market view - food processing · spend your marketing budget wisely with every expenditure, ask...

Market ViewTHE MARKETING EXPERTISE

OF JOHN STANTON

TABLE OF CONTENTSDo You Really Understand Marketing? 3It’s making what consumers want to buy, not making them buy what you want to sell.

Spend Your Marketing Budget Only Where it Works 4With every expenditure, ask yourself: Did this strengthen our brand?

The End of TV Advertising as we know it? 5While the execution may change, television ‘commercials’ remain an essential vehicle for marketing, even as new mediums arrive.

Have You Audited Your Marketing Efforts? 6Marketing expert John Stanton offers advice on how to audit your company’s marketing efforts.

Learn From Your Mistakes...and Those of Others 7Like scientists, marketers should document what went wrong and why.

Are You Listening, Informing, or Feeding the Beast? 8Don’t marketers have an obligation to inform, not just sell?

What’s Wrong With Our Food? 9There’s nothing wrong with our food, although marketers keep pointing out how theirs lack the negatives.

Food and Beverage Processors Must Stop Enabling Bad Retailers 10Slotting fees, like a drug, keep some grocers from effective target marketing.

Support Your Independent Grocer 11Small grocers give you some leverage against big retailers who give you big orders but squeeze you on price.

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John Stanton, Ph.D., is a professor of food marketing at Saint Joseph’s University in Philadelphia. Email him at [email protected].

By John Stanton, Contributing Editor

Someone once asked me, “What is all this marketing crap?” It’s apparent many of a company’s employees may not re-ally understand what marketing is … and quite frankly

I would include some in the marketing department. I think if I asked 10 people, “What is marketing?” I’d get 10 different answers.

The concept of marketing is complicated by the fact there are two distinct meanings of marketing in the business world. One meaning is a strategic or philosophic approach to how the com-pany approaches the market. The other is the tactical things that are often done to execute or carry out the strategic approach, for example developing advertising for trade promotions, etc.

My definition of marketing is “making what consumers want to buy, not making consumers buy what you want to sell.” With-in this definition one can see there are tactical activities that must take place to be a marketing-oriented company. For example, you need consumer research to determine what the consumer wants to buy. And unfortunately for us, since consumers appear to be so fickle, we have to continually monitor them.

We also need research and development and production activi-ties to make the products. Of course, we need to tell consumers how good our product is at satisfying their needs and wants, so advertising and promotions are all part of marketing activities.

How did this concept of marketing – i.e. focusing on the con-sumer – come to be? There is a number of stages that business and specifically the food business have gone through in the past 50 or so years that led to the proliferation of the marketing concept.

Stage 1 was the production era. Shortly after the Second World War, American business was in high gear. It was hard to produce enough product to satisfy the demand that was coming from sol-diers returning from the war and setting up new households.

In this case where demand exceeds supply, the focus of the American industry was to make production both more effi-cient and effective. The leaders of many companies were engi-neers who could figure out how to do this.

However, as demand slowed and competition increased, com-panies found they needed to not just wait for retailers and consum-ers to buy their products, they had to do something proactive to

keep the company successful. Thus began Stage 2: the sales era. Now success was measured not so much by how many products you could make, but how many products you could sell. The sales force was created to convince retailers to buy more of a company’s products or to give the company more space in the stores, and the advertising department was created to convince consumers to buy more. The common thread was to buy more of the product that was coming off those assembly lines at record speed.

However just like Stage 1, the bliss of success slowly wilted, as competitors also sent salespeople to the retailers and com-panies spent more on various forms of advertising. A primary solution to making more profit in a highly competitive market was to cut costs. The problem with cost cutting is it frequently meant your sales force and advertising had a weaker product than they previously sold.

For example if you were Acme Soup, you might replace chicken with more vegetable or more broth as part of the total weight. As you might expect, consumers were less willing to spend money on the weaker product and demanded it be sold at a lower price. This simply encouraged top management to demand more cost cutting. This process of cutting costs and reducing product desirability, which leads to lower prices, is frequently called “the death spiral.”

Some unknown company – I’ll say P&G because they seem to take credit for everything anyway – asked the question, “In-stead of trying to convince consumers to buy a single brand we make, could we make a variety of brands targeted to different consumers?” And this began Stage 3: the marketing era. So instead of just making Tide, the company makes Cheer, Bold and Gain, each targeted to a different group with consumers wanting different things from their laundry detergent.

So here we are today, with companies creating food prod-ucts for very specific target audiences. These “marketing-ori-ented” companies appear to be doing everything that every non-marketing company is doing. They are producing prod-ucts, they have sales forces, they advertise, etc. The difference is in not what they do but how they think. For a marketing-oriented company, profit is the reward for doing a good job!

Do You Really Understand Marketing?It’s making what consumers want to buy, not making them buy what you want to sell.

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I love TV commercials. While many people speed past com-mercials, I watch them. However, I do not understand how any company can justify the amount of money spent on

advertising during the Super Bowl. I know all the justifications about the audience size, post-advertising spill-over and PR, etc. But advertising should be a precious opportunity to communicate with consumers about how our brands are perfect for them.

In many cases, the real justification for buying ad space on high visibility shows such as the Super Bowl, the Masters or the World Series is not really marketing objectives but the desire of top executives to be personally involved with these events. When you sponsor these types of events, all the top brass go to the event and parade around like grand poobahs. The marketing budget is tagged with the expenses while the top management enjoys the benefits. That is until the end of the year, when marketing produc-tivity is called into question. At that point top management seems to get amnesia about their fantastic visit to the Super Bowl, etc.

I am not a stick in the mud! I enjoy a good time as much as anyone else, but I think advertising dollars are too difficult to come by to pretend we are spending them effectively on some of these super events. Everyone likes to quote the adage at-tributed to John Wanamaker: “I know I’m wasting 50 percent of my advertising but I don’t know which 50 percent.” Well the wasted 50 percent just might be the wining and dining of executives! Advertising should be reserved for communicating with consumers about great products.

Today’s world of advertising is even more complicated as so-cial media, online advertising and other high-tech methods of communication are all the rage. I have no doubt that before long they will capture the majority of advertising dollars. For the most part, I believe these platforms can be even more effective than the methods we used in the past. But the newness of these methods creates an even greater burden to be vigilant on how the money is spent. While marketing dollars are less likely to be wasted, a company is a more likely to invest these marketing dollars in the new methods of communication without real due diligence.

It is not just the top executives that take advantage of the advertising budgets. I have seen marketing brand managers

wined and dined by their advertising agencies, who then just bill these expenses back to the company, or new on-line advertisers that are led astray by technocrats that are testing and trying new methods.

A college roommate of mine became a VP of marketing at a well-known company. He noticed how his New York advertising agency was all too willing to arrange to have a limo pick him up when he was in town and how a half dozen agency staff would take him to lunch and dinner and always pick up the check. When he started checking their bills he realized he was ultimately paying for everything — plus the agency tacked on overhead.

And of course, all the attendees at the meetings and dinners were charging their time to his account — you know, billable hours! He decided to stop this practice. He took Uber like most people and he made the agency justify the presence of each per-son at meals and meetings. He was able to free up more money than anyone could have imagined for real marketing activities and not marketing department aggrandizement.

Another colleague was convinced to spend thousands of advertising dollars on social media. It wasn’t clear to him exactly how it would work, but it was the “in” thing to do, so he did it. He still is not certain what his ROI is and no one seems able to give any good decision-making information other than how many views he gets, how long people stay on various pages, etc.

I have often railed about the nerve of accounting and fi-nance people acting like they are protecting the company from marketing people wasting their company’s money. However, I think marketing executives should be sure to closely examine their own house and make sure the marketing budget is spent on marketing and demand-building activities and not on perks that come through the back door. I know it is not easy.

I believe in the “Wal-Mart policy.” Wal-Mart buyers could not accept anything from suppliers but they asked the suppliers to just reduce the costs of products instead of taking them to baseball games or buying them pens or magnets.

With every expenditure, ask yourself: Did this strengthen our brand? We should spend our marketing dollars where it works not where everyone else is spending it.

Spend Your Marketing Budget WiselyWith every expenditure, ask yourself: Did this strengthen our brand?

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A friend recently lamented that TV advertising was ending its dominance as a way for marketers to communicate and persuade. The data is pretty clear that people are

watching less television and more other types of screens. Nielsen research demonstrated people are watching less TV. In a 2006 survey it found:

• Teens (12-17) watched 15 hours 5 minutes of traditional TV per week in Q3, an 11.3 percent drop year-over-year and a 37.6 percent contraction over the previous five years

• Older millennials (25-34) watched 20 hours 4 minutes, a 5.2 percent decrease year-over-year and a 27.7 percent drop over five years

• Gen Xers (35-49) watched 28 hours 24 minutes, just a 1 percent decrease year-over-year but an 11.6 percent decline over five years

• Adults 50-64 watched 39 hours and 54 minutes, represent-ing a 1.4 percent increase year-over-year, but a fractional 0.5 percent drop over five years

• Adults 65 and older watched 48 hours and 32 minutes, up 2.1 per-cent from the previous year and up by 6.9 percent over five years.Sorry for the dated data, but things undoubtedly have eroded

further in the 10 years since.But is this really the death knell for traditional TV advertis-

ing? Maybe not. First, much of the new e-commerce businesses have come to rely on TV to explain how their online businesses work. They need to use every available outlet to let people know they are open and what they sell. Television is a prime vehicle to tell their story and attract people. Just having a website wasn’t enough. Many major online retailers advertise on traditional TV, including Overstock, Amazon, ShoeDazzle, Dollar Shave, Blue Apron, Graze, JustFab, Gilt and so forth.

Then everyone worried about the DVR destroying advertising. This may be less of a worry than first thought. Although it is possible to fast-forward through the advertising with a DVR, viewers can walk away from or mute live TV commercials anyway. There is no unequivocal evidence that DVR usage has hurt TV advertising.

While I believe TV advertising will be around for a while, one must also recognize that there are more options appearing every day. According to the research house MarketingSherpa,

“ye olde” print and TV advertising still have consumers’ trust. They asked, “In general which type of advertising channels do you trust more when you want to make a purchase decision?” While everyone is excited about all the online popup ads, ads in podcasts and even mobile phone ads, these were at the very bottom of the list in terms of consumer trust.

However, there is a life cycle to most things and that includes TV advertising. All the other hi-tech advertising will keep get-ting better and more efficient. There is no question there are many new and innovative advertising media “comin’ round the mountain.” And I think we “ain’t seen nothing yet.”

There is some good advice if you want to be a player in the non-traditional media channels. In his book The Tipping Point, author Malcolm Gladwell offers some advice to consumer packaged goods marketers when they consider adding alternative media to the mix:1. Be honest: The bromide “honesty is the best policy” applies

to new media as well. Brand equity in the new media world, like the old, relies on product and promotional integrity. And I would add authenticity.

2. Be quick: Alternative media is all about speed. The useful life cycle of a message is much shorter than with conventional media. The biggest crime in the new media environment is being boring.

3. Be first: If you want to play the cool game with products and messaging, then you better be in the vanguard. The next cool thing is only cool until the masses embrace it.

4. Be young: Match the medium and message to the market. Alter-native media won’t reach or resonate with older consumers. New media attracts a new fan base, one growing younger every day.While the medium may change one thing is here to stay…

advertising. It will likely be on TV for years to come but it may be different. Challenges from all of the different non-TV channels may force advertisers to be more interesting and more commanding of our attention. I think the lack of competition over recent years has made TV advertising tired and boring.

One other thing is certain. Non-traditional media is here to stay, a permanent part of the media landscape. Are you ready to join in, willing to change, or are you still spending most of your budget on the old media? Think anew, act anew.

The End of TV Advertising?While the execution may change, ‘commercials’ remain an essential vehicle.

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We all take for granted that the company’s finances get audited regularly. Yet very few companies do a marketing audit. That is a review of whether what was

planned in the market actually happened. That is, if a company said consumers would prefer its brand over the competition, did it happen?

A marketing audit examines what was expected and what happened for every situation that consumers came in contact with the company. The first step is to identify each place that contact exists. This will at least include advertising, in-store mer-chandising, contact with labels, mail, telephone call responses, email, reception desk, in-store contact with consumers, etc. For each one of these occasions, ask what policies or plans you have in place to deal with the interactions with consumers.

Some time ago I did a very informal test of food companies’ websites. Since I didn’t do a very scientific study, I don’t want to reveal details but generally speaking the response was not good. I found that if you had a question that the food company has planned for (FAQ) you get a good response, but as the questions get less routine, the answers get worse and less frequent. When I asked via email on various websites for examples of the company’s advertising, only about half of the firms ever got back to me.

One food company responded to my email with a stock response that they could not provide the information I requested. I responded by asking for the name of someone in the advertising department so I could call directly. I got no response. In other words: You’ve been dealt with, now move along. By the way, thanks to the half that did get back to me and provided examples of their advertising.

If the marketing function is the advocate for the consumer inside the company, then they should be very concerned about the quality of the interaction between the consumer and the company or brand.

I think many of our food marketing executives really don’t worry about how the consumers who call or write in are treated. My guess is they are more concerned with the millions of dollars being spent on advertising and promotions. I hate to believe that anyone would be cavalier with even one customer.

When I was a vice president of marketing, every day I called one consumer and just asked them “How are we doing?” I really wanted to hear directly from consumers about our products and

service and not exclusively via research reports. I also wanted to drive home to the staff that each consumer is important. I would say at department meetings that “I just spoke to Mrs. Smith, our consumer.” I know this was more symbolic than substantive, but it made the concept of the individual important.

The next step is to verify that what you would like to happen is happening. This is not so easy either. I believe the only way to do this is to actually send emails, send shills into the office and ask for the “person in charge of ketchup.” Call your own 800 number and ask questions. See what kind of response you get.

I told one brand manager of the lack of response I got from her website email and she was horrified. She didn’t want consumers to be treated that way, but she didn’t know that was the kind of response sent out. In almost every case that I had a personal experience with bad customer service the brand managers were appalled. Why didn’t they know?

The next step is to keep a performance standard and measure the results against the standard. In many cases the action is simply to make it clear how important each and every consumer is to the company. That no one can be complacent when it comes to making each consumer delighted with our products. I tried to think about how many bottles of ketchup I will buy in a lifetime and it had to be hundreds of bottles. Can any firm afford to lose a customer like that? My value cannot be measured in the profit from one bottle but from a lifetime of bottles.

The last step is the hard one. You have to be willing to finance all this. In many cases this activity is one of the most poorly funded functions in the marketing organization. Receptionists are often not trained in dealing with customers, delivery people are only trained in how to deliver, how to write orders or how to pick up shipments; few have real training to deal with consumers or customers.

Instead of putting another few million dollars into advertising try investing in all the areas where consumers come in contact with your brand. With such a high rate of product failure, with so much wasted media expenditures, with so much attention spent on catering to the top executive’s creature comforts, could someone please take care of the consumer? Food companies spend zillions on finding new customers; maybe we should spend more on keeping them!

Have You Audited Your Marketing?Not financially, but in how they actually interact with consumers.

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Quite a few years ago I wrote a book titled “Success Leave Clues.” It detailed what the most successful marketing programs had in common and established

10 rules from this commonality.Over the years it has occurred to me that failures also leave

clues. (Of course this would not make a very popular book title.) The dilemma is, however, that while it’s pretty easy to get information on product successes, it’s a nightmare to get information on product failures.

It’s very difficult to find out exactly what was done in the past and what was the likely source of the failure. It seems as if management acts like the ancient Egyptians – when they ban-ished someone they would remove all traces of their existence.

I’m not sure why we do this, but I guess it’s because a prod-uct failure represents a stigma on the managers. Keeping an accurate record, however, lets us learn from the past. To quote General Otto von Bismarck, “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”

Scientists keep meticulous notes on each experiment they run. When the experiment fails, they can go back and see ex-actly what they did to determine how to not repeat the same mistake. Marketers however seem to hide the failures.

In marketing we do not have the equivalent of the scien-tist to record how decisions were made. Marketers frequently make the same mistakes over and over again. As I have said many times, we have no “organizational learning.” The experi-ence a company has leaves with the employee; the only record of the decisions is what the final outcome was, but not how it was done or what was considered.

The absence of a decision-making record may be the single biggest point of inefficiency in companies. I have asked a cou-ple of executives why logs like those used by scientists are not kept. One said he thought it was too much trouble and might require an additional person just to document the depart-ment’s decisions. Another was afraid of the legal implications if the company was ever sued. Finally, one told me he thought it would slow down the decision-making process. “Marketing people are always on the run,” he said.

These answers make sense to me, but I further asked, “Isn’t the cost of marketing inefficiency greater than the cost of a re-cord keeper in marketing?” Doesn’t our 50-75 percent new prod-uct failure rate cause someone to at least consider the option?

I believe it’s essential that marketing departments become more efficient. We can no longer accept high new product fail-ure rates. We cannot continue to ask R&D to keep doing the same thing over and over again. It is no wonder that marketing has so little respect inside so many companies.

However, things have changed significantly in the new high-tech world. In the days of paper, keeping track of how decisions were made, what things were considered, what was the current state of competition, etc., was not only laborious but it involved a significant volume of paper. Today with various sorts of digital re-cording, it is much easier to create systems that allow marketers to track the history of decisions. Of course, while I focus on product failures, it also would be easier to track product successes.

The new technology is even more fantastic because of voice recognition software. Brand managers could simply sign on to a specific file and dictate the details of what they were currently con-sidering and the decisions that had already been made.

This is not too far-fetched, because even my physician, in an industry way behind in the use of high-tech, uses voice recognition to document virtually every aspect of my visits with him.

I challenge each food marketing executive to put into place some system akin to a marketing decision log. It should be in the form of prose and not some formula. It should definitely not be a fill-in-the-blank-type document. It should have as much emphasis on what was considered but not acted upon as on what was done. It should be something that will show oth-ers what worked as well as what was tried but didn’t work. It also should record how we got to the decisions that were made.

These decision logs could be mandatory reading for new hires to the department or the product. They could be fodder for presentations at meetings scheduled for professional devel-opment. They could be part of the secondary research activi-ties starting a new project. But most importantly they could be the sites for organizational learning.

Learn From Your Mistakes...and Others’Like scientists, marketers should document what went wrong and why.

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I recently interviewed a number of supermarket executives on how they decided what new products to put on the shelves. They had a “feed the beast” mentality: Whatever

consumers wanted, they sold. They stocked gluten-free, no GMOs, no antibiotics, no hormones, nothing artificial, natu-ral flavoring and colors, etc., if consumers would buy it.

What leads consumers to want so many things taken out of their food, especially when previous generations didn’t demand it? I came to two conclusions. One is the internet and the other is food processors’ reticence to explain why their products may have some of these things and why they are not bad for consumers.

Do we as food marketers have any obligation to set the re-cord straight or at minimum to provide two sides of the story?

The internet has given voice to a minority position on many food issues and given these voices a level of credibility simply be-cause they are “on the internet.” I certainly don’t begrudge anyone from wanting no artificial color in their food. That is their choice. However, when people write extensively on the web about the top-ic and tell everyone to beware, I think it creates misinformation.

One cannot underestimate the impact of social media on consumers’ ideas of what is good and bad food. For example, if you use Google trends on the search term GMO, it has in-creased almost 300 percent since 2011. Terms like “gluten-free” also have increased.

There was a State Farm Insurance TV commercial where a young woman told a friend her impending date was a French model. When the date arrived he looked more like a bum than a sophisticated Frenchman. When the friend questioned how the woman “knew” he was a French model she said, “I read it on the internet. They can’t put anything on the internet that isn’t true.”

There are other jokes, but the web is consumers’ major source of information for food issues. Much of what is written on the in-ternet may not be scientifically correct but it certainly influences people’s behavior. Consumers read that additives cause some disease, and it suddenly becomes truth and, more importantly, shared by the reader with many other potential consumers.

The second question is more vexing to me. I am a dyed-in-the-wool marketer. I have always believed marketing is finding

out what people want and giving it to them. To that extent, I believe in feeding the beast. However, more recently I think we have an obligation as food marketers to try to set the record straight or at the minimum provide two sides to many of these food-health arguments.

I suspect I have gone from simply feeding the beast to “feeding the beast food and information.” I realize creating products that are free of antibiotics, hormones, artificial in-gredients, etc., may be ways to differentiate products in the marketplace. And in fact this may be a financial boon to the company that first introduces the product. But how does this affect the whole industry?

When a major branded chicken company announces their chicken is antibiotic-free, it leads consumers to believe there must be something wrong with other chickens. However, to my knowledge, no chicken in the food supply should have traces of antibiotic treatment. So one company has created a sense of concern over an issue that might not even exist. But no doubt, the chicken company has reaped the profits from making that claim.

Maybe the best example is gluten-free. If you have celiac disease, eating gluten is really bad. Therefore, it’s a good thing to let these people know whether or not a product has gluten. However, by putting the words “gluten-free” very prominently on labels, and especially on products that never had gluten, consumers have come to believe gluten must be bad for every-one. Sales of products that are gluten-free are soaring because consumers want to avoid that “terrible” gluten.

When I ask food marketers if they have any trepidation about marketing foods that focus on not having perceived neg-ative attributes, their answer in most cases is no. No, because any bad things that might happen to the industry by catering to misinformed consumers would be in the long run. In some cases, people tell me they don’t expect to be with the company or with that brand in the long run, or their bonuses and other compensation is strictly based on the short term.

So I’m left with the quandary as to whether we should just “feed the beast.” And I ask if anyone else has the same trepidation.

Are You Just Feeding the Beast?Don’t marketers have an obligation to inform, not just sell?

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All I see in today’s food advertisements are the negatives. No hormones, no GMOs, no artificial sweeteners. How are we to respond to the “food police,” who find

everything wrong with our food, when it looks like we’re finding everything wrong with our food?

There is much to be proud of in our food supply. And there are at least two areas that we should be “tooting our horns” about to remind consumers.

We should remind consumers of the emotional side of food and a trend toward families trying to eat together more often. I believe we lost the emotional importance of food. For the past 20 years or so, food has been viewed more as a source of vitamins and calories; virtually an elixir for eternal life. Now the fringe social media crowd is focusing on “clean” food and the ilk. But food and meal preparation is as old as human existence.

Food and meal preparation is a way most societies show love, respect and nurturing to others, especially family members. Think of how we celebrate life’s great events such as marriages (usually with a meal) and deaths (a wake with lots of food – and if you’re Irish, lots of strong drink). Couples who are dating go out to dinner to get to know one another. Religious ceremonies, such as christenings, often involve meals. Proms often have meals. Many couples celebrate anniversaries with romantic meals together. Food and meals are very intimate aspects of life.

A second point we fail to continually remind consumers of is “\taste. Taste is the main reason most people choose our food. In the past 40 years that I have been doing surveys, the No. 1 desired attribute has always been taste. If it doesn’t taste good, consumers won’t buy it for long. Remember all the low-fat foods that tasted slightly better than the box? They are no longer around.

Yet today most marketing effort is spent telling people all the things we are taking out of our food, such as gluten, GMOs, antibiotics, etc. Not only do many people not really care, it makes our past of including these things appear sinister, leading consum-ers to ask, “Why did they put them in there in the first place?”

Not everyone is focusing on taking everything out of food. Blue Apron is focusing on the emotional/social side of cooking and eat-ing together. Watch their ads: They are warm and family-focused,

often with children helping to prepare the meal. They talk about fresh and tasty food and not all the negative ingredients.

Olive Garden has used the family angle for years with its campaign “We are all family here.” And previously “When you’re here, you’re family.” In both cases, it celebrates the family meal celebration and eating as a nurturing occasion.

On the other side of the issue is Perdue Chicken. Recent ads announce its chicken is antibiotic free. I think the company is making millions of consumers aware that antibiotics are an issue – which they never really thought about before. I always trusted Perdue and would have trusted it to sell nutritious, safe chicken even without the antibiotic-free claim. I think most people would.

Perdue never says its chicken tastes any better because it has no antibiotics. It doesn’t say it is better for you without antibiotics. If it doesn’t make it taste better nor make us healthier why is the company telling us there are no antibiotics in the chickens?

Now, the emotional attribute and taste attribute may have been lost, as nutrition and clean foods have dominated. But “the times they are a changing,” as Bob Dylan said.

Millennials are recognizing they may have gotten a raw deal when it came to family dinners. As they grew up, convenience and pre-cooked meals dominated their dinner tables. Now, they are be-ginning to say family is important. They still want convenience but there are ways of getting home cooked meals with convenient food.

Make no mistake, the new generation will not go back to “old time” cooking, but they will begin an age of convenient involvement with meals and cooking their way. They will want to say and feel like they are making the meal for the family again. Convenience will still be important and maybe even No. 1, but giving these new consumers the opportunity to say I love you with food and meals will be important.

So stop talking about the lack of negatives in your food products. Let’s stop empowering the fringe social media population that looks for these negatives. Stop catering to the fringe that wants to follow all sorts of diets like cave man diets, low “anything” diets and the ilk by changing all of our products to comport with their desires.

We have been selling good food to millions of consumers for years. Let’s keep it up!

What’s Wrong With Our Food?Nothing, although marketers are touting the negatives ... or lack thereof.

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In just about every food & beverage sector, you hear execu-tives talking about target marketing. Some companies call it precision marketing, niche marketing or micro market-

ing, but in every case the objective is the same: trying to define the consumer very carefully so the food company can create a product that really meets the consumer group’s needs better than any other product in the market.

As Peter Drucker said, “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Many companies are now targeting millennials; others target Hispanics. One coffee company I am familiar with had a target market of people who are in upscale households, travel internationally, reside in urban areas and are in one or two person households.

Processors target their products in every way possible – ev-erywhere except where the products were actually sold. Because many retailers still are not practicing target marketing. For years, their only target was a consumer “with a pulse and a penny.” But the retail environment is changing and has created a number of retailers with clear target markets. Wegman’s in the east is targeting foodies. Aldi is targeting the low-cost shopper who isn’t brand-conscious. Whole Foods is targeting nutrition- and health-conscious consumers who are willing to pay more. Publix is targeting consumers with a demand for high-quality customer service Sedano’s targets Hispanics. And so on.

Despite these examples, the vast majority of retailers still “Mass market”– i.e., go to Mass on Sunday and pray someone shops in their store. It is not by chance that the most successful retailers appear to be the most targeted retailers.

Food processors have to be more aggressive in getting the retailers to see the benefits of selling products and not renting them “real estate.” Companies must stop paying retailers just to stock their products. No wonder retailers have lost interest in marketing and paying attention to the consumer; they can make an acceptable living without it.

In our seminars at the university, we often hear food proces-sors complain about the “despicable” behavior of retailers who demand so much money just to put products on the shelves. I

ask them what they do about it. It’s always the same answer. They pay it. Let me see: If I was to ask you for money and each time you complained but still paid me, don’t you think I would continue to ask for money?

I see retailers like drug addicts who are hooked on this drug called slotting. The retailers know this drug, slotting, is prohibit-ing them from acting in a normal way, but they just can’t stop. And the food processors are the “enablers” that make excuses but help the addict by providing them with slotting.

Manufacturers complain about how anti-marketing the re-tailers are, but all the while they are the key contributor to the problem. Until the manufacturer “bites the bullet” and stops this enabling, the drug use will continue.

My advice to food processors is to find a “drug counselor” and bring him/her into your company to determine how this behavior can be stopped. Obviously, you will need to translate the human aspects of this behavior into organizational behavior.

More importantly, food processors must support the efforts of retailers that are targeting a market segment. Money should be spent on retailers that have plans and objectives consistent with yours. Many food processors want to be fair and equitable with their trade and promotional dollars, but spend where you are working in concert with a retailer. Make sure you are playing in all the new channels of food distribution. In the past, we had almost no choice but to capitulate to food retailers, as they were the only channel, aside from foodservice. Today food proces-sors have so many choices to get their products to consumers.

You may lose sales and space in traditional supermarkets if you don’t keep up the payments, but you will likely lose those sales in the future anyway. You should be investing in future channels and not the decaying channels.

There are riches in niches for everyone, but to get rich ev-eryone must be on the same page. The market battles between worthy competitors already are fierce; why make matters worse by wasting the scarce resources you have?

Let’s make our battles for the consumer, and her loyalty, and let’s stop the battles within the marketing channel. Or we all will lose.

Stop Enabling Bad RetailersSlotting fees, like a drug, keep some grocers from effective marketing.

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Two big factors for food marketers when dealing with the retail trade are the size of the order and the ability to negotiate prices. Both of these have major impacts on

profit. However, unless food processors pay more attention to independent grocers you will continue to get big orders from the retail giants but will lose the strength to negotiate.

The problem is the consolidation of the retail industry. As retailers become larger they place big orders but demand lower prices. The solution is to build support among the independent grocers. While they don’t place the really big orders, they can help keep the large chains in check by providing competition.

If we don’t do something soon, the supermarket industry will be all big chains like the situation in the United Kingdom, which has five food retailers controlling more than half of sales. You might think of me as a “chicken little with the sky falling,” but there is evidence this can happen.

Today independent drugstores are virtually gone, replaced by Walgreens, CVS, Rite Aid and the ilk. The same thing hap-pened among department stores.

The same can happen to independent supermarkets. They are holding on as best they can but they need attention to remain a competitive force against the giants. Some of you may ask, “So what if they have problems?” The independent grocery channel, which includes nearly 21,000 of the 36,500 U.S. supermarkets, generates $129.5 billion in annual sales, representing nearly 25 percent of the total domestic market. Many of the independents that are going out of business are selling their stores to chains, just as the independent drugstores did.

According to a Fortune article last year, more than 700 grocery stores of all sizes closed. But food processors could be the real losers. Not because the stores are disappearing but because it is giving the remaining chains more and more negotiating power.

I’m sure it is not news to anyone that food processors are paying about $3,000 for a one-inch FSI ad that very few people actually read. Most food processors are paying slotting fees of millions of dollars to get significant distribution.

The medium-size players are getting hit even harder. One broker told me a retailer doubled his slotting fee two weeks

after quoting a lower figure. Prices for endcaps and secondary placements throughout the stores are going up annually. I asked one retail buyer why they continually charge more for nothing. He said, “Because they pay it.”

I’ve written before about the loss of negotiating power in countries where a few retailers dominate the market. In many of those cases the retailers had higher margins than the food processor. And this is not too far from the truth in the U.S.

In my opinion we have not yet lost control but we are close. In the U.S., about 20 percent of food sales are made by the top five chains, whereas Australia is about 78 percent and Canada is about 45 percent. We still have a viable independent market but we need to keep it that way.

What can food processors do to help? Use the F-word! That’s right, help independents do a better job at Fresh, Fast and Friendly, because this will be the way to stay in business. The price war is over. The giants have won and independents won’t be able to compete on price.

It is not just the giant supermarkets that are keeping the price low, it is the dollar stores and even the mass chain drugstores that are selling at very low prices to increase traffic. This means food processors may need different sales and marketing strategies for the different types of chains. Independents may need more support in creative ways to get people into the stores based on something other than lowest prices.

The only way independents can compete against the giant chains is to be better at something other than price. Just offering better deals won’t keep them in business; at best it will make them better targets for the chains.

It will take a real leader among food processors to take the steps necessary to help independent grocers. They will have to overlook the short-term costs to realize long-term negotiating power. It will take a real leader to not be excited by the siren call of the mass merchants buying huge percentages of produc-tion on one sales call, to see the merits of having a competitive marketplace that gives food processors options. It will take real leadership to argue that keeping independent retailers in business is good business for the food processor.

Support Your Independent GrocerThey give you some leverage against big retailers who will squeeze you.

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