Eating healthy, vegetarian/vegan alternatives, gluten free, the use of palm oil: New trends on health, sustainability and convenience, impact the food industry continuously. How these will affect growth and margins is not always clear, especially when the economics – from production all the way to sales – are not transparent. The same applied to our client. Commercial conditions with vendors were often complex and confusing due to promotions, kickbacks, block discounts, combination pricing, and other special incentives. So how do these new food trends affect the economics? And can we make it a chance for new and sustainable profit?
Our mission and approach
We first set out to develop a new compass for innovation – to embrace new trends as much as possible. We started by making a thorough analysis of the real net-margin per elementary transaction. This formed the base to combine transactions into full contract economics and customer (segment) profitability. Further breakdown of the product portfolio actually showed pockets with extraordinary high margin potential. This unveiled key success factors for product innovations: characteristics such as specific ingredients, packaging, portioning and ease of preparation for end-user. We completed this work with a quick scan of the consumer and vendor market – and unravelled how local consumer demographics should determine the commercial strategy per retailer in different parts of the country.
Innovations aimed at new customer values proved to go hand in hand with higher profitability. Products matching consumer health trends actually showed most opportunity for sustainable growth in an otherwise lukewarm market segment. By uncovering these insights in close collaboration with management, the company was able to expand its product range and direct its product development – profitable and fitting to the new, conscious, customer segment.