February 2006 Strengthening Cooperation: A Workshop for New and Emerging Farmer-Owned Businesses Understanding How to Develop Effective Presented by: Diane Holtaway, Associate Director, Business Development Christopher Shyers, Business Development Specialist Understanding How to Develop Effective Understanding How to Develop Effective 1
Overview of the Food Innovation Center Mission: To stimulate and support sustainable economic growth and prosperity to the food and agricultural industries in the New Jersey region by providing businesses with innovative research, customized practical solutions, resources for business incubation and a trusted source for information and guidance. Overview of the Food Innovation Center Clients: Startup food companies coping with challenges such as financing, technology, regulations, market development, and infrastructure requirements Existing small and mid-sized food companies seeking to access new technologies, upgrade quality assurance capabilities, enter new markets, and expand and improve their operations Retail and Food Service Establishments seeking to improve their operations and purchase locally grown NJ products Farmers and Cooperatives desiring to create new businesses based on value-added agricultural products and/or developing new markets for their existing commodities Overview of the Food Innovation Center Business Association Mentoring Program The Food Innovation Center has created a Business Association Mentoring Program to support the development of existing and new cooperatives as well as associations related to food, agriculture, and other targeted industries throughout New Jersey. The Business Association Mentoring Program assists clients in identifying business growth opportunities. A regional conference will be hosted in 2006. 2
Overview of the Food Innovation Center Services Provided: Business Development Market Development Product and Process Development Quality Assurance and Food Safety Regulations and Compliance Workforce Development and Training Understanding How to Develop Effective Overview of Food Innovation Center Developing Business & Marketing Plans 3
Developing Business & Marketing Plans Marketing Defined: According to the American Marketing Association, marketing is The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create exchanges that satisfy individual and organizational objectives. Developing Business & Marketing Plans Business and Marketing Plans Key Points: Business overview and focus Industry and competitive assessment Marketing plan who is the customer? Operations detailed growth plan Management and employees Financial projections and analysis Developing Business & Marketing Plans Business Overview and Focus Clearly describe your business and goals Understand the Features and Benefits of your Product Demonstrate your business competitive advantages Industry and Competitive Assessment Describe the industry size, growth and environment Describe competitive and substitute products Demonstrate your business competitive advantages 4
Developing Business & Marketing Plans Marketing plan Who is the customer? Who is the customer? Be clear! What is the customer s need? What is your product s value proposition? Detail marketing plan to reach customer Direct marketing, collateral, advertising, website, public relations, word-of-mouth, etc. Sales and distribution strategy Competitive and value pricing Developing Business & Marketing Plans Operations Plan Detailed operating plan includes goals, milestones, and resources needed Identifies regulatory issues, facility and technology requirements, key vendors, strategic partnerships and service providers Management and Employees Competent and passionate management team Skills, experience, training and workforce development Detailed staff requirements, incl. seasonal and temp Identify regulatory issues and trade related issues Developing Business & Marketing Plans Financial projections and analysis How much does your business need? How will you spend the money? How will you pay the money back? Financial Forecast Must Mirror Operating Plan 5
Understanding How to Develop Effective Understanding Trends in the Marketplace Understanding Trends in the Marketplace Five key trends are driving consumer choices today. Quality Full Flavor Customization Convenience Good for You 6
Understanding Trends in the Marketplace Convenience Time starved consumers continue to search for convenient solutions, that meet specific demands Quick and easy to prepare Re-sealable packaging Fresh / freshness dating Easy to clean up Easy to open - Yankelovich 2004 Understanding Trends in the Marketplace Good for You A new sound and simple health strategy Natural goodness increasing consumption of products that they consider inherently healthy Understanding Trends in the Marketplace Customization Looking after me Attitudes Needs Tastes..tailoring foods and beverages for personal preferences In order to reach smaller and smaller slices of the American population, in an effort to spur growth, food manufacturers are customizing products to population segments. 7
Understanding Trends in the Marketplace Quality Or, Higher Quality to be specific. Consumers today are trading up Premium foods market is projected to grow by 30% to $94 billion in 2008 (Datamonitor 2005) Premium Mid Market Economy Understanding Trends in the Marketplace Full Flavor Although consumer food purchase decisions are based on many variables, the key determinant is taste Taste benefits have become a prerequisite among new food product introductions. Nearly all (90%) of top new food product introductions offer a taste benefit. Bottom Line: no matter what other benefits a food product may offer, it has to taste good! Understanding How to Develop Effective 8
Understanding Customers & Consumers Market The place where goods and services are offered for sale. Target Market Population of Potential Purchasers of Products Offered, Defined by Demographics, Socioeconomics, and Geography Market Segmentation Specific Subsets and Groups within a Target Market that can be Marketed to by Different Methods and Messages Understanding Customers & Consumers Customer include all participants (re-sellers) in the Supply Chain. How can you address a re-sellers Wants and Needs? # of units sold * unit margin = gross profit And a Customer (Re-Seller) looks for: A proven market potential A reasonable margin A reliable supplier Understanding Customers & Consumers However Food Companies Must Market to Consumers. How can you address Consumers Wants and Needs? Product Development and Management Association (PDMA) claims that Only 1 in 7 product ideas makes it through the development process and succeeds in the market. Those food products that succeed in the market meet the quality, lifestyle, and integrity expectations of consumers. 9
Understanding How to Develop Effective Understanding Distributors & Distribution Industry Supply Chain (Distributors) Participants: Grower/Shippers/Packers: Either on-site or at a packing house, produce is harvested, sorted, sized, packed, and / or cooled before packaging, labeling and marking; then shipped Brokers: Intermediaries operating (primarily) in spot markets w/ or w/o chain buying houses Wholesalers: buy from grower/shippers, brokers or import and reselling to retail or foodservice Jobbers smaller intermediary wholesalers operating (primarily) in underserved and or remote locations Marketing Cooperatives: actual or virtual cooperatives supporting volume and price negotiations Direct Marketers: Community Supported Agriculture, U-pick operations and farmer s markets Understanding Distributors & Distribution Industry Final Seller (Distribution) Participants: Terminal Markets: (of lesser importance over time) blends wholesale and retail distribution. NJ produce may be found in Newark-New York City and Philadelphia, PA Supermarket Chain Distribution Centers: direct self-distributing chain stores buy / sell direct Niche Players: Specialty Retailers, Farmers Markets, Grocers, Convenience Stores, Foodservice, Restaurants, and new internet direct distributors providing retail online purchase with drop-point or door-to-door shipping 10
High Understanding Distributors & Distribution Where there is Risk there (may also be) Reward. Sell Direct to Consumer Amount of Market Risk Sell to Distributor Sell through Co-Op to Retailer Sell to Wholesaler Low Amount of Business Risk High Understanding Distributors & Distribution Average Percentage Margins in Food Distribution Manufacturer Low Average High 30 40-50 60 Wholesaler 10 25-35 40 Retailer Consumer 15 30-40 50 2005 Industry Data Provided by the National Association for the Specialty Food Trade Understanding How to Develop Effective 11
Understanding Competitors & Competition Understanding Competitors & Competition Competitors include all sellers in the marketplace of all competitive and substitute products available in the market. How can you address the challenge of Competitors? Product Differentiation Target Marketing Market Segmentation Competition includes sellers competing for your same demographic, socioeconomic, and geographic customers. How can you address the challenge of Competition? Sometimes it is better to be a big fish in a small pond. Understanding How to Develop Effective 12
Understanding Buying Decisions Understanding Buying Decisions (Food) Needs are basic human requirements. (Food) Wants are desires for specific attributes. Buying Decisions are predicated on Wants and Needs. A consumers discretionary income (and ability to borrow) determines the number of Wants that can be purchased. Marketing is an effort to influence a Consumers Wants. Understanding Buying Decisions How can you address a Consumers Wants? Although consumer food purchase decisions are based on many variables, the key determinant is taste. Taste benefits have become a prerequisite among new food product introductions. Nearly all (90%) of top new food product introductions offer a taste benefit. Bottom Line: no matter what other benefits a food product may offer, it has to taste good! 13
Understanding How to Develop Effective Understanding the Selling Process Features Tell Benefits Sell Understanding the Selling Process Successful Sales Simplified: The person you are selling to must have: Ability to Buy Authority to Buy Agreeability to Buy 14
Understanding How to Develop Effective Understanding Appropriate Tactics 5Ps of Marketing: Ingredients of the Marketing Mix Product. Package. Price. What is the Point of Difference? What is the Portion and Premise? What is the Positioning? Promotion. What is the Presentation? Place. What is the Purchasing place? Understanding Appropriate Tactics The ABCs of Marketing to Customers & Consumers Advertising. Advertisements introduce and also remind (reinforces messages) consumers of brands & products through media messages and promotional materials. Branding. Brands communicate corporate values of quality, lifestyle, and integrity, through an implied promise to meet the expectations of customers. Communicating. Communications include articles, events, newsletters, press releases, public relations, sponsorships, verbal, websites, etc. with consumers 15
Understanding Appropriate Tactics SMART Goals are: WISER Tactics are: Simple Measurable Appropriate Realistic Time-Bound Well Thought Out Implement-able Scalable Efficient Replicable Understanding How to Develop Effective Conclusion and Q&A Thank You. Remember to Join the Food Entrepreneurs Network. www.foodinnovation.rutgers.edu 16
Contact Information Lou Cooperhouse, Director cooperhouse@aesop.rutgers.edu Diane Holtaway, Associate Director, Business Development holtaway@aesop.rutgers.edu Julie Elmer, Associate Director, Food Technology elmer@aesop.rutgers.edu Christopher Shyers, Business Development Specialist shyers@aesop.rutgers.edu Phone 856-459-1125 Fax 856-459-3043 87 East Commerce Street, Bridgeton, NJ 08302 www.foodinnovation.rutgers.edu 17