of protecting the product during distribution and helping it maintain shelf life. Finally, is it optimized for the lowest possible cost while still achieving the critical requirements above?
- Shelf Life
Is your product formula, package and code date designed for maximum food safety and sensory quality? How did you validate the microbiological safety and the sensory attributes over shelf life?
More advanced areas can include:
- Project Management
Are you efficiently developing and commercializing your innovation by using a project timeline with clear activities, milestones, success criteria, assigned accountability and due dates? There’s a great quote attributed to Peter Drucker that says “What gets measured gets done.” Without knowing what needs to get done and who is going to do it, things don’t get done efficiently!
- Formula Optimization for Scale
Can the product you made on the bench be commercially manufactured at scale for distribution? How will it be made and have you assessed the risks of undesirable product defects from manufacturing?
- Supply Chain Optimization for Scale
Are ingredients available in the quantities needed for your sales volume? If you’re using unique ingredients or ingredients made in another country, how quickly can the supply respond and grow with your success?
- Cost Optimization
Early on, you’re likely going to have high costs due to the relatively small scale of your company. Have you reduced your costs as much as possible to maximize your margins in order to make investment from others more attractive? What are your future plans to reduce formula, packaging and processing costs without changing quality?
- Intellectual Property
If you’ve done some or all of the things above to develop the technical depth of your company, how are you going to protect that information? What strategies will you use and do you have the appropriate systems in place to protect it?
As just one example of how a technical area can be developed early on, consider this and see if it sounds like your company:
Many entrepreneurs put their first formula into the marketplace very quickly in order to get consumer feedback and be first to market. They’re willing to sacrifice optimization of the product for speed to market but potentially risk alienation if the consumer doesn’t like it and decides to never purchase it again. While large CPG companies can be faulted for over-testing and trying to get a product perfect before launching, there’s a happy middle ground between high quality and speed to market. A simple experimental design can efficiently predict the optimal levels of ingredients to achieve a product that consumers will love and purchase again.
All of the technical areas above can easily be addressed by leveraging people from your network with the right knowledge or by engaging a consultant with a strong technical background. The time and resources you invest early on to develop a strong technical basis for your company will set you apart from others during conversations about potential funding!
If you’re not sure where to start, feel free to contact me at email@example.com for a pro bono consultation.
Greg is a Research and Development Consultant and Innovator with extensive Product Development, Project Management and Strategy experience. He’s known for his strong expertise in food/beverage formula and process development as well as project management and commercialization to deliver innovation and drive growth.
He’s worked for and with many Fortune 100 companies including Kraft Foods, Starbucks, McDonalds and Nature’s Bounty as well as early stage start-ups.
Greg is also an entrepreneur having ideated, patented and successfully commercialized a repositionable magnetic frame hanging system – Gallery Magic®. He achieved nation-wide distribution in Ace Hardware and a five-star rating on Amazon and on The Grommet.