When we went to work on this feature, we made a list of the smartest people we know. Leading experts on c-stores, consumers, consumer packaged goods, foodservice and retail who could help us develop a list of the most innovative products to roll out in recent history, things that have shifted and shaped your plan-o-grams and P&Ls.
But what good is it to you to commemorate past innovations? Products such as liquid-water enhancers and cigar foil pouches are undoubtedly game changers, but nonetheless are already in the rearview mirror of innovation.
Instead, the conversations that really generated excitement from our roster of experts were the untapped opportunities—areas ripe for innovative products, marketing or retail experiences.
Your task is to shape the opportunities to your business.
So how do you seek out innovation? It rarely comes when you’re looking for it—and yet the marketplace, your competitors and your boss won’t wait for divine inspiration.
It’s often said that the most innovative products give people something they didn’t even know they wanted. But today’s consumer culture—social media, e-commerce, blurring of channel lines, customization—has made brands more reactionary.
“What’s really changing is the model of how innovation happens. There are some true innovations, but a lot of what the CPG companies are doing these days is really just emulation or product extension,” says Laurie Demeritt, CEO of The Hartman Group, Bellevue, Wash.
Sure, there’s a lot of innovation happening, says Demeritt, especially when it comes to food and drink. “But it’s really driven by consumers, and then the broader food culture—media, chefs on TV, restaurateurs. … CPG hasn’t quite caught up.” (Which is why we spend much of this article looking at food trends that translate to other categories and channels.)
Here’s where the opportunities come in. On the following pages are 20 opportunities for innovation—chances for manufacturers and retailers to meet new demands and maybe even surprise the consumer. Read on, and be inspired.
Capturing the Singleton
Just as retailers and manufacturers have ignored household opportunities by focusing on moms, so too have they missed the chance to capture the growing number of singletons.
According to 2010 U.S. Census data, only 51% of adults today are married, and 28% of all households now consist of just one person—the highest level in U.S. history. And it’s growing at a fast clip: That number has doubled since 1960.
Further fodder: Singletons aside, approximately 50% of adult eating occasions are alone, according to The Hartman Group.
“I don’t think CPG has done a great job of keeping up with that change,” says Demeritt of The Hartman Group. “People who live by themselves don’t just want a frozen entrée warmed up in the microwave every night for dinner.”
Demeritt expects to see a rise in the products and services geared toward single, child-free households—concepts that cater to the “experiential” desires of today’s consumer. This can mean smart portioning and customization. A recent Hartman Group study on the subject highlighted Trader Joe’s salad kits and Sabra Hummus singles as good examples of products that “can shift solitary dining from a lonely occasion to something fun by serving as an interactive and pleasurable distraction.”
In the retail space, consider food stations—think blown-out salad bars with multiple grains and legumes and more—for people to customize and, as the Hartman report said, “aggregate snack items to become a meal.”
The ‘New View’ of Foodservice
Quick quiz: What is the ratio of your time spent looking at Excel sheets to time spent actually looking around your stores? Regardless of the actual numbers, you’re probably wishing for less screen time, right?
Well, restaurant operators are actually trying to be more like you. The International Foodservice Manufacturers Association (IFMA) and Datassential have teamed up to develop insights around dining occasions and eater types along with a comprehensive view of the foodservice industry—including grocery and c-store.
“While this type of research has been around for quite some time within the retail/grocery industry, it’s a fresh and essential approach for us in foodservice,” says Larry Oberkfell, president and CEO of IFMA. “Using the ‘new view’ of foodservice, we have the opportunity to revolutionize the entire industry by getting into the mind of a consumer. Why do they go where they go? And once there, why do they order what they do?”
While you can download the insights yourself at www.ifmaworld.com/landscape, highlights include a breakdown of “eater types” with regard to food away from home:
- Basic Eaters, 21% of the population. With a no-frills mentality, these consumers “eat to live” rather than “live to eat.” Affordability and speed are key motivators.
- Quality Essentialists, 22% of the population. Quality matters to them, but only to a certain point; It’s got to be good, but need not be spectacular. Consistency is key.
- Progressives, 28% of the population. Progressives are often foodies with a greater appetite for experimentation; many also favor health-conscious dining.
- Experientialists, 28% of the population. For them, it’s not just about the food, but rather the entire experience—from ambiance and service to kid-friendly options.
At the c-store level, the standards for quality products and a unique experience along with speed, consistency and affordability should be put against every category and every touch point in the shopping experience.
Stop Thinking Demographics, Start Thinking Need States
When categorizing your shoppers, consider not just who they are, but also when they visit your store and why. For every demographic there aremultiple needs, and you must understand thoseneeds before you can actually innovate. From there,consider what can be executed in the store.
Who’s the Household Decision Maker?
CPG manufacturers, retailers and consultants have spent much of their time and marketing budget going after Mom, and while moms are certainly a powerful demographic with a large market basket, she’s not necessarily the decision maker anymore.
Only 20% of all primary shoppers are moms, according to The Hartman Group, while half of primary shoppers are men. Kids are also increasingly part of the decision-making process, and the incidence of multi-generational households—currently at about 16%—just keeps growing.
So while moms are still very important—and many a savvy retailer has realized that to capture the discerning mom means capturing everyone in between—don’t ignore the others.
“Wow, [consider] the incremental opportunities with all these other households with demographics that look very different,” says Demeritt.
Take men as an opportunity. For one, we already know they shop the c-store channel more often than women. They also make mental lists of what to buy vs. written-out versions. Think about how to become the fill-in destination for the male shopper: the place for him to grab a loaf of bread on the way home from work, or to stop for granola bars and juice between the kids’ soccer games.
The New Day-Part: Pre-Breakfast
Having a quick nibble to eat before, say, getting to the office to have your oatmeal, has increased 15% in the past three years, according to The Hartman Group. So keep an eye on what consumers are buying on the way to work, and whether any CPG companies pick up on this blip on the trend radar.
Customization Turns to Curation
Chipotle and Coke Freestyle have superchargedthe consumer desire to “have it my way,” and nowcustomization has become an expectation.“Consumers are expecting more value for theirdollar. And I think a bad economy is a great way tospur that innovation,” says Eric Stangarone, creativedirector of The Culinary Edge, San Francisco.
But could customization jump the shark? When doeschoice become a burden? Hyper-minimalized burgerjoints such as Five Guys, with just a few options on itsmenu, is one example of the countertrend against toomuch customization. “For every disco movement there’sa punk movement,” says Stangarone.
But what’s even more interesting is an adjacenttrend toward “curating” an experience—bestexemplified by the boom in subscription-based mail-deliveryconsumption. It began with companies suchas Birchbox, which sends consumers sample sizes ofhigh-end beauty products that they can then buy ifthey like. The concept has spread to beer, clothing,coffee and—most notably in our industry—snacks.
The “curation” comes in that the user reviews theproducts online. The company then adjusts what itsends out each time based on users’ preferences.Eventually, you have a box of products landing atyour door chosen just for you.
How might this curated consumption translate tothe c-store? Expand the concept of a bundled offerand consider “grab bags” of a few products, pairingwell-known favorites with newer items to helpincremental sales. Create signage that focuses onconsumer need states, such as a woman who needsa protein boost, or a gluten-free male just back fromweightlifting. (See “Food as Pharmacy,” p. 24.)
Protein Power
It seems there’s some science behind the proliferation of protein-packed products. “The dietary need for protein may in fact be greater than we’ve been thinking for the past 20 years. There are other uses than what we talk about, benefits other than an energy source,” says Janet Collins, senior manager at DuPont and president of the Institute of Food Technologists (IFT).
Busting Down the Silos
The snacking phenomenon is not just changing the way we eat; it’s also changing how companies do business.
One-quarter of consumers eat four to five mini meals per day, and 21% simply grab food or drink whenever the opportunity arises throughout the day, according to Chicago-based IRI. Consumers don’t differentiate between the products in their pantry and those on the take-out menu—CPG vs. foodservice—and neither should brands.
“This is a tremendous growth opportunity for the CPG industry,” says Susan Viamari, editor of IRI’s Times & Trends. “Restaurant industry growth is outpacing CPG industry growth by a sizable margin. By adopting a focus on winning ‘share of stomach,’ rather than just share of CPG spending, marketers can adjust their analyses and strategies and reap significant rewards.”
The same conversation is happening on the other side of the aisle. “Food manufacturers are in a prime position because they own the brands that operators and retail/grocery sell to consumers,” says Oberkfell of IFMA.
Some manufacturers have already taken action. Minneapolis-based General Mills recently retired its Bakeries & Foodservice unit and relaunched it as Convenience & Foodservice. “Our c-store customers want to grow in foodservice, and our foodservice customers see convenience and snacking as a huge growth opportunity,” says Mike Burris, channel marketing manager. “We’re breaking down the barriers to ensure that structure doesn’t impede the ability to deliver that expertise to our customers.”
While c-store retailers can expect to see shifts in strategies from their CPG and foodservice partners, they should likewise looks for synergies between their own snack, beverage and foodservice categories.
The Bifurcation of Retail
In 2014, in a culture that has experienced the impact of both The Food Network and The Great Recession, we are witnessing a unique split in the retail landscape. “There’s not much of the mass market anymore,” says Demeritt of The Hartman Group. “[Some] people tend to be moving to one end of the spectrum—to the really value-driven end—and then the other group is moving toward the higher-quality, premium end.”
Take a look at retailers across the segments and, sure enough, the leaders fi t into one of those two buckets, be it Aldi, Dollar General, Whole Foods or The Fresh Market. And what really doesn’t work, says Demeritt, is trying to serve both populations: “We don’t think in this day in age you can try to do both very well.” It’s what traditional grocers are doing, and are struggling.
What’s more, consumers are shopping less in grocery stores and mass merchandisers overall and paying more visits to drug, dollar, convenience and club stores, according to IRI.
“Manufacturers must stay in lock step with these changes and explore new opportunities to stay in touch with key consumer targets, such as channel-specific products, packs and pricing to meet consumer needs, achieve acceptable margins, and set distribution strategies that create a more narrow and focused assortment,” says Viamari of IRI.
C-stores should consider ways to kick grocers and mass merchandisers while they’re down—dollar chains certainly are. Demeritt suggests leveraging the obvious immediate-consumption needs with fill-in shopping opportunities. “What am I going to have in the next 24 to 48 hours that is going to be a supplement to whatever I have in my home? It’s probably not going to be fresh per se, but refrigerated, perishable items,” she says.
Fresh to Your Door
We often equate delivery with foodservice, but why not focus on other c-store staples? A concept that started in Madison, Wis., and has since expanded to St. Paul, Minn., Madtown Munchies is a delivery-only, storefront-free convenience store that focuses on college campuses and surrounding neighborhoods.
Retailers can either tap into the opportunity, or give it away to others such as Madtown.
Tell Me a Story
Across industries, the conversation around corporatecitizenry continues, encompassing everything fromsustainability to the treatment of employees. The underlyingtheme is that consumers want to feel good aboutwhere they spend their money.
Sometimes that brand story already exists, createdby the founder or owner of the company. But what ifyour brand doesn’t really stand for anything—or at leastanything that resonates with today’s consumer?
“The opportunity lies in looking at populations ofpeople and saying, ‘What are they doing and how canI connect that to my brand meaningfully?’ Not chasingthe tactics, but chasing the metaphors and strategiesbehind it,” says Stangarone of The Culinary Edge.
“Is everything at Whole Foods organic? Not really.Does everything at Whole Foods feel like it belongsunder that roof? Absolutely.”
Stangarone recommends not looking at trendy “burstsof behavior,” nor too broad a collection of consumers.“But if you look at your guests and … their values, thenyou start to home in on some attitudes.”
E-Commerce vs. Impulse
There is no doubt the Internet has affected the way consumers shop, but what is less apparent is how it might affect the convenience channel. So far, it seems that unlike your mass-merchandiser brethren, impulse-driven c-stores may have the upper hand over online retailers.
“We’re not seeing the increase in usage of e-commerce that all of us predicted a decade ago,” says Demeritt of The Hartman Group. “It’s growing, but quite slowly, for very select things.”
“Web-enabled grocery delivery is now in at least generation three, and still appears to be floundering,” says Michelle Barry, president and CEO of Centric Brand Anthropology, Seattle. “Some folks are doing cool things but don’t appear to be profitable.”
Demeritt attributes it to the American consumers’ lack of planning—a pretty pivotal element of e-commerce, even with next-day delivery.
And it’s the retail industry itself and the expansion of CPG across all channels that has decreased our need to plan. The Hartman Group calls it the “roadside pantry”: “You can stop anywhere and find food to eat,” decreasing your need to plan, says Demeritt. But don’t ignore e-commerce; assume online retailers are strategizing ways to make you irrelevant. Focus innovation on the elements that differentiate you: impulse and the sensory experience.
Apps With Meaning
By now, most big brands have developed their own apps—and while embracing such technology is great, even necessary, few have done so in a meaningful way.
“Most information-based shopping apps don’t tend to produce much that is worthwhile; they simply reproduce the standard text and photos you see on a manufacturer’s website,” says Barry of Centric. “So far it seems like the focus has been to put products like apps and such out there because we can, and because of our cultural obsession with technology, without any real consumer need driving them.”
Customer reviews back Barry up. A report from mobile-solutions firm Xtreme Labs released last year found that only two retailers received positive ratings for Apple and Android apps: Walgreens and CVS. A Forbes article on the report cited “immediate actual utility” as the reason why those apps scored well. So before rolling out or updating an app, carefully consider how to make it relevant and functional.
Vending Revival
The buzz around vending has been slowly building over the past few years. While on the surface it looks like another avenue of competition, the technology might be translatable to the convenience channel. And consumer acceptance of purchasing meals from a machine may help c-stores’ own freshness perception.
Redefining Luxury
Consider the data from IFMA and Datassential’s “Foodservice Landscape” study that 56% of people want an away-from- home meal to provide something beyond mere sustenance, and you begin to understand how Americans have raised their expectations on the consumer experience.
Perhaps it was an effect of the Great Recession, but consumers today are looking for small daily pleasures and affordable luxuries, be it a nice craft beer or a handcrafted cupcake.
“Twenty years ago, luxury meant something I can’t afford, for rich people, maybe something I have once or twice a year,” says Stangarone of The Culinary Edge, evoking images of yachts and jewels. “None of that really matters. … We’re yearning for what can make me feel luxurious in this moment.”
“7-Eleven is labeling wines with tasting notes. Five years ago that would have seemed absurd, but with lines blurring, it is much more plausible today,” says Barry of Centric.
This is an opportunity that many retailers and manufacturers have already captured, but the impulse nature of the convenience channel makes it even more of a viable opportunity. And think not just about product-based luxuries, but also the retail experience itself.
Holding Innovations
The foodservice industry has experienced an onslaught of cooking-technology innovations in recent years. Industry experts tell us the next category to get a major overhaul is hot-holding equipment—certainly a plus for c-store foodservice.
E-Cigs 2.0
The boom of the e-cig market has been the top c-store story of the past few years, but the category is really only in its infancy, and industry experts expect a whole new evolution in terms of technology and customer experience.
Soon enough, a number of trends will merge—or duke it out—to become the consumer’s preferred product. While the c-store industry has largely focused on products that mimic the shape and feel of a tobacco cigarette, a thriving culture exists among consumers who prefer personal vaporizers, frequenting vape shops for e-juices, investing in rechargeable kits and developing a culture onto themselves. In fact, the number of manufacturers rolling out new or advanced vaping products in early 2014—from Vapor Corp. to 21st Century Smoke—has been notable.
Other manufacturers seeking to differentiate themselves include Ploom, whose device atomizes actual tobacco, herbs, liquids, waxes—you name it. Vapor Corp. was at the Consumer Electronics Show in Las Vegas earlier this year showing off the prototype of a rechargeable vaporizer unit with patent-pending fingerprint lock technology.
“What’s being used today two years from now could be ancient history,” says Lou Maiellano, president of TAZ Marketing & Consulting Group, Sevierville, Tenn. “All you have to do is go back and look at what was used in the past. It’s constantly evolving. There’s going to be real changes.”
Convenience Cuisine
Foods aren’t just convenient for consumers. The foodservice industry has long used products that allow operators to make high-quality products with fewer resources, and Oberkfell of IFMA has seen a lot of innovation around partially prepared baked goods, sauces and other items that reduce prep time and require less space and talent as scratch cooking.
Food as Pharmacy
A quick perusal of recent c-store product rolloutsreveals a huge societal trend towards functionalfoods. Food or beverages with a health benefit, beit low-fat or high-protein, is nothing new, but theproliferation of products and consumer expectationcertainly is.
“It’s something we’re hearing particularly frommillennials,” says Demeritt of The Hartman Group.“They talk about these nagging day-to-day quality-of-life issues: ‘Is there a way via food and beveragethat I can help improve my quality of life?’ ”
The proof is in the numbers: On the beverageside, dollar sales for the category of ready-to-drink“wellness and functional” beverages grew 3.9%from 2011 to 2012, making it a $65.3 billion category,according to the Beverage Marketing Corp.,New York. The entire $143.5 billion ready-to-drink beveragesector increased only 2.4%.
The retailer’s opportunity lies in thinking notjust about traditional categories—CSD, bottledwater, iced tea—but also the very specific needstates of consumers beyond satiety or craving. Butalso be careful to not fall down the rabbit hole offunctional foods—balance niche products that fityour consumer base with core SKUs.
The Future of Food Packaging
All three of the food scientists we spoke to for The Innovators Issue discussed the evolution of food packaging and labeling. Roger Clemens, chief scientific officer at ingredient company Horn, and past president of the Institute of Food Technologists, described microchip coding based on consumer’s genetics and what he/she needs nutritionally at that specific point in time.
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