In today’s newsletter:
Transformation: How experience can unlock more value for your brands
BFY Change: Are we entering a new era in healthy food?
Restaurant Balance: Digital and In-Store
Corporate Speak: Is it time to rethink business inspiration?
Tidbits: Quick links to cool food news
Taste the Transformation
OREO has launched a limited edition Most OREO OREO Sandwich Cookie. The cookie takes the classic and fills the interior crème with crushed up cookie (or as OREO’s copy says “These cookies and creme flavored OREO cookies are full of themselves”). The Inception-level cookie will be launched alongside OREO’s new OreoVerse, an immersion digital space where consumers can play cookie-related games.
Belgian Boys, makers of all things cookies, pancakes and waffles (including stroopwafels), is launching a limited edition pancake cereal. Based on the TikTok trend, the ‘cereal’ consists of Belgian Boys mini pancakes microwaved for a few minutes and served with milk (or butter and syrup). Available for a limited time at Target.
Kettle Brand (a Campbell’s brand, not the Australian brand) has launched an Air Fried line of chips. The new chips are cooked in oil-filled kettles, as the brand name suggests, but finished in an air-fryer “for a light and crispy crunch.” The chips are available in three varieties, Sea Salt & Vinegar, Himalayan Salt, and Jalapeño.
To announce the launch of their new Japanese-inspired Teriyaki Steak sandwich in the UK, Subway hired an artist to create “the world’s smallest sub.” The clay-based sandwich was created to be 1/12th the size of the original and includes a proportional bag and soda cup. You can watch a video of the mini-sub creation here.
So What? There is a growing TikTok trend of people freeze drying candy (e.g., Warheads, Jolly Ranchers, etc.), beverages (e.g., sodas) and other foods (e.g., pickles, ramen, Fruit Roll-Ups, etc.), then eating the result on camera. TikTokkers like TrendyTreat and TastelyBox have millions of followers and both are now selling their creations to curious viewers (e.g., TastelyBox product website).
There is something intriguing here that could be big for food manufacturers: selling the allure of transformation. Humans love to watch something we are familiar with get transformed in surprising ways. Whether it’s Fruit Roll-Ups getting freeze dried (what will happen??) or Post-It Notes getting crushed in a hydraulic press (The Hydraulic Press channel has 4M subscribers), we are drawn to the mystery of conversion. In fact, psychologist have long noticed that we are hard-wired to enjoy watching ordinary objects change into something new, its why slight of hand magic is so fun to see.
I think this freeze-dried craze has unlocked a new level of potential line extension or limited editions for big brand food/beverage CPG. It would go something like this:
1. Create a TikTok, Instagram, or similar video where an iconic product is exposed to a transforming technology (e.g., freeze drying, puffing, canning, fermenting, liquifying, etc.)
2. Package and sell result and hint at a surprising transformation
3. Ask consumers to post reaction videos
4. Repeat
For example, what if Mondelez took regular OREOs and put them into an industrial vacuum chamber and puffed them? How would that change the texture/flavor/experience? Would they still be crunchy? Would they be chewy? Could you still dunk them? Would you pay to find out? I’m guessing a lot of people would pay double normal line price to taste the transformation, bringing news and interest to the brand.
While form changes have been a staple of line extensions for years, it’s always been rooted in the fact that the product is a new formula or process. I think there is a power in using a social media to take consumers on a journey and allow them to be part of the transformation of the original product.
The BFY Innovation War is About to Begin
Korean company My Beauty Secret has launched a new line under their Fresh Bell brand. Pomegranate Collagen Jelly Sticks are individually-wrapped gelatin sticks made up of Spanish pomegranate juice and marine collagen peptides. The company claims that their low molecular weight collagen is easy to absorb and supplies the body with nutrients it needs for better skin. Available via the company’s website and at major retailers (like Walmart).
Oregon-based superfood company Wilderness Poets has launched a new squeezable package for their Spin Nut Milk concentrates. Users add the concentrates to a blender with water and spin. Each 8oz squeeze packet of concentrate makes 3 cartons of nut milk. Varieties include Original Almond, Unsweetened Almond, Vanilla Almond, Cashew Cream & Milk, and Macadamia Nut Maple.
San Diego’s Triton Algae Innovations is launching an algae-infused pasta into retail markets. Branded under the company’s Too Good To Be Foods label, the pasta is infused with Triton’s microalgae (produced via a proprietary sustainable fermentation process) which supplies vitamin A, iron, omegas 3, 6, and 9, as well as protein. The company’s fusilli and linguine products are available exclusively from Amazon.
Tahini maker Soom is out with a new line of snacks called Tahini Bites. Packaged in resealable pouches, the bite-sized snacks contain a mix of dates and tahini combined with spices and seasonings. Varieties include Double Chocolate Brownie, Cherry Chocolate Chip, and Pumpkin Spice. Available from the company’s website as well as Amazon, Whole Foods, and regional grocers.
Canadian startup Cove Gut Healthy Drinks is launching a new line of sodas. The company, which also makes kombucha, will offer the new sodas in three flavors, lemon-lime, orange and grape. Each contain probiotics and prebiotics, all organic ingredients, and natural plant-based sweeteners. Available in Canada at Loblaws and Sobeys, and later this year in California.
Oatmilk maker Oatly Group AB has announced that they will be debuting climate footprint labels on four of their oatmilk yogurts (‘oatgurts’), with plans to expand this to twelve products in the next two years (although the info for all 16 products will be available online immediately). Oatly is utilizing a 3rd party company, CarbonCloud, to verify their carbon numbers.
So What?
While it may feel that the Natural & Organic (N&O) and overall Better-for-You (BFY) sector has always played a pivotal role in the food business, it’s important to remember that its place in CPG is extremely recent. In fact, if N&O was a story, we’d still be on the first chapter. However, recent activity makes me believe that this chapter is quickly coming to an end, which means we are about to see some big shake ups.
Before we get into that, allow me to give an extremely simplistic recap of where we’ve been:
N&O Phase 1
(1970s-1999) N&O brands slowly build cultural capital in the niche natural grocery channel
(2000-2008) Mainstream consumer interest in N&O grows; big CPG makes small venture investments (e.g., Kellogg buys Kashi)
(2008-2014) N&O startups begin to disrupt mainstream categories (e.g., Chobani in yogurt); big manufacturers see profits decline and create own label better-for-you (BFY) versions of current portfolio offerings to stem the losses
(2014-2023) Large CPG companies begin to acquire N&O/BFY brands at an accelerated rate, remaking their portfolios with health and wellness as a key component
As we start 2023, the biggest players in food and beverage N&O are multi-billion dollar companies (e.g., Kroger’s Simple Truth is the largest organic brand in the world and Walmart and Costco are the #1 and #2 organic retailers). While this dominance seems secured, there is trouble brewing. With over a decade of N&O mainstreaming, there is little left to ‘clean up’ in terms of traditional packaged food. Big CPG has worked its magic making supply chains and production of N&O faster, less expensive, and more readily available. Every ingredient deck has been shortened and ‘un-chemicaled,’ founder stories solidified, and copy romanced. Today, from chips and cookies to bread and frozen meals, every grocery category has multiple BFY players.
However, that’s the problem. BFY products are no longer novel. Getting a ‘clean’ cookie or natural ice cream used to require a special trip to a health food store, but now Walmart carries hundreds of brands. This means charging a premium for BFY benefits (like organic) and standing out on shelf is getting much harder, so the price gap is shrinking. This has led to large manufacturers reshuffling their portfolios, with Danone looking to sell their US organic brands and General Mills divesting Food Should Taste Good.
Now we are entering N&O Phase 2.
With margins getting tighter for larger manufacturers and retailers, breakthrough innovation becomes the only answer. However, this also opens up the gates again to startups. Major manufacturers will likely favor innovating in the categories and forms that give them the best margins. So, if they are a snack bar or frozen meal company, they’ll preferentially create innovations that use their amortized IP and equipment to keep costs low (My advice to major CPGs—invest in groundbreaking BFY innovation beyond your current capabilities). Startups that push into new categories and use novel technologies could break through in the coming years.
My predictions for N&O Phase 2:
Supplement and beauty companies will be surprise entrants into food/beverage N&O/BFY. The benefits that are starting to resonant with consumers (gut health, mental health, beauty through diet, etc.) may be more credible coming from these companies. Potential opportunities for CPG partnerships abound.
Grocery retailers and private label double-down on BFY innovation. The novelty that we used to think of coming from major CPG companies may shift to retailers as grocers look to strengthen their bottom lines. Instead of BFY startups being acquired by major large CPG companies, I can see Walmart, Kroger or Target being the buyers and folding the tech and products into their lines.
More acquisitions. There are certain brands that have gained enough distribution and tech that companies will likely purchase them to stop further erosion. For example, D2C cereal brand Magic Spoon just announced they are expanding to 6.8k+ stores across the US, including Target, Walmart, Kroger, and Albertsons. I would be surprised if they haven’t been approached for a buyout.
Restaurant Balancing Acts: Digital and In-Store
Subway saw impressive growth in 2022, with a move away from customization and the creation of a new menu. While currently pondering whether to sell the company ($10B is the likely asking price), Subway is continuing to innovate. One major change that you’ll soon see in stores is the arrive of a deli slicer. Subway CEO John Chidsey told CNN that slicers will give customers “a better perception of seeing the nice, fluffy meat.” Plus, Chidsey sees a cost savings of moving the slicing into stores versus at a central location.
Starbuck’s interim CEO Howard Schultz has one last surprise for customers before he hands over the reins to Laxman Narasimhan on April 1. At his final earnings call, Schultz said the company will unveil “something much bigger than any new promotion or beverage.” “While I was in Italy last summer, I discovered an enduring, transformative new category and platform for the company, unlike anything I had ever experienced. The word I would use to describe it without giving too much away is alchemy.”
Dunkin’ announced last week that they are introducing their first Member Exclusive beverage. The new Brownie Batter Signature Latte, inspired by the chain’s “beloved” Brownie Batter Donut is available only to Dunkin’ Rewards members through the company’s app.
So What? COVID accelerated consumers’ changing relationship with fast food. While Subway is gaining momentum, this comes after a serious struggle in the past few years as the chain tried to regain its health credentials. Starbucks, for all its genius with mobile apps, is losing share and leadership, as customers renegotiate what the stores mean in a coffee-saturated culture.
How do these chains maintain profit and customer interest? Do they push more mobile convenience or in-store excitement? Mobile has less of the sensory cues that lead to impulse buys, but stores have to offer mobile or they might lose business. Dunkin’, and Starbucks for that matter, are betting on unique mobile offerings to keep customers loyal.
When customers do come in, it needs to be worth it. Hence, Subway slicers and Schultz’s “transformative new category.” Businesses need to work hard on both the digital and the in-person fronts to keep customers engaged and interested.
***Oh, my guess on Starbucks’ big reveal? Gelato. The Milan Reserve current has a nitro gelato machine that makes the frozen treat instantly. Meaning they can serve affogato (gelato with hot espresso) or brioche con gelato (gelato nestled in delicious buttery bread). Starbucks announced on their earnings call that morning and early afternoons are their prime times. Gelato could increase foot traffic in the late afternoons and evenings. Just a wild guess on my part!***
Rethinking Corporate Speak
We need to stop and rethink motivational corporate slogans.
Created in the last decade when every massive corporation was obsessed with pretending to be a startup tech company, many of these inspirational mottos are heavily steeped in cringe-worth grind culture. While well-meaning, too often they sacrifice pithiness for clarity and are misunderstood, misused and misdirected. Without the underlying context (which isn’t being read), these slogans are being used to reinforce careless behavior.
“Fail fast”—sure, it’s better to fail early (instead of spending lots of money and time, and then still failing), but this saying misses the important bit that failure is only useful when you learn from it. Instead, I’ve seen this saying used to justify a string of money-burning decisions that don’t advance a project. If failure happens, at least make it worth it.
“Move fast and break things”—even Facebook has gotten rid of this motto, but I still hear it in meetings. For startups and ringfenced venture projects that are piloted to explore, this might make sense. But for everyday business, it’s a dangerous way of thinking.
“Bias for action”—OK, I actually like this motto, it spurs people to do something rather than passively accept things. However, when presented as a ideal without stressing the HOW, ‘bias for action’ becomes an excuse for terrible choices.
Back in 2007, researchers did a study looking at soccer goalkeepers. After analyzing 286 penalty kicks, the researchers found that for the overwhelming majority, the best blocking strategy would be for the goalies to stay on their feet in the center of the goal. But that’s not what they did. In fact, almost every time, goalkeepers jumped left or right. Why? Because that’s what goalies felt they were expected to do! When the game is on the line, and every point counts, goalies believed that they needed to show action, even when jumping was not the right thing to do.
In other words, just telling employees to have a ‘bias for action’ can lead to herd mentality and a ‘ready, shoot, aim’ response. I’m all for bias for action, but only if it’s partnered with bias for thinking first.
What corporate motivation slogan are you ready to retire? Or better yet, how would you improve them?
TIDBITS:
China has created ‘super cows’ (more milk, faster. Could this shift dairy power in the world?)
Microsoft Teams Premium uses ChatGPT and AI to recap meetings (will people still pay attention?)
Inflation is pushing more people back to bread machines (is there an opportunity for greater innovation in this old tech?)
Is human hair the biggest frontier in material recycling (are you ready for clothing and packaging made of hair)?
The Google spinoff company that is using tech to create hard to produce aromas (can brands formulate less expensive but more alluring smells?)
Why University of Florida makes $20M off Gatorade every year
Is Starbucks shortchanging customers on caffeine?
A new $70 candle that smells like pasta water (that’s not an insult, it’s suppose to smell like water that pasta was cooked in)