Welcome to the Community Call Podcast.
I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-hosts Jackie Brugliera and Mike Schneider.
If you're enjoying the show, please follow and review us on Apple Podcasts or your listening platform of choice.
Mike, Jackie, great to have you back in here.
We were just talking about the Labor Day hangover.
You can tell by our energy, we might have a Labor Day hangover.
It's like that feeling when you're wishing you were still on the Jersey Shore, but you're not.
Yeah.
I don't know, this year, I feel like I finally figured it out because it's always been a slow ramp up for me in summer, and then it's like middle of July and I'm like, oh, okay, it's time for summer to start.
And this year, I decided to start in May and had just a phenomenal summer.
Now, I'm feeling the hangover because I could use another month of summer.
That's the thing, even if you start summer earlier, you just want more summer.
Yeah.
The good thing about San Diego, September is actually the local summer.
So all the tourists leave and we actually get to go to the beach and there's parking.
So I still have a whole month left.
Oh, we're going.
You're going.
We're going to be in San Diego local summer.
Yeah.
Winner the events again.
We have our San Diego office meet up on September 25th during San Diego local summer.
So come on down to the San Diego office.
We'll be having our meet up from five to seven for any industry professional and it's free.
Oh, that's so good.
And you'll be here, Mike.
Oh, that's right.
The TASTE Radio team is going to be there.
It's TASTE Radio meet up.
It's going to be awesome.
Well, that's certainly something to look forward to.
And hopefully that kills anybody's summer hangover.
I don't know if you guys had a chance to sort of kiss official summer goodbye.
And it's not goodbye.
Like there's still a few, there's still a couple more weeks, but still, I don't know if you had a chance to kiss summer goodbye with any good food or meals.
But this past weekend, I went out to Western Mass to visit a few friends.
We were trying to figure out where to go.
Like, do we go to a restaurant for dinner?
Do we cook something?
And they took me to this place called the Buncheon Korean Deli.
It's in Sunderland, Massachusetts, near Northampton.
And it's in this shopping plaza, like a strip mall.
There's a woman named Hilda Bailey.
You walk in, there's just like a wall of fridges with pickled things.
So they had so many different kinds of kimchi.
There's a peach kimchi that was so delicious.
Turnip kimchi, cabbage kimchi, spicy squid, pickled daikon and carrots.
And she just has, you know, row upon row of the Buncheon.
And then you can get a frozen square of marinated beef or pork, I think it was.
And so you buy this like, it's frozen flat, so it defrosts really quickly.
So you defrost the meat, you buy all the Buncheon, you can make your own rice or buy it there.
And it was such a delicious dinner.
And I mean, we were just talking about how expensive it is to eat out.
It was like a hundred bucks to feed six people and we had a ton of food leftover.
That sounds yummy.
I thought it was such a smart, just, I don't know, are you guys really annoyed by how when you go out to eat, it's like $25 for a sandwich?
Yeah, I feel like I've been revisiting the happy hour a lot more because it's the only way to eat out affordably.
Or actually, I went to Chili's over the weekend and had fajitas, which that was a throwback since I think, I think I was like 16 the last time I went.
My family's been olive gardening too, which is, but I mean, that's another thing.
Like, now maybe some of these chains are back in style because it's cheap.
Do they still do free breadsticks?
Oh yeah, unlimited.
And Jackie, how are those fajitas?
Would you go back?
Yeah, I would go back.
Yeah, they had a great happy hour.
Vaginas?
Vagitas in that campaign.
You'd go back for the happy hour, Jackie?
I would, and I would go back for the fajitas.
I would, you know, compared to like some other restaurants too, it's just hard.
It's and whereas you go to chains and they can be pretty consistent, you know what you're going to get.
Totally.
My I was talking to my mom on my drive in this morning, and she said, Melissa, your father and I went to Five Guys, and he got a cheeseburger and I got a hamburger.
He got a small drink.
I just got tap water because it's free, and it was $25.
No fries.
Can you believe it?
I can actually, but I mean, if you find yourself in the Buffalo area and you're heading over to Niagara Falls, I was just in Grand Island because that's where my grandmother used to live.
We just passed away, so I was there for the funeral, and we went to this place called 773 North, and it was phenomenal Buffalo Fair.
If you like beef on whack, if you like turkey, I'd give that place a thumbs up if you're just heading over to Niagara Falls for some end of the summer fun.
Niagara Falls makes you hungry too.
Niagara Falls, yeah, and it's also like expensive, so get something before you go over to Niagara Falls.
Totally, that's a hot tip.
Get something to eat on your way, right.
Jackie, was Chili's your sweet kiss goodbye to summer?
I guess I had multiple kisses over the weekend.
It's like a home makeout session for summer.
I went to this place called the Huntington, which is like a library, botanical gardens, museums, and they actually have a really great cafe there.
And I had some vegan watermelon poke, which was actually delicious and like perfect on a hot day.
Really like satisfied the poke need without having fish in it.
So it was really tasty and they had like a whole food court, lots of different options, and then you could just go roam the gardens.
They had like a Japanese garden, a Chinese garden, they had art museums.
It was really cool.
Well, in other food and beverage news, I read in Food and Wine that Mountain Dew is staking its claim to Mountain Time as the official unofficial time zone of Mountain Dew.
They are promising a free Mountain Dew to anyone who crosses into Mountain Time by whichever means necessary.
Plane, train, foot, wheelbarrow, you have to register first and then go to their website, and then you prove where you are with a geo target.
Two marketing professionals right here, is this the best way to drive traffic to your website?
I think some crazy people will do it.
I think it's hilarious.
I think Josh, our technical director, would actually probably do this because he's such a huge Mountain Dew fan.
But my big question is, do people that already live in that time zone, do they just automatically get free Mountain Dew?
Doesn't sound like it.
So they have to be excluded from that.
First, you're excluding a whole time zone.
Second, it sounds more like a threat to me.
We're going to poison you if you come into Mountain Time.
So I feel like it's going to have people retreating.
And actually, Jackie, I put this in just for Josh Pratt.
Josh, if you're the one listening to this, this one was just for you.
They also have a new brand character.
Shout out to Josh Pratt, right?
They have a new brand character, the Mountain Dude.
And then I read in this article, they say that the great outdoors is at the core of everything they do.
Is that true?
I typically think of the typical Mountain Dude user as more of a gamer.
Yeah.
I don't think people that are climbing mountains are guzzling Mountain Dude usually.
I think the only mountains are climbing are on Fortnite.
Jackie, is this what you're packing for your climb up?
Definitely not.
I think my system would malfunction and I would wither away.
Only Josh would get away with that.
And what's with all the dudes now they've got?
Mountain Dude, Dude Dad, so many dudes, too many dudes.
Yeah, you can have too many dudes.
You just drop a dude into PR and we're on it.
You're at the BevNET headquarters.
Well, you know, funny enough, the topic of this community call is what emerging brands can learn from big CPG innovation.
Not all lessons from big CPG companies are worth following, but understanding the key principles behind smart innovation, if these brands can help emerging businesses become more capital efficient.
In this episode, Glenn Pappalardo, co-founder of Integral CPG and former executive at RXBar, Kashi and Kellogg's, joins Monica Watrous, managing editor at NOSH, to lay out the core strategies emerging brands can gain from big CPG.
This is a companion piece to a NOSH article, so make sure you go over to nosh.com to read all about it.
Please enjoy.
Monica and Glenn, thank you so much for joining me on Community Call today.
It's such a pleasure to have you here.
Thank you for having me.
Pleasure.
Monica, we know and love you as our managing editor of NOSH.
Again, thank you for joining us.
Dwight, we would love an intro from you as well.
You have so much experience with big CPG, and now you're working on your own project.
Could you tell us a little bit about where you've spent your time and what you're working on now?
The quick version.
So the first kind of decade of my career was in consulting growth strategy consulting with some of the larger firms globally.
So places like DeLoyt and PricewaterhouseCoopers, where I focused primarily on consumer packaged goods and in the back half of that decade, increasingly on food and beverage.
Working with companies like Florox and Procter and Gamble, as well as private equities who invested in the industry, all around different ways to grow, including mergers and acquisitions, as well as what we refer to as organic growth, meaning from within the company.
And towards the tail end of that, I ended up joining the Kellogg Company, which is sad enough to say, I guess doesn't exist anymore, but at the time, a 100-year-old icon of breakfast foods and cereal as well as snacks.
And similarly there, I started in a role where I was focused on growth strategy for the company as a whole.
So doing large kind of initiatives as well as mergers and acquisitions for the first few years.
And that's when I started focusing on the kind of better for you and natural and progressive side of the food industry and really fell in love with that part of the industry and kind of the founder led and kind of missions and values based businesses that dominate that part of the industry.
And as a result of that kind of specialization, in a couple of years, I joined the newly formed or reformed management team at Kashi, one of the original organic food and beverage brands that at that point had kind of gone through some tough times and we were trying to rebuild.
And so I joined in a kind of innovation strategy, international capacity on the leadership team and got to do some fun things like lead some major innovation campaigns as well as take Kashi into Mexico.
And then we, Kellogg Company, helped design at the company level a series of what we called platform innovation teams.
So like five year out type innovation, which is a little bit pertinent for today's conversation.
And was then kind of handed control of the one that focused on natural organic.
And so in the middle of doing all this, then was also asked to connect all of Kellogg's natural organic brands around the world for things like innovation and marketing to make sure that we had better cohesion, weren't stepping on each other's toes or being duplicative or any of that fun stuff.
And as all of that was picking up steam, Kellogg's company acquired RXBAR.
The short version is I opened my big mouth and I was asked to lead the non-integration of RXBAR into, I guess with a question mark, into Kellogg's company if it's a non-integration.
And as part of that joined RXBAR, actually they were left pretty much autonomous and was asked to build international business first.
So that included building a full-fledged business from the ground up in the UK, helping lead the business going into Canada and other international markets through more of a traditional export model.
And then ultimately became COO when we restructured a leadership team there about a year later.
Ultimately did that for another year plus and departed to join a boutique consultancy firm called JPG Resources.
Some of you may have heard about, which specializes in a host of innovation related services for food and beverage, expanding a wide variety of strategic and kind of executional including product development and command searches and regulatory and quality, as well as some of the front-end strategy work.
And was a co-managing director there for four years.
Got to work with startups all the way up to Kraft Heinz, General Mills, Conagra, the biggest of the big.
All of which was fantastic.
And this past spring decided with a co-worker of mine to leave and strike out on our own with a firm we've called Integral CPG.
To specialize on a subset of work that relates to what we've done previously, which is really what we call ambitious innovation and the entire journey strategy through execution of helping brands navigate that.
Ambitious innovation is anything that companies are doing that takes them away from the kind of day-to-day core portfolio they're used to.
There's another set of challenges when it comes to that kind of innovation.
And we've seen companies not always recognize that.
And so we've invented Integral, formed it to have a specialized approach to help them do better when they make those efforts.
So that's the not so short summary of who I am and how I got here.
Absolutely perfect.
And into Integral, are you working with brands of all sizes?
Do they tend to be at a certain size?
To have a core, you have to have existed for a little while, right?
And so when we say ambitious innovation is things that take you away from your core, it usually means that you've been doing something with some degree of success for a period of time such that it's become your core.
In that regard, it's not that we couldn't help pure startups.
I just think that our methodology is maybe not as impactful for them because in many ways, the methodology we deploy for ambitious innovation largely resembles what startups are doing in the beginning, which is thinking about all the different functions and opportunities simultaneously.
It's something that companies walk their way out of accidentally over time and a little bit forget.
And so when they go to do ambitious innovation later, they often kind of deploy their standard core innovation approach to it and they miss out on some of the benefits that a startup mentality can bring to that.
So long way of saying we can work with startups, but we think that the major benefits for someone in working with us really come once they've got an established core.
So what that means, four or five years, probably old companies and upward to obviously multinational.
Understood completely and certainly your experience will be very helpful in expanding on this topic.
Monica, could you tell us a little bit about the article that you're working on now about how CPG approaches innovation?
What are some of the themes you're uncovering?
I have to caveat this with big CPG companies have a lot of money to do a lot of insights research and consumer polls and focus groups and things that really help that innovation strategy.
But there are some through lines if you look at some of the most successful new products that launched last year.
Serkana has been tracking its new product pace setters for 29 years now.
And on the list, there's a few common themes that emerged.
These are the products that were launched with the highest first year sales.
So a lot of them are going to be the bigger brands that have the budgets to have widespread distribution and marketing right out the gate.
But a lot of these brands are finding their way to new parts of the grocery store, new product categories, expanding usage occasions.
And basically, what's appealing about this for the consumer who is in an inflationary state of mind, they are looking for a trusted brand in a new way.
Maybe like familiar with a twist.
So maybe it's their favorite breakfast cereal of Cinnamon Toast Crunch, but now you can get it as a baking mix.
Or maybe it's Doritos and Cheetos, but they're in a miniature form in a canister that you can take on the go with you now that consumers are out and about a lot more since the pandemic period.
So basically, a lot of these products are, again, marrying the familiar with the unfamiliar.
And another common theme that we're seeing is licensing and co-branding.
So that's another way to sort of get in front of new audiences, but in a way that consumers already have a little bit of experience.
Is there really a cinnamon toast crunch baking mix?
There sure is.
It feels very...
Well, I will be looking forward to seeing whether it waffles or not.
Thanks Monica.
Of course.
Glenn, could you lay out the high-level strategy that big CPG tends to use for innovation?
And I'm sure that is a little bit different and maybe more strategic than how more emerging brands tend to approach it.
Sure.
I mean, a couple of caveats.
When done well, right, it is.
And certainly just being a big company doesn't mean you always do everything well.
And in fact, if that were true, right, then there probably wouldn't be any small companies and there wouldn't be any for consultants either.
So that's one thing to remember as we're talking through these various lessons today is like, I'm going to talk about it when it's done the right way, at least from what I've seen.
And the second is, as part of that, a corollary that the right way also includes a certain striking, a certain level of balance or moderation in any of these points, right?
Often when large companies, it doesn't go well for them, it's because they overindex on some of the things we're going to talk about and they spend too much time on them or they invest too much in them or what have you.
So keep that in mind that the simple presence of some things we're going to talk about doesn't mean the right answer, it's also the way it gets deployed.
That being said, so to your question, one of the things larger companies when it comes to innovation tend to actually do pretty well is they connect it to the broader company strategy, right?
If you think about where do innovation requests and innovation efforts at big companies come from?
They come from an annual and multi-year and annual strategic slash planning processes, right?
So someone sits there and says, where are we trying to take this entire entity?
Okay, what does that mean?
Let's start chopping that up into the different pillars that support achieving that overall objective.
They do this a couple of times, right?
This is sometimes across multiple brands, geographies, and eventually it gets down to a level where it starts to relate to product lines or potential product lines.
That's where innovation needs start to surface, right?
Okay, wow, we need to grow, usually growth, right?
We need to grow X percent here.
We need Y million dollars here.
How are we going to get that?
Well, we think what we currently have can grow this much.
Now we have a gap, and that gap becomes something that innovation has to fill.
So that's kind of where their process starts from.
For smaller company, that's a bit overdone, right?
Like you don't need quite that level, but I think that the takeaway for companies of any size is that innovation when done well, and innovation planning and innovation strategy starts from the larger strategy, right?
Like what are you trying to achieve as an overall company, and then being able to draw a through line from that down to, okay, well then what does innovation do in service of that?
So that is kind of a practice that I will say most larger companies do a pretty good job of, and maybe some smaller companies for a variety of reasons don't do as much of, and so something that they could potentially learn from.
Do you ever find that through innovation, a brand goes back and edits their overall strategy, that that sort of helps define and change what the overall strategy is, or is that a bad thing, and if you don't have it locked down, then you're in big trouble?
Well, there's definitely a push and a pull in all of this, right, and sometimes, and this is at Integral, one of our philosophies is that when you start an innovation effort, you need to, even if it came from a larger strategy, or even if it came, quote, the right way, that there is value at the onset of kind of looking backwards, looking, pushing back a bit, and asking some important questions around why are we doing this?
What are we trying to achieve?
And it might just be confirmatory, and hey, that's great.
You know, one of the things we often say is like, our approach is an exercise and intentionality, right?
Be intentional.
You know, asking the question, even if it just confirms something, has value.
And so before you embark on what can be often expensive, and kind of consuming from an energy and mind share perspective, innovation efforts, it's worth taking a moment to ask some of these questions and double checking, we know why we're doing this, right?
Like, so to your question, what that would mean is, what is this in service of, right?
And so at the more strategic level, the obvious ones are always these kind of revenue targets, but there's other things, right?
There could be strategic reasons around improving our defensibility of our shelf position in key retailers, because right now we've only got four things, four facings, and if we can innovate a little bit better in this particular step, we can get to seven, we feel it's way more defensible because people keep coming for our space.
It could be if we innovate in this particular category, we can now get into some retailers we couldn't get into before for whatever reason.
It could be our brand becomes known to people who, consumers who hadn't seen it before.
So these other strategic reasons beyond the kind of obvious quant metrics that often get thrown around with innovation that are worth making sure you're aware of.
This is all what we refer to as the context around why you're doing the innovation.
Again, I don't want this to come across as these are not like 10, 12 week processes.
These are a series of conversations.
They can be a short, sometimes a half an hour, if you're a small enough company.
But the point is you have them.
You have them and you get it out there and you capture it.
Then that helps guide you through the innovation process, which as we all know has plenty of twists and turns.
So if you don't have a strong foundation, if you don't have a north star to follow, it's really easy to get lost.
So to finally come to an answer on the question on brand.
Yes, you could.
There could be a scenario where by pushing back, by looking back, you ask some questions that make it clear, and this has happened on projects of ours, that actually the brand isn't fully where it should be.
So maybe jumping ahead and trying to innovate into brand new categories on top of that brand right now, isn't the best idea or isn't the best idea in isolation.
We actually have some shoring up to do around what we already have, in order to make sure that what we want to do next has a better chance of success.
Figuring out whether or not it makes sense to innovate is one of your innovation process guidelines.
Let's get into that list.
So you came up with a list of guidelines and thought processes that brands can think about and look at when they're thinking about embarking on innovation.
I think it would be helpful to start off with, what are the forms of innovation?
Because it's not all a line extension or a new skew.
What do you look at as sort of the key buckets of innovation for brands?
And this is another one of those years where, in general, larger companies, I will say, at least do a pretty good job of being intentional about dividing their innovation efforts up into the different types.
And the reason that's important is because, like I said at the beginning, and why Intergrow was found is you need to take different approaches for different types of innovations, or at least for some of them.
Traditionally, innovation around your core, which there's a lot of different nomenclature out there, right?
Sustaining.
People do line extensions.
You think about new flavors.
Anything that basically takes what you already have and kind of expands it gradually, if you will, in terms of it's still built in the underlying chassis.
It's probably the same supply chain network, and going to sit in the same set in the store, right?
So this is all kind of core related innovation, packaging redesign.
All of this can kind of fit more in that bucket.
Then your next ring out, which, you know, you can call breakthrough, is often is things that aren't totally divorced from what you or maybe even the industry is doing.
There's, you know, you're going to use the same brand, for example, you might use same, some of the same suppliers.
So think of basically a bar company going into Granola, a salty snack company going into companion dips that are going to sit more or less in the same aisle in some way.
These are things that begin to be breakthrough, right?
Because something is meaningfully different about them, whether that's the format, whether that's perhaps the channels or the accounts they're going into, you name it.
Then the furthest ring out is often referred to as disruptive, right?
It's most elusive.
This is the kind of things that really change the game either for you as a company and your portfolio and or for a part of the industry.
And so these are things that really move away from food forms, temp states, channels that you're used to.
They could be...
And really, one thing to think about is you're moving from kind of core innovation closer and closer to disruption.
In order to be successful, this is kind of a bedrock philosophy of integral, is it becomes less and less just about the product.
You can innovate in a lot of different ways that aren't just the three-dimensional items someone picks up off the shelf.
Your organization model, your financial model, your partnership model, your marketing model, your supply chain, all of these things are in play.
And in fact, as you become closer and more in pursuit of disruption, the more they matter, that's where disruption comes from.
Think about Uber, right?
Tell me, what is Uber?
Not a food or beverage, right?
For purposes of this call, but from an innovation perspective, I'm going to say to you, what is Uber and why has it been successful?
It's not one thing, right?
It's not just that it was an app.
It was an app that enabled non-taxi drivers to use their cars in a fractional manner, and allowed people to interface with them directly with the dynamic market, yada, yada, yada, right?
There's a number of different things that make something like Uber which is just, I think, we would all acknowledge disruptive, the success it has been.
Then the final one, which is related back to core, is just renovation.
It often gets forgotten and it shouldn't, but renovation is taking the things you already have and making them better.
So don't forget, just because you have a product that's working right now, that it will always work.
That's not necessarily going to be true.
And in fact, probably unlikely to be true.
Consumer tastes and preferences change.
Competition comes, right?
You can become the expression being a victim of your own success.
You know, as at Rxbar, we saw this almost immediately.
The number of people trying to basically do the exact same thing, just one notch better.
So the idea that you can put something out and it's working, it will always work is a fallacy.
It's key going in either in creating an innovation strategy or when you're thinking about doing a particular innovation to understand which one it is so that you do take the approach that makes the most sense.
Another one of the process guidelines you pointed out was due diligence, making sure that it makes sense to do that innovation.
What kind of information should a brand be looking at when they're trying to decide whether or not the innovation that they're thinking about is the right way to go?
I think due diligence is another one of those terms that people hear and get scared of, because it's often equated with tons and tons of work and time and effort.
Really, it's more a mentality than it is a heavy-handed process.
It's just the notion of, again, making sure you know why you're doing something.
In the case of innovation, starts with a consumer need or a job, their job to be done, a fan of that framework like we are at Integral, then you'd say a job, but basically, are you solving a real problem for enough consumers?
That even if you're successful, they're going to care.
They're going to want to put their money up against it again and again.
And by the way, in exchange for something else, that are already putting their money up against.
And so doing enough of that thinking and work, and again, this is one of those double edged short ears because big companies certainly do this.
And in fact, one of the reasons we started Integral is we often see they do too much of this.
They kind of pass a tipping point of where the consumer understanding work moves from very helpful and insightful to kind of repetitive to almost counterproductive the longer that you do it without bringing other kind of activities into the mix.
That said, if you don't do any of it, which sometimes at smaller companies, a common journey you see is early on, a founder who's really good about understanding what the core target consumer's needs, status in part or job because they are that person.
They're great early on thinking about the innovation portfolio and what should come next.
But inevitably, at almost all those companies, to grow, they start moving into jobs or needs dates that move further from maybe what the founder themselves lives and understands.
But the approach to coming up with innovation strategy doesn't evolve.
And so it's still one or two people sitting at the center thinking we should do this now, we should do this.
And the cracks start to show.
And that's because they're not putting in enough effort or thought around who is this really for, why do they want it, and then what does success look like for them?
Like why would they actually buy this product and keep buying it?
And so you have to have that awareness and there has to be at least a baseline level of thought and investment, not necessarily dollars, but could be time, into making sure that that question has been answered to the satisfaction of the team, because that's what the whole thing is going to be built on.
I think if I asked any food or beverage brand, if the consumer needs the product that they have available, they would absolutely say yes.
How does a brand remove themselves from the business enough to figure out whether or not there is actually a consumer need?
Is it looking at what the available revenue in the market is?
Is it taking a really close look at competition?
Are there any sort of like hard and fast ways for somebody to decide whether or not there's a consumer need?
Because sometimes even that can be a hard thing to figure out.
Yeah, I mean, the obvious ways to figure out consumer need, and the good news is it's gotten a lot cheaper and easier than it used to be.
20 years ago, it was a lot of money and there was very few ways to do it.
Most of them involved in big agencies or whatever.
These days, from a pure consumer work and insights perspective, there's fractional people you can bring in.
There's digital online tools that make rarely targeted consumer work surveys of different kinds.
Very effective and quick to deploy and not terribly expensive.
So that's all that realm.
On top of that, to your point, yeah, there's ways to look at where the money in the categories or related categories are going.
Again, you got to be careful because categories and consumer needs or jobs don't always perfectly align.
So it's directional at best when you do this kind of analysis.
But if you're looking and there's a white space and it doesn't seem to be a lot of revenue around the white space, it could be a white space or it could be a space that nobody wants to be in, and there's a fundamental reason for that.
Similarly, if you look at people who have tried to do something similar to what you're thinking about, who's tried recently?
Did it work?
Did it not work and why?
Often, what you'll see again with these white space occasions is a lot of people have tried it and it hasn't worked, but then not asking enough questions and getting into why.
Because there might be a fundamental reason it doesn't work, which suggests that the white space isn't really a white space, it's again a place that no one can live in, it's a desert, if you will.
Category revenue and another point of sale data, if you can get it, syndicated reports and all that stuff, and then just general observation, like Google and other online basic research tools, can still tell you a lot about who's out there and doing what in a given space and what they're trying to sell and how they're talking about it.
So even just looking at that and trying to see if anyone is apparently going after the job that you've identified.
Again, you have to know the job because you can't do this research if you don't understand who you're going after and what problem you're solving for them.
So once you have that, then there's all these other ways that you can piecemeal at various levels of depth and sophistication, a point of view to give you better comfort about the opportunity is what you think it is.
It's very helpful.
Monica, you're talking to emerging brands all the time, founders, and folks who are working at those brands.
How are you finding that folks who are working at brands are collecting research and data on how their consumers are responding to their current line of products, which helps them understand some of these questions around, is it renovation, is it a line extension, what should I do next?
Are you seeing any themes in how brands are collecting data?
Well, I think a lot of emerging brands and digitally native brands have this amazing locked-in consumer base that's super engaged and happy to provide feedback.
So there's a lot of interaction already happening in that way, probably more qualitative than quantitative.
But I think that another key thing, and this is based on the conversations that I've had with some of the folks for this feature, is that whatever you're innovating has to be super easy for consumers to adopt.
It's very hard to break routines and to break through and get somebody to spend money and spend time and incorporate something into their lifestyles.
So if there's any barriers to adoption, then I feel like that's dead in the water.
We do have a question from Jeff Williams.
Jeff, thanks for your question.
Jeff wants to know, from your perspective, what are the key issues that companies are experiencing with innovation?
Is it more related with the strategic fit, or is it much more tactical?
So consumer-relevant, ideating versus commercialization?
Glenn, do you want to take that one?
Did that question make sense?
Yeah, it does.
And the sad answer is a lot of places can go wrong.
But if forced to choose, my bias, I think more of these things go wrong.
I think it's easier is the wrong word.
I think, but I'll use it anyway.
It might be a little bit easier to come up with decent ideas.
Reason I think most of them fail is that they are then divorced from all of the kind of real world what I call three-dimensional aspects that will drive their success.
So this is the financial model that's required to support them.
Are they truly scalable?
Can they ever get to a margin that will make your company happy?
Can they grow enough and produce enough news over time to keep retail buyers happy year on year so they can command their space in the set?
And then can they be made at all?
I would say my view is it's not enough consideration, even during the strategic work is given to, how is this actually going to unfold?
How is this going to get made?
How is it going to get moved around?
How are we going to grow it?
And that too much is given on polishing this two-dimensional notion, idea, concept, whatever you want to call it, within the balance of the overall effort.
You mentioned financial modeling, which I would expect drives all of those things, but that's also a really difficult practice when so many different factors are changing and will change over the course of a brand's trajectory.
Any kind of big mistakes that you see brands make over and over again when it comes to financial modeling for innovation?
I think that often there's probably too much optimism on how much better they can get their cog situation as they grow.
There's a realistic range, which you can probably improve with scale.
But if you're coming up with an idea or a concept that as you do the initial penciling out, it's going to have a zero or a negative gross margin.
And then your expectation is somehow you're going to find 25 or 30 points through scale over time.
It doesn't tend to happen for two reasons.
One is an awful lot to make up even with scale and iteration and kind of learning curve knowledge.
Two, competition and other market effects are going to hurt your top line and pricing ability as you're growing.
So like the fallacy there is that, oh, that part's static and I'll just get better at making it.
Well, that part's not static.
So I think that is when I see an awful lot of people just say, oh, we'll make that up.
You probably won't.
It's like 10 points somewhere in that neighborhood.
Yeah, sure.
25, 30.
That's a really tall order.
And is the answer to that just building in better margins before you sort of allow yourself as a brand to move forward with that innovation?
Well, it might be you don't move forward with that innovation or you have to kind of rethink what that concept should be in order to, can you still do the job effectively for the consumer in a way where you don't have a 25 or 30 point margin gap to make up?
Is there another way to rethink the format or some other element of the offering that unlocks a significant improvement in the cost?
We have a question from Jesse Freetag for Monica.
Jesse, hello, thanks for joining us.
Jesse wants to know, based on your coverage of both emerging brands and big CPG brands, are there any examples of emerging brands that you think have been able to innovate in ways that big CPG companies might not have had the flexibility for?
That is such a great question.
That is a really good question.
Hi, Jesse.
That's tough.
I need more time to think about that.
But off the top of my head, I would say certainly emerging brands that have, they're self-manufacturing, they have a little bit more control over their production.
They're already poised to have a little bit more flexibility.
One of the brands that comes to mind is Aura Bora.
They do a really nice job with LTOs, and that's something that a lot of emerging brands are hamstrung to do because they don't have the capacity to turn out all those flavors on a monthly basis.
Because of that, Aura Bora has been able to do some really fun, creative skews like their green bean casserole that went viral at Thanksgiving a couple of years ago.
Then another brand that I think about who also has that flexibility because they are self-manufacturing is Pockets Chocolates.
They make chocolate-coated almonds and they started out doing a lot of Asian-inspired flavors like Vietnamese coffee and matcha and mango yuzu.
They've been expanding over the past year with churro and I believe an ube flavor that I haven't had a chance to try yet.
Chris Young, if you're listening to this, I really need you to send me some of those.
Me too.
But I think that's part of it, being able to respond to flavor trends or of the moment type, whether it's a flavor or an ingredient, certainly having that control over your supply chain will help.
Thank you so much for the question, Jesse.
That was a great one.
Let's move into another point that we talked about as we were getting ready for this conversation which is making sure that you squeeze everything from your existing products and existing lines before you move on to innovate something else.
Glenn, please talk a little bit about this.
What exactly does that mean?
Sure.
And this is another of those double-edged short areas for big companies who traditionally are pretty good about making sure that they're not leaving any meat on the bone.
Pardon the pun, I think.
As relates to their existing portfolio and sometimes they skew too much so, right?
Like they just keep pushing more of the same and kind of turning the consumer and the retail buyers off.
But when done right, you know, the idea here is take, for example, a growing company whose ACV is in the 40s or 50s, and maybe they're in most places, they have two, maybe three items on shelf and they're set.
And they're doing well, right?
They've got great growth, they've got great velocity, repeat all the right metrics, right?
And let's say they're in snack chips, just make up some, right?
And they turn each other up.
We're awesome in snack chips now.
Let's go into frozen dumplings, let's go into cookies, let's add that way.
Well, there's a bit of a fallacy there in that you're leaving behind something that still isn't fully defensible, right?
This notion I mentioned earlier, your core is always evolving, right?
The work's never done.
Does it go down a little bit versus a full on innovation?
Yeah, for sure.
But it's not in a place where you can ever take your eyes off it or assume it doesn't have to change at all.
And so particularly if you're in a position where you're not, like there are kind of tipping points or moments of inertia for portfolios where they are more defensible, right?
And that's ACV and that's volume in general, and that's share of shelf.
Those are brand metrics, right?
And if you're not all the way there yet and you start planting flags and a number of other new categories, what you're doing is increasing the chances that the very core that you thought was healthy is going to come under attack and suffer.
And then what do you think that does for the new things, right?
The analogy we used to say, or Kashi's like, you know, you go into like a new category.
It's like maybe a terrible analogy.
It's another mouth of these having another kid, right?
Like it doesn't go away.
Once you do it, like the obligation is there and it's kind of permanent.
You have buyer meetings and they have expectations and, you know, the person coming in right behind you after your buyer meeting might only do that category and they might have 25 skews to your two.
So you have to really think smartly about making sure that the things you already do have been fully established and that there isn't more to do with them through the familiar with the twist.
You know, Monica has talked about this before.
Some of the things that we're seeing could be the Cementos Crunch example, could be others.
But if you want a good example from not so much as recently, but the first 15, 20 years of their history, Cliff, right?
What Cliff did within bars by continuing to stay within bars, and yes, they had a few other side things, but like finding new ways to make different forms of bars that were compelling and did different jobs and were incremental to their growth.
Like that's a wonderful case study of how do you continue to extract maximum value out of largely the same space by looking at different jobs, by tweaking, adding the edges.
That's one way to think about it.
The other is you have an existing supply chain network and existing internal capabilities.
Are there ways to leverage them to do other consumer jobs and maybe in other categories that don't make that effort quite as onerous and as difficult and as complex as it might be otherwise?
Obviously, you can't sacrifice the quality to which you do the consumer job, you still have to do it well.
But if there's a trade-off to be made between, hey, I want to go find a new command, so I want to make a frozen dumpling.
Well, the current command we have can actually do like empanadas or pierogies or some other form of filling wrapped by a dough-based thing.
Is there a way to still do the consumer job as well as the frozen dumpling idea, but working through them so that we still retain some economies of scale?
So there's two different ways to think about making sure that you're taking advantage of getting all the meat on the bone, so to speak.
We have a comment from Can Coyancu, who says that she's bullish on Rind Snacks since they bought Small Batch Organics on this topic, which was in reference to the comment that Jesse had for Monica.
I couldn't agree more.
Lindsay, the founder of Small Batch Organics, is a trained culinary professional.
She's always innovating.
They own their own manufacturing and then of course, when Rind acquired Small Batch, then they absorb all of that functionality and opportunity.
So I couldn't agree more.
And actually, I was thinking about exactly that.
And that made perfect sense.
Thank you so much, Glenn.
On the topic of renovation, you mentioned that RX Bar always had to find something that was one notch better because of all of the competition in the market.
How does a brand like RX Bar look at things to renovate in order to stay one step ahead of the competition?
Well, in the early days, it was easy because Peter, the founder, was kind of maniacal about, and this is a perfect case of where the founder is part of the core target, maniacal about what great looked like for the solution that the bar was meant to be.
And so he naturally was always going in and working with the R&D team.
The number was on the Chocolate Sea Salt Bar, over 300 varieties from the start of the company through kind of the first four or so years.
Naturally tinkering, it was easy for him because he was the target.
I think it gets a little bit harder if the team itself is not the target, then you need to have, that's when intelligence and information from the marketplace and from those consumers becomes relevant because it's all a matter of understanding over time, because it does evolve.
What is doing the job for them look like, doing it well look like and how is that changing?
Taking those moments to compare that to what you're offering.
Doesn't have to be every month, but it's something that at least annually makes sense to be doing particularly on your biggest skews and cores.
Are we still giving them what they want effectively, is what you're asking.
There's ways to do that through direct consumer interplay with your existing customers, surveys, field marketing.
You can watch who's growing and what they're offering, and how does that compare to what you're offering?
A lot of times people do trend monitoring, but they don't do the final step, which is like the comparative is what's important, right?
Like that's great that that's happening.
What does that mean for what I have and how I'm talking about it and how I'm innovating on it?
So I think it particularly as the company gets bigger, it takes more of that effort versus when your earlier stage, particularly if the founder is the core target, it's kind of almost innate.
And you mentioned collecting consumer feedback to kind of understand what the need and want is.
How much does velocity come into play?
Is that one of the biggest sort of finite metrics that a branch should look at when they're trying to figure out where to go next?
Velocity matters, but velocity got a lot of other inputs going into it too, right?
You think about velocity as you get more widely distributed, velocity by design has to come down almost always, or at least over time.
Competitive actions are another, somebody's promoting a lot even if they shouldn't be, like bad decisions by others can influence things like your own velocity.
So it's definitely one indicator, and it certainly should be included in a consideration set.
But it has to be complemented, I think, by things like actual voice of the consumer work and trying to understand what matters to them.
It's the simple things, right?
Getting out and talking to people who buy your product on enough of a repeat basis and have real conversations with them to understand why they did and why they're not anymore.
Even though that's a smaller sample size, it's like that smaller sample size, qualitative, and these larger sample size, quantitative.
The combination of those two is really where you find the power and often the answer.
How do you think about portfolio interactions?
If RXBars had, was it over 300 SKUs?
I think you said, how do you make sure that you're not cannibalizing your existing SKUs, your existing core line so that the innovation is worth it?
It's another one of those exercises of intentionality.
It's very hard to do it perfectly.
They're very complicated analyses.
They take a lot of guesswork.
To be honest, we launched this new product for Pringles, and it was at Kellogg's.
What does that mean for Cheez-It?
You can do all kinds of modeling.
At the end of the day, it's an educated guess.
What's more important is that you're aware it happens.
Because a lot of companies don't even realize it could happen to them, that by innovating in one area, they could grow there, but at the expense of another part of their business, and in a way that maybe didn't want, because that other product might have been higher margin, healthier, more important, whatever.
So step one is being aware that it happens, and it happens in a couple of ways, right?
It's category to category, format to format for consumers for whom you're trying to do the same job.
Are you just basically doing the same job with another alternative and therefore stealing your own volume?
The other interplay that's important is just retailer against retailer.
So as you become more widely distributed, tactics that you employ, including innovation, have knock-on impacts you may not have been aware of, i.e.
target calling and asking why Costco got something first and what does that mean for them?
Or is that going to be something that they'll ever get?
Is that a format that they can carry?
And I'm not picking on either of those retailers.
I'm just using those examples.
So I think it always starts with asking the question of what is this going to mean if we do this?
What's it going to mean for our portfolio?
What's it going to mean for our retailers?
And maybe what's it going to mean for our consumers?
If it shows up here first and that doesn't necessarily make sense to them with our brand, what then?
We've talked through so many helpful ideas and guidelines to help brands figure out whether they should move forward or not.
How do you avoid paralysis?
How do you not just kind of get overwhelmed by just the thought of going forward with innovation?
I think it's kind of a combination of 80-20 and perfection is impossible.
So, was it perfect?
Is the enemy of good?
There's just an innate cultural kind of mindset that has to exist.
One, like I said, a lot of the values just in asking the question or being aware and being intentional.
And then two, if you're asking the question a third or fourth time, pushing back, what are we asking this in service of at this point?
We've already talked about it three times.
Why are we trying to get that extra piece of data?
Like, does that pass the smell test?
Does that feel like it makes sense?
The level of effort and time we're going to consume to get this next data point versus the value it could give us in making a decision?
Because that was the other thing that like a lot of big companies fail on is they'll properly value the role of time as a strategic risk.
So they'll be like, oh, well, let's do another study over six months, it's not that expensive, but we're going to learn like a little bit more.
Well, that six months in the scope of that category may be really important because in that six months, someone else may come up with something just as good, if not better than what you're trying to do.
It changes the entire game.
So, time matters, time has a cost.
So, I think it's kind of making sure you're reconciling all those costs as you're going through.
And it's very much, I wish there was a better answer, but it's a lot of intentionality and kind of the 80-20 mindset and a little bit of feel.
And Monica, I know that innovation is something that you've spent a good chunk of your career reporting on.
And I know that you're working on this article, which we're all looking forward to checking out on nosh.com.
What are some of the patterns that you're seeing to help us kind of understand what the future looks like?
Yeah, I would go back and read or write my point about familiar with a twist, because I think consumers, again, they don't want to change their habits.
They don't want to do something crazy and take a giant risk on spending money on something that they have no idea what it is.
So if there's an element of familiarity and comfort there, then that's going to be a draw, as well as convenience, nostalgia, premiumization.
Those are themes that have been emerging for a while, and I don't think that they're going anywhere.
Well, on that note, I will certainly be looking for the Cinnamon Toast Crunch Baking Mix.
Thank you so much, Glenn and Monica.
It was such a pleasure to have you here on Community Call.
We'll see you next time.
That concludes another episode of the Community Call Podcast.
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