HermannM

Archive for the ‘Grocery’ Category

Great Moments in Brand Management History

In Business, Cooking, Grocery, Lifestyle, Marketing on December 1, 2009 at 10:33 pm

Erik B. & Rakim penned the lyrics “it’s not where you’re from but where you’re at” but I disagree, especially as it pertains to innovation. Where you’re from matters! History matters! Entrepreneurs who demonstrate a thorough understanding of historical innovations are the ones best positioned to guide the next generation of commercial ideas. I tend to think that I am one such entrepreneur.  In the interest of praising history, the following is my salute to:

GREAT MOMENTS IN BRAND MANAGEMENT HISTORY

1883 – Kroger acquires independent general stores to form the first grocery chain

1893 – Coca Cola distributes the first paper coupons

1920 – Women gain the right to vote

1930 – Kroger president ignores employee Michael Cullen’s ideas on self service

1930 – King Kullen launches as the first self service supermarket, though it hardly gives juggernaut Kroger a run for the money

1930 – Northwestern students write a sorority sketch called “Clara Lu ‘n Em”

1930 – WGN Chicago airs “Clara Lu ‘n Em” live, radio’s first daytime soap opera

1931 – Colgate-Palmolive sponsors “Clara Lu ‘n Em”

1931 – P&G develops brand management to maximize sales of Camay & Ivory

1967 – Amana debuts the first microwave oven for the kitchen

1971 – McDonalds tells housewives not to cook (“You deserve a break today“)

1972 – Congress passes Title IX, increasing educational opportunities for women

1974 – McKinsey, IBM, Kroger et al. collaborate on a bar code system to alleviate bottlenecks at the checkout counter

1981 – MTV captures teen’s attention with music videos

1981 – Nickelodeon provides programming for kids who outgrow Sesame Street

1989 – Peapod allows consumers to order groceries online

1990 – 20th Century Fox releases “Home Alone” and draws attention to latchkey kids

1992 – Al Gore invents the internet

1993 – Catalina Marketing distributes contextual coupons via grocery checkout

1993 – Food Network teases Generation X’ers who don’t know how to cook

1996 – Professor Herm earns a masters degree from the Kellogg School at Northwestern University (#1 BusinessWeek), receiving a Distinguished Dean’s Award at graduation.

1998 – Coupons, Inc. distributes the first printable coupons over the internet

2001 – WebVan burns through $1.2 billion in 18 months, files Chapter 7

2007 – Venus Williams demands and gets equal pay for women athletes at Wimbledon

2007 – Grocery iQ emerges as the first digital grocery list for the iPhone

2008 – Kraft launches iFoodAssistant, a recipe engine/grocery list for iPhone

2009 – Coupons, Inc. acquires Grocery iQ for an undisclosed amount

2010 – HomeShop emerges to help millenials “Fight the war on take-out” and lure them back to the kitchen

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I am a Food Criminal

In Cooking, Grocery, Marketing on September 25, 2009 at 1:43 pm

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My parents are Haitian immigrants and they raised me to obey the law and set an example of leadership.  Their advice served me well for the first 40 or so years of life but a recent experience has converted me to the dark side. I am not ashamed to have joined the ranks of New York’s felonious underworld. The following is the story of how I came to be a food criminal.

Last August, I attended an industry event in Lower Manhattan. It was hosted by the National Association of Specialty Food Trade, the sponsors of the Fancy Food Show.  It was there that I first experienced Alili Morocco’s harissa. Business events are often cold and impersonal; I expected no better when I entered the conference room. There was a food table and so I helped myself to the offerings so lavishly provided. After spreading a little harissa on a piece of french bread, I chomped away.  The first bite ignited a culinary explosion inside my mouth; the second bite caused me to tell somebody. Within minutes, the room was sticken with harissa-fever. Everyone tried it and we all experienced something profound.

We live in a world that values conformity, convergence to the mean and (quite frankly) blandness. It was uncommonly refreshing to experience the unique and bold blend of spices that make up Morocco’s third greatest export (behind Wm Shakespeare’s Othello & Humphrey Bogart’s Casablanca). The harissa shook us all up. That shared experience was the ice-breaker that ultimately brought us all together.  Suffice it to say, we had an extremely productive meeting.

At the close of the session, everyone shook hands, exchanged business cards and went on their merry way.  I, on the other hand, had a more grandiose plan. It isn’t fair for industry professionals to have sole exposure to this North African delicacy; it belongs to the people! Fancying myself a Robin Hood of the kitchen, a Babyface Nelson of spices and a culinary Jesse James, I swiped an unopened jar for my personal consumption.

I shared it with some colleagues and often bring it to picnics, brunches and dinner parties.  In doing so, I have rescued countless palates from the gastronomic mediocrity of most processed foods. Just as Robin Hood “stole from the rich and gave to the poor,” I steal from the enlightened and give to the bland. My harissa campaign, if you can call it that, is to “Spread the spread.”

As the Alili Morocco brand is not yet carried in local New York supermarkets, I have had to get creative in order to satisfy my harissa addiction.  I frequent their website to learn about upcoming trade shows. At the ones I attend, when nobody’s looking, I apply a five-finger discount toward the acquisition of my next harissa supply. So far, I haven’t been caught and I doubt that this public confession will alert the authorities.  After all, who reads my blog?

I am a food criminal. So goes the story of my entry into a life of crime.

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The Inefficient Grocery Shopper

In Business, Finance, Grocery, Lifestyle, Marketing, Politics on August 21, 2009 at 1:14 am

Last week I walked into the grocery store expecting to spend $20 – $30. After all was said and done, I found myself debiting almost $130 from my Chase account. I would love to tell you that I was surprised, but I cannot. This happens to me all the time; upon further inquiry, I found out that this happens to many people with an alarming frequency. Why is that? and why isn’t anyone doing anything about it?

In economic terms, we call this phenomena a disconnect between realized behavior and prior intent.  For most Americans, purchase intent and purchase behavior aren’t even remotely correlated.  To better understand this problem, we collected anecdotal frustruations to identify the key sources of shopping inefficiency. Some of the mistakes were made in the grocery aisle, while others were made in the home.  The combined list included thirty-seven (37) unique actions, however near universal consensus was found amongst the following eight (8) behaviors.

  • Forgotten Purchases – suffering a memory block about a needed item but remembering it after you’ve left the store. | Tweet: I’m guilty!
  • Impulse Buys – purchasing items only because they were on sale, accessible and/or prominently featured.| Tweet: I’m guilty!
  • Binge Buying – buying items in extremely large quantities to avoid the possibility of it ever running out.| Tweet: I’m guilty!
  • Duplicate Purchases – making a purchase on a “just in case” basis only to find out that you already have more than is needed.| Tweet: I’m guilty!
  • Subjective Consumption – focusing deeply and purchasing items you use while mis-prioritizing items needed by others in the household.| Tweet: I’m guilty!
  • Recipe Roulette – risking the taste of a meal by substituting an available ingredient in lieu of making a special trip to the store| Tweet: I’m guilty!
  • Unplanned Trips – making an unplanned trip to the store for one or two essential items.| Tweet: I’m guilty!
  • Plan B Dining – ordering take-out or fast food because you don’t have the ingredients to prepare a decent home-cooked meal| Tweet: I’m guilty!

Using only three of the mistakes (impulse shopping, unplanned trips & plan B dining), we did some analysis to quantify the impact of the problem. We concluded that consumer inefficiency in the store was a $2800 a year problem.

  1. Impulse Purchases: The average household with children spends $119.30 per week on food and other grocery items. Of this amount, approximately 20% represent spontaneous and unnecessary buys that reflect the wants of the consumer, not an immediate need.  On an annual basis, impulse buys create $1240 of economic waste.
  2. Unplanned Trips: The average household makes 2 trips to the grocery store per week. Assuming one of those trips is unnecessary, a 10 mile distance between the home and grocery store, gas prices of $3.00 per gallon and fuel efficiency of 12 mpg, unplanned trips.  On an annual basis, unplanned trips create $260 of economic waste.
  3. Plan B Dining – One of the biggest sources of economic waste is switching the venue of food consumption from the home to a restaurant or take-out counter. In general, the cost of a meal prepared outside of the home (approximately $15 per person) costs between 3x and 6x the cost of preparing that same meal at home.  Assuming a family can eat one more meal at home and a markup multiple 3x, on an annual basis, Plan B Dining creates $1300 of economic waste.

In 2008, the median household income in the US was $50,233 and grocery waste represents 5.5% of that figure.  To put it in other terms, solving the shopping inefficiency issue has the same effect as President Barack Obama putting forward a $392 billion stimulus package that reaches every American family without increasing the federal deficit.

Surely, there will be opposition to such an endeavor. But no goal worth achieving was ever met without challenge or adversity. Solving the inefficiency problem has been a constant obsession and is the goal of my company, HomeShop Technologies, Inc. We surely hope you will join and support us as we embark upon this journey.

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Happily Every After

In Business, Cooking, Finance, Grocery, Marketing on July 17, 2009 at 8:11 pm


Can you tell a little bit about yourself? and most importantly about your passion in healthy and delicious foods?

When I was growing up, my mother cooked every night; the family ate dinner together and life was a lot of fun. As I grew older, it became harder and harder to orchestrate a family meal. With both parents working, we kids had to fend for ourselves. Sometimes I would eat at a friends house and I don’t remember what my sisters did. When we stopped eating together, we started to drift apart. I think this happens to a lot of families. In America, most people can count on one hand the number of days per year when they share a meal at home with more than one other person. I think this is bad. My generation works longer and harder than did our parents, we earn more money than our parents did but we enjoy life less.

I am now an adult and I don’t believe that success and isolation are inextricably linked. My primary focus in starting a company was not so much good food but rather the impact good food could have on making us feel more connected, more alive. I love bringing people together and have always viewed food as the ultimate lubricant for social interactions. I think that if we can get more people to break bread together, we can solve a lot of problems in terms of how we relate to one another, how we feel about ourselves and our place in this world. With this as my goal, I sought to figure out a way of getting people to cook more.

What is HomeShopr? What’s the goal? How did it start?

I conducted a brief survey to understand why people don’t cook. The #1 reason was because they didn’t think they had the time to cook. The #2 reason was because they rarely had the proper ingredients in the cupboard. The #3 & #4 reasons were not knowing what to cook and not knowing how to cook, respectively. Of the four problems, I thought the second was the most important. When I started HomeShop, I was looking for a solution that would address the empty pantry problem. The first thing that came to mind was a grocery list so I examined the reasons why people don’t shop with a list.

The problems I found were two-fold. First, lists are hard to generate and second, people usually leave the lists at home. Any solution I came up with would have to address both those problems with tools to which everyday people would have immediate access. When Apple announced that they would allow third-parties to develop applications on the iPhone, I immediately saw mobile phones as the platform for delivering a digital grocery list. What I liked about the iPhone was the large screen and high quality graphics. The Treo and Palm Pilots called for small fonts that were very hard to read; but the iPhone offered design flexibility given its large face. The other thing I liked about mobile phones was that, like an American Express card, people never left home without it. I often tell a joke about how Brittany Spears doesn’t always wear her underwear but she’ll never go out without her phone. America, and the rest of the world, is very much the same way. The mobile phone is a constant and its ubiquity solved the problem of access to the grocery list. My only problem now was devising an easy way to get entries onto the list.

Can you tell me the story behind ReciClick? What were your goals in the first place? and how its going so far?

When I originally launched the company, I thought a hardware solution would be the most optimal. I purchased a laser scanner, wrote a serial driver for the device, hooked it up to a Mac-mini and built a barcode database for the 300 most commonly purchased items in my home. I positioned the scanner near a garbage can; whenever I ran out of an item, I would scan the barcode then throw the item out. It seemed like a perfect solution because we (me and my original partner Eric) had developed a solution for capturing product needs at the “point-of-depletion.” This solution was superior to the pen & paper because it was effortless. We also developed a wireless solution that would connect multiple scanners to a Mac-mini. By positioning one scanner in the kitchen, another in a bathroom, another in another bathroom and maybe one in the home office or other room where there was a garbage can, we offered significant flexibility for creating an accurate grocery list. And because the scanners were fixed in their positioning, they wouldn’t get lost.

It sounded like a great idea so we costed out the materials. We figured that we could build a stand-alone single-purpose computer that bridges to wi-fi, connect it to two wireless satellite scanners and sell it for $120. At that price point, we would suffer a slight up front loss but profitability would be achieved by charging a subscription fee for using our service. We also came up with alternative ways of monetizing the scanner information to further recover costs and meet profit and growth expectations. It seemed like a great idea until the economy turned and we came to the conclusion that people aren’t going to have an extra $120 to spend for what, to many, would seem like a “nice to have” product. When times get tough, people cut back on extras and the general feeling was that our model would not be feasible. Confident we had a killer solution, we looked for another way to monetize our product. At first we took the idea to an online grocer to see if they would give the product away in exchange our directing their grocery list information to their fulfillment centers; they said no. We went to an appliance manufacturer to see if they would incorporate our scanner in their refrigerators; they too said no. Innovation for innovation’s sake did not make sense. As 90% of the refrigeration market is controlled by 3 companies, we could not make the case that it was in anyone’s best interest to incur the cost and technological risk of our new gadget. After only nine months on the path to entrepreneurship in pursuit of Life, Liberty & Happiness, we gave up and started looking for jobs.

Later that year on Thanksgiving morning, I was sent to the store to buy ingredients for the meal my then wife was going to cook. When I got to the store I was greeted by an army of cell phone’d boyfriends and husbands taking orders from their significant others as they shopped in the aisle. One man’s wife was reading off the ingredient list from the web page of a celebrity chef while he navigated the supermarket aisles. A mental light bulb was immediately lit; instead of linking my digital grocery list to a scanner, maybe it would make sense to link it to online recipes. This was the genesis of ReciClick.

I put a few thoughts on paper and went to a pitch event to get feedback. It was there that I met our third founder, Maria, who worked at a marketing company that delivers contextual coupons alongside the receipt of a supermarket purchase. She was there to get feedback on her pitch for a real estate idea but heard my idea and sort of liked it. I thought her marketing expertise would prove useful so we kept in touch. Within a month, I invited her to join Eric and me on our journey, more like a bridge to nowhere, and Maria agreed. We clicked and started working together. After doing a little research, we found that most people shop at the grocery store based on habits. At dinner time, they look inside their cupboards to see what ingredients they have and, based on that, decide what to cook. When the ingredients run out (as they most often do), people then resort to plan B, ordering take-out. With ReciClick we can change all that. Instead of shopping first and selecting meal ideas based on the ingredients you have, we allow you to select from the web the meals you want to cook and we’ll then tell you the items for which to shop. Our ReciClick solves the empty pantry issue, thereby eliminating a key barrier to cooking. We changed our business model from purchase and subscription (razor and blade) to an advertising model. By converting to a software-based entry solution, we made the service free to the consumer thereby eliminating an adoption hurdle. We built a prototype of this functionality and are currently raising a seed-stage investment in order to launch into a public beta.

Can you share tips for new start ups around the world? How should they follow their passion? Is it easy?

I attended top schools and received the best education money could buy. Nevertheless, nothing I ever studied could have prepared me for the life of an entrepreneur. Unlike in most professions, intelligence is not a factor in determining ones entrepreneurial success. The driving factor has been a passion for solving problems and the perseverance to see things through. I am not yet successful but I strongly feel that we are on the path to success; for this I am eternally grateful. There are times when I have wanted to quit or when I think my life shouldn’t be so hard. But then I step back and ask two fundamental questions: #1 Do people need help in cooking at home? #2 Would my digital shopping list be useful to them? For as long as the answer to those two question is yes, I summon the will to keep going.

In a more general sense, entrepreneurs have to be problem-focused, not solution-focused. When I started, I identified a problem and developed a solution to that problem. When my solution didn’t work out, I gave up because I was married to a solution, one of many possible solutions but I was not singularly focused on the problem itself. It took a few weeks for me to realize that the problem still needed fixing and I probably wasted a lot of time by not sticking with it. Thank goodness someone sent me shopping on Thanksgiving morning. A goal is only worth pursuing if a great deal of effort is required to achieve it. In other words, entrepreneurship, problem solving, innovation is supposed to be hard. If it were easy, everybody would do it and there would be no great rewards at the end of the journey.

Life is not a fairy tale but if everybody does their job, dreams can indeed come true.  Having been through all this, I am certain I will never take any bit of future success for granted. I have seen very high highs, I am experiencing very low lows and I feel that I am back on the path to even higher highs than ever before. No matter what happens, I can say with definitiveness that I was not cheated out of life. I feel more alive now than perhaps ever before; if I had it all to do over, I would not change a thing.

When all is said and done, I sincerely hope history determines mine to have been a life worth living.

Comparing Prices before the Grocery Trip

In Business, Grocery, Interesting, Marketing on July 15, 2009 at 4:35 pm

I gave a presentation last week on the business case for HomeShop’s digital grocery list. One of the panelists suggested that we incorporate a price comparison feature that allows consumers to choose a grocery store on the basis of cost of the overall basket. My gut reaction was to resist this strategy but I hear it so often from venture capitalists and advisors that I may have to reconsider. The following thoughts are the initial ramblings of a Confused Enthusiast on what I believe to be the key issues in this matter.

The internet was designed to be a democratizing platform that shifts the balance of power from producers and retailers to consumers.  In the early 1990s, we saw price comparison features on just about every retailing application on the internet.  The prevailing concept was that price margins were so fat on manufactured products that favored the rich industrialists at the expense of poor consumers. Price comparison tools changed the balance of power, transferring producer surplus to consumer surplus.  The reduction in price forced manufacturers to increase supplies to maintain profitability while allowing more consumers to enjoy the benefits of so many manufacturing innovations. No more was this true than in the consumer electronics industry, where very few would dare purchase a plasma TV, camcorder or other gadget or device before consulting MySimon or C|NET. Today, many people consult GasBuddy in advance of filling up at the pump and other industries have implemented price comparison tools as well. As a result, I can understand why so many would consider such a tool for the $750 billion grocery industry.

My initial thought is to resist the deployment of a price comparison tool simply because the industry’s margin structure would not support it.  Let me explain…

In the consumer electronics space, everything is new. At product launch, consumers rarely know much about the products available for sale and this provides manufacturers a great deal of latitude in pricing. The original DVD players sold for $1,600 and people paid that price, especially those who relied on retailers to direct their purchases. When retailer information falls short, consumers can rely on user reviews and feature/price comparisons from independent sources to make a decision. Information, in the consumer electronics industry, has been a game-changer. The net effect has been a ceding of market power from producers and retailers to consumers, eventually leading to lower prices and wider adoption. This could have only occurred in an industry where product knowledge and the power of substitutes were low while profit margins remained high. The grocery industry does not exhibit these characteristics.

Last year, Tide launched its Tide-to-Go stain remover. It was the iPhone of cleaning products: Tide had finally gone mobile. A stain on a shirt can mean the difference between getting a job or not; it would be reasonable to expect the on-the-go stain remover to be priced in the range of an increase in salary. But that didn’t happen. Pricing was severely undermined by consumer expectations and the power of substitutes. P&G could never market the item at a price-point anywhere near the consumer surplus it creates; instead, Tide-to-Go sells for $3 a pen (less than a penny a stain). Were it marketed any higher, Katja Presnal and Jessica Gottlieb would have launched an online “twissy-fit,” the likes of which would surely have caused the carcasses of William Procter and James Gamble to turn, if every so slightly, in their graves.

The repetitive cycle of use and purchase, consumption and replenishment allows consumers to quickly gain knowledge of items sold in a supermarket. When knowledge is high, the power of retailers to raise prices is severely undermined. As a result, the best grocery retailers (including my Mom, may she rest-in-peace) are little more than middlemen who convert inventory risk and location to turn a profit. Caught in the squeeze between manufacturers, who take all the risk in bringing products to market, and consumers, whose brand and product knowledge have a restrictive impact on price, supermarket retailers rarely, if ever, have sufficient margin to ever effectively compete on price against one another. This is why I oppose price comparisons in the supermarket space.

From an economics perspective, let’s consider what would happen if consumers knew the price of their entire shopping basket before the moment of purchase. They would simply go to the store with the lowest price. This, in turn, would force retailers to lower their prices to lure consumers. In the short run, every retailer would be caught in a prisoner’s dilemma where the Nash equilibrium solution would be to drop their prices to the level of variable costs. Eventually, some retailers to go out of business. The few that remained would have to rationalize their product offerings, carrying fewer brands in any one category and limiting excess inventory. The marketplace would begin to experience a higher incidence of stock-out and consumers would be forced to visit multiple stores to purchase all the brands they like. Overall, value would be destroyed once market discipline set in. It’s a nightmare scenario. Having grown up in a retailing family and knowing how hard it is to turn a profit, I wouldn’t wish it on my worst enemy.

Price Comparison for Grocery Shoppers

Price Comparison for Grocery Shoppers

That being said, I am very anxious to understand the opposing view. Perhaps the suggestion was the brain-child of a misguided MBA who puts more faith in the philosophies of Gordon Gekko than Epicurus. Or maybe I am missing a key point. In the UK, there is an experiment underway amongst a consortium of top supermarkets. Tesco, Ocado, Sainsbury and Asda each participate in MySupermarket.com’s price comparison service; I am eager to learn if the venture proves successful and if so, if that business model can be ported to North America. Again, my gut reaction is to resist price comparisons… I guess only time will tell.

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