The era of category management has created many positive changes for the food business, like giving retailers the tools to minimize supply chain risk while consolidating suppliers. But one of the negatives of buying by the numbers is that product assortment on the aisles from retailer to retailer began to look very similar. Groceries became a muted sea of sameness, each featuring the same tried, trued and mostly big brands. After all, the numbers will always favor the established big guys that have scaled distribution and hordes of impressive data. With this focus on buying-by-numbers, how do emerging brands emerge?
Over the years, having regularly attended trade shows such as the Winter Fancy Food Show and Natural Products Expo, it is easy to say that for the past decade or more, Whole Foods has represented something far bigger than just a premium natural grocer.
Whole Foods has arguably been the single largest catalyst and incubator for emerging and early-stage brands, providing young brands an opportunity for shelf space within a nationally recognized, multi-store retailer. Many $50 million-plus brands began their lives as a newly discovered impulse buy in the treasure hunt of fewer than 12 Whole Foods stores. Additionally, Whole Foods provided high-touch programs that allowed brand representatives to promote their products within the stores themselves. And let’s face it, the Whole Foods brand held the cachet that encouraged more timid retailers to stand up and take notice.
Why did Whole Foods manage to be such advocates for emerging brands? Through the localized buying power of its divisions, a desire to be different and win on assortment and a willingness to take small risks on the new guys. But will this come to an end with the recent Amazon merger?
Most say “not entirely.” But it is clear that consolidation to achieve needed efficiencies to scale will necessarily require additional consolidated buying, a practice that is already in progress — and this most likely means less opportunity for new brands. Think about it this way: It makes great business sense for Amazon to shift some of the lower velocity items and brands to the online format and use the expensive retail floor space for the higher volume items. Furthermore, Whole Foods has announced that starting in April, they will eliminate the programs that gave brands hands-on access to in-store interaction with consumers.
So what does this all mean for tomorrow’s emerging brands that currently rely on Whole Foods for a third to half of its distribution? It means you need a strong Plan B now. Inevitably, those without it will find themselves scrambling. What can emerging brands learn from the Whole Foods shift?
1. Create multiple revenue streams
As the old adage goes, “Don’t put all your eggs in one basket.” This is the obvious one but it’s very important, especially when you are small. Overdependence on any single retail relationship leaves your brand vulnerable.
2. Learn the ins-and-outs of selling on Amazon
Don’t just sell on Amazon, learn how it works fluently. Amazon is Whole Foods now, and learning to speak the language and understanding the possibilities are essential to negotiating a favorable relationship moving forward. Amazon has many tricks and nuances to getting ahead and is more upfront about it than a typical brick-and-mortar retailer.
3. Maintain a long-term distribution strategy
Any brand that intends to be successful in the long run needs a well-thought-out three-year distribution strategy with strong consideration around things like diversification, density and geography.
4. Don’t slack on quality
Product differentiation matters more than ever. We love pretty packages. We design pretty packages. But legitimate substance needs to match style when you lose some of your ability to influence through impulse.
5. Tell your story
A strong, differentiated brand that tells a bigger story to both the consumer and the retailer is more important than ever. Strong brands weather consolidations. And brands that can connect will resonate better with consumers in non-traditional selling formats like e-commerce.
6. Prove your capabilities
Early brands and launches need to become more deliberate about where its case studies will come from. If you want to grow big, you need to carve out a case study that shows you can succeed on a bigger stage. The shifts being made by Whole Foods will create a window of opportunity for other traditional retailers to step into this void and assume the mantle of the champion of the emerging (and local) brands, potentially attracting the sizeable segment of consumers who embrace discovery and supporting local.
Whole Foods has shown us that such a segment exists. Kroger has already made some moves in this direction with the strategically timed launch of the Kroger Loves Local Campaign. Growing retailers like Sprouts may find a broader market gap to fulfill. Retailers like Fresh Market should seize this opportunity to return to their roots as a home to newfound gems.
Reprinted from an original article published by Forbes.com on December 4, 2017, by Concentric’s Kelli Masilun. Masilun is Vice President of Brand Development at Concentric, a branding and marketing firm specializing in driving CPG brand growth.