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Define It: Categories In Action

Welcome to Edible-Alpha™ Insights, our twice-monthly roundup of the best food and beverage finance news, events and resources about business model insights, raising capital, consumer packaged goods (CPG)/national brands, market trends, deals/M&A, and industry events.

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Your insights this week…

A word we use quite often when talking about food and beverage brands is categories. And it turns out, what “category” means in the context of a grocery store is more difficult to define than you might think.

We advocate beginning everything in your business with meeting an unmet consumer need. So, categories could be defined as groups of products that meet a similar consumer need or that can substitute for each other. This allows something like snacks, as a category, to cover many different types of products and have a plethora of sub-categories (salty snacks, sweet snacks, etc.). What makes sense to consumers might make less sense to you, and you don’t have that much time to communicate with consumers in the grocery store.

There are practical challenges to categorization as food and beverage brands seek to grow their businesses. Different categories have different buyers at grocery stores, and it can be a struggle to develop relationships with buyers only to have to start over because you positioned yourself in the wrong category. And, certain categories are growing more than others or are more crowded than others, limiting potential top-line sales growth. This should be considered before launching a business or ramping up production of products.

The reality is, for food and beverage brands, the dynamics of the category they are in can mean life or death. Retailers might define your product by in-store location only, and this placement in-store might conflict with your ideal positioning or the story you are telling to your target consumer. This dynamic is especially true with companies that have products that have a legitimate claim to multiple categories. If you are positioning your product as a snack but it looks like a bar, a placement in the bar section might mean less sales and eventually losing that store.

Food and beverage businesses should define what category they are in and make sure their salespeople and brokers develop relationships with the right category buyers. That definition and clarity is needed to be properly placed in stores and hopefully get off the shelf.

And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Business Model Insights

  • Costco’s Business Model Is Smarter Than You Think (Investopedia) – “Costco’s business model is called a subscription business model. Customers who want to shop at the store must buy a membership with the promise of lower prices to make up for the initial upfront cost. While other stores may have occasionally lower prices on their loss leaders, Costco has permanently capped its margins to ensure that members can justify paying for a membership. Costco employees also earn a decent wage, saving money by making them more productive and less likely to quit. Costco has a policy of carrying a lower number of products than traditional grocery stores. Having fewer products to order, track and display means cost savings for Costco. And, by having a limited retail space, suppliers must bid for Costco shelf space to get their products sold.”
  • Finding opportunity at the intersection of food production and distribution (Food Dive)
  • Making a killer impression starts with standout founders (New Hope Media)

Raising Capital

Packaging Design Example

CPG/National Brands

  • Retailers find fresh solutions for their most challenging—and critical—categories (New Hope Media) – “Stroll down the aisles of Natural Products Expo West or Natural Products Expo East and you’ll discover innovations in packaged foods galore. What you won’t see at many trade shows, however, is much creativity surrounding key grocery store products such as perishable grab-and-go items and fresh produce that actually capture a significant portion of natural retail sales. In response, retailers are prioritizing categories such as produce, dairy and grab-and-go to offer a point of differentiation. That difference can be described as “fresh.” Produce, dairy and grab-and-go offer shoppers something that online sales can’t: the opportunity to examine, smell, feel and ultimately buy specific fruits, vegetables and other ready-to-consume items themselves.”
  • 10 Forces That Have Caused the Packaged Food Startup Explosion  (Entrepreneur)
  • Grocery, disrupted: 5 minutes with Future Market’s Mike Lee (New Hope Media)

Market Trends

 AI and Robotics in Agriculture

Farming and Ag Tech

CB Insights Food and Beverage Deals Reach New Highs


FaBcap Accelerator 2017

Industry Events

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