Burger King Reinvents Around Customer Experience

In a sign that efficiency and commoditization are waning as business strategy du jour, Burger King has announced a sweeping overhaul of its go-to-market model. On the surface, the company has sikmply announced a new retail franchise format called the Whopper Bar.

But a deaper look suggests that the company is also responding to consumers' craving - and insistance - on new, exciting experience retailing. A recent WSJ article provides a tantalizing preview of what's to come at BK:

...The Whopper Bars' look will be distinct from a typical Burger King. Workers will place toppings on the burgers in front of the customers "to put a little more theater into it," Mr. Klein said, representing a shift for a company that has always hidden food preparation from patrons. Early design plans call for the bars to have chrome, wood, exposed brick and plasma-screen televisions with images of fire playing on them to evoke Burger King's flame-broiled motto...

...the menu (could) include as many as 10 types of Whoppers, such as the Western Whopper, the Texas Double Whopper and the Angry Whopper, a version topped with spicy onions. One menu sketch has a section called "Pimp Your Whopper," where patrons can chose from additional toppings like jalapeno peppers, bacon and barbecue sauce...

Tough economy or no, it is clear we will see more and more channel champions and stewards crafting fresh go-to-market strategies for driving growth. Branded product makers would be wise to get on the train quickly. Pre-emptive strategy and business model leadership and influence roles are hard to supplant.

Branded Products and Distinctiveness

Branded product manufacturers will continue to get a boost from rising concerns about the "three S's" of global supply chains: source, safety, and sustainability. This window of opportunity for Brands to reassert their influence in the face of mass discounting and price obsession will be a battle.

An article in today's Wall Street Journal highlights the enduing importance of continuing to emphasize distinctiveness from the end customers view.

Mark Hellendrung (President, Narragansett Brewing Co.) : "I've learned over time that you've got to start with a unique reason for being, something that makes you clearly different from every other product or service out there...Another key is staying true to that brand message, which is incredibly hard because the temptation always comes to be all things to all people."
Read more...

Break The Rules to Win in Food Service Distribution

Over the last ten years, sales in the American foodservice industry have roughly doubled. The same period has seen significant consolidation among upstream food processors and mid-stream wholesalers. As a result, the largest players have generated top-line revenues outpacing U.S. economic growth. Yet competition and commoditization are rampant. For most players, profitability dismal. What kind of moves will help aggressive incumbents break free from the pack – and from a legacy of conventional, uninspired industrywide strategies?

Our answer: Disrupt the industry’s traditional pattern of distribution to hit a powerful home run.

When it comes to distribution, most vendors concentrate on surface-level improvements, shying away from the deeper problems. That foundational weakness shackles them. Consequently, they aren’t set to take a full swing at what is arguably their biggest market opportunity: small and mid-sized food service enterprises. SMEs, as these operators are known for short, represent a huge segment of suppliers’ market. And it is a virtual greenfield of demand.
It’s true that SMEs are being serviced now. However, aside from some notable exceptions, these service levels remain distressingly low. Granted, SMEs are an operational nightmare to serve, hundreds of thousands of unconsolidated accounts tucked into every conceivable nook and cranny of America. Simply converging with other players gains a company little or no field advantage, and costs much in the process. A hard-dollar business rationale no longer justifies underservice. With competition overheating in the national-accounts space, vendors have to look elsewhere to relieve pressure on their margins. They have to deliver. They have to hit the optimal SME go-to-market model, exactly.

There is a right way to develop that new model. It starts with understanding – first, small operator customers, then go-to-market channels, and finally strategic alternatives – and then on this basis resolves tough SME market issues:

• How to set aside the large-account sales mindset


• How to scale and augment capabilities to reach thousands of small outlets


• How to differentiate within a sea of commoditizing distribution channels


• How to gain share in the rough-and-tumble small operator market


• What mix of go-to-market channels to use (What’s hot and what’s over?)


• Whether to invest massively and integrate into distribution activities


• How to ensure exciting customer experiences (How does online fit?)

Planned disruption to the go-to-market landscape can widen margins, drive up market share, and eliminate competition. The supplier or wholesaler willing to work with key distribution partners and present a unified—and dramatically improved—value delivery system to SMEs can make convert this ‘alternative market’ into a ‘core growth market.’

Disruptive Distribution Case Study: Dean’s Milk Leaves the Porch

Some folks still remember milkmen and the glass bottles they delivered door to door. For about fifty years in much of the U.S., your milk came to you. Dean’s changed all that. Around 1930, Dean’s, one tiny rural milk processor among thousands across the country, broke from the pack and chose to distribute its milk indirectly, through grocers.

Over the years, Dean’s had learned how grocers operated, what grocers and consumers needed, and what they liked or didn’t. Dean’s decided to back a new form of packaging, the paper carton. Cartons were light. They didn’t break or need to be recycled, washed, or handled with the same care as glass. They could be folded for volume shipment and storage. Cartons changed the economics of milk distribution fundamentally. And they moved milk delivery from the customer’s back door to the refrigerated closet of any grocer with the wherewithal to put one in. Inexpensive milk in cartons, in other words, became the booster rocket for the launch of the supermarket in the 1950s, a staple that was obtainable in no other outlet.

In itself, the new carton packaging wasn’t enough to accomplish that. For twenty years, Dean’s patiently taught the safety and convenience of cartons to consumers, who almost to a woman distrusted the flimsy paper boxes. By the time supermarket chains were beginning to their extended surge, Dean’s had won consumers over. And only Dean’s was ready to serve them through the growing chain stores. Dean’s then leveraged its inside track with the supers to drive down processing and distribution costs, meanwhile buying up regional milk processors one at a time. Even as late as 1980, no producer controlled more than a few percent of the liquid milk market. Today, Dean’s is the largest liquid milk producer in the world, with a 35-40% share in the U.S.

Small Restaurant Owner Designs New Food Service Distribution

Jay Porter, the bright, thoughtful owner of The Linkery - a small restauarant in San Diego - wrote the following to illustrate how a Food Service distributor might rethink their Small Business strategy:

Mon, 1 Jan 2007 16:50:59 -0500
To: Fellow YESCO Assocates
From: Jay Porter
Subject: Changes in 2007

Greetings everyone and a Happy New Year as well.

As many of you probably know, our Board of Directors has brought me on as CEO, beginning today, in order to help our company finally establish strength in the Small-to-Medium-Enterprise (aka SME) market.

While our company is the largest and most successful broadline distributor in the foodservice world, all of our business is concentrated in the world of enormous foodservice companies with predictable volume and needs. This puts us in the position of becoming basically a commodity provider — with the attendant trend toward low margins, dubious quality, and uninteresting jobs for all of us except our finance department.

By expanding into the SME market, we will grow out of the commodity market and into services that are difficult for our competitors to match. No longer will we be competing solely on price — instead, we will be doing harder and more interesting work, charging a fair amount for it, and making a difference in the world. With our enormous size and expertise, no other company in the world is equipped to match us at this challenging work.

You may be wondering about our new name. We’re changing it effective today to emphasize that our primary mission is helping the community of individual restaurants obatin anything and everything they need — products, services, and knowhow — to best serve their communities according to *their* mission. No more are we shoehorning businesses into the model that works for us. Our job is, when our customers ask us for anything — we say “Yes” and get the job done. The paint fumes which have been wafting into the building today are from our whole fleet of trucks being repainted as you read this.

Now, I know that this isn’t the first time you’ve been told we’re going to make a splash in the SME market, and you may be wondering why it’s going to work this time. The answer is that this time, we are going to change who we are in order to serve this community of customers.

And we are going to start with changing our values.

The two values that are going to define YESCO from now on are transparency and service. This is non-negotiable. If you don’t want to or can’t live to be transparent and of service, then you will be working elsewhere. Perhaps Maryland.

TRANSPARENCY

Transparency is like integrity, turbocharged. It’s not just doing what you think is right, it’s letting the world see what you’re doing and judge for itself.

The words “company confidential” will cease to exist at YESCO. Everything we do, from below the soil to the paid invoices, will be visible to the public.

We will not be able to juice our margins from some customers by keeping our prices for each account confidential. We won’t be selling any of our items under misleading brands such as “White Marble Farms” in order to make people think they’re getting something they’re not.
We will be able to run a successful business this way because we will, from now on, be offering services of such high value that we can openly charge for them, and in the process build stronger relationships with our community of customers.

SERVICE

When you look out the window at our fleet of newly-painted trucks full of items such as meat, produce and paper goods, it’s easy to think that we’re in the business of selling these products.

We’re not.

Here’s how you can tell we’re in the service business: we don’t make anything.

We’re in the business of connecting restaurants with producers who make the products they need.

There are two kinds of products in the world: products that we already distribute, and products that we will locate and distribute if asked.

That’s it. That’s why we’re YESCO. And because we will find and locate anything in the world that will help our community of customers, and be completely honest and open about it, we can charge a reasonable amount for what we do.

SERVICE SPECIFICS

Let me give an example of the kinds of services we will now provide.

Every restaurant in the world has a goal to serve its community in some way. Our job is to understand what specific service that restaurant provides, and what things that restaurant might want to do its job better. At that point — and only at that point — can we work to find and bring the products useful to that restaurant.

In other words, it’s not about finding the product in our book that best suits the restaurant’s needs. It’s about finding the product in the world that best suits the restaurant’s needs. Our book will grow accordingly.

Somewhere in America is a farmer raising American Guinea Hogs on pasture, and finishing them on whey and acorns. Somewhere else in America is a restaurant that wants to serve succulent pastured heritage pork belly rich in good cholesterol. We will introduce the former to the latter.
Somewhere in America, maybe closer to that restuarant, is a farmer with an avocado orchard and chickens and goats and pasture who is looking for a sustainable way to improve his farm and profits. We will find that farmer, tell him about the restaurant wanting to serve avocado-finished heritage pork, and find the experts he needs to begin a successful heritage pig program.
Does the cafeteria at a local tech firm want to upgrade the nutrition of its offerings and support local businesses? We’ll find all the local farmers and artisan foodmakers we can, see what’s available in what seasons, and put together a well-balanced rotating menu of meals for that cafeteria all year long. Does this cafeteria want to start offering desserts made with real free-range eggs and pastured cows’ milk. We’ll find them. If not, we’ll find farmers who will produce them with our help.

Does a large national fast-food chain want to buy every factory pig that Cargill can produce in two integration plants? Heck, that’s easy. We’ll drive those trucks, though in this case we’ll be competing on price so in the long term this is not a growth business.

VALUE AND GROWTH

Speaking of growth — one last note. Our stock price will fall tomorrow, and that’s a good thing. A lot of very naive people operate under the belief that growth is the reason companies exist.

They’re wrong.

The role of a company is to provide a service to its employees, of organizing and marketing their intelligence and efforts so that they make a difference in the world, and provide enough income for the employees to live happily; all while generating enough profit to justify any capital investment in the company by equity partners. Note that growth is not an essential part of this mission.

Growth will often happen as a company becomes more successful; but it is by no means imperative. Investors who buy stocks in hope of growth, and hire and fire executives based on share price, are at best gamblers and at worst strip-mining your effort, value, and goals as contributing members of this enterprise.

Don’t worry about these stock-players. By providing valuable services and charging for them, we’ll all have good jobs serving society, make a good living, and pay off the money invested in our company at a good rate of return. We don’t need to do anything more.

Thanks for your time everyone, and I can’t wait to work with every one of you in achieving these ambitious goals.

Best,Jay

***
Hey, if Eric Mangini can do it, why not me?

Independent C-store Market Cries Out For New Distribution Model

Convenience stores are fast becoming stores in name only. Without much notice, most have been morphing beyond traditional fuel, beer and cigarette products into new in-store categories and consumer service offerings. Eighty percent of “C-stores,” for example, now offer some form of foodservice, which is today their fastest growing source of profit. Consider also: C-stores’ in-store (non-gasoline) sales are rising at roughly 10 percent a year.

Emerging From Shadow of Grocery

• Grocery and C-store distinctions are rapidly blurring – over 30% of grocery sales are ‘quick trips’ for purchases of about $20.
• 60% of convenience stores are single-store affairs today – up from 50% in 2000 – and 70% have annual sales under $1million
• 80% of convenience stores today see some form of prepared food concept as key growth driver - $16 billion market growing over 13% annually
• C-store industry profitability up 17% in 2006 - foodservice gross margins 2x average for in-store merchandise

Packaged Goods companies, food service suppliers, broad line distributors, buying groups, food brokers, national wholesale clubs, and an assortment of other players are all jockeying for territory in the great single operator Convenience store land rush.

How can companies break from the pack and leverage new trends in C-store purchasing channels to reach this critical growth market more effectively and economically?

It is no small task. Sixty percent of convenience stores are still single-owner proprietorships. Capturing share in this fragmented, thinly financed collection of filling stations and small town mom-and-pops demands a unique go-to-market approach that integrates suppliers and their carefully managed marketing channel system.