13 Aug 2014 The nine habits of highly effective nutrition companies

If you want to make a success in the healthy food/nutrition business, here are some of the “most-proven” elements of strategy that you need to follow… sage advice from Julian Mellentin, founder and director of New Nutrition Business.

1. New category creation
Coconut water, energy drinks, probiotic dairy, Greek yoghurt – these are among the biggest success stories of the past 15 years. All of them were new markets, created by pioneering brands (respectively: Vita Coco; Red Bull; Danone Activia and Yakult; Chobani).
Creating a new category based around an innovative product is rare – and understandably perceived as a high-risk strategy. But it is also one of the most successful and well-proven strategies. In a world which is over-supplied with me-too products it’s essential to differentiate your product as much as possible.
What market research tells you is what people already know, it won’t tell you what consumers don’t yet know they might want. Creating a totally new proposition and then educating consumers about it has been the basis for some of the world’s most-successful brands. In fact, creating a new category is less risky than doing a me-too – the cost of building the brand will be far higher, but the chance of failure appears to be no worse and the returns can be massive.
Jamba Juice successfully created a new category with its out-of-home fruit smoothies. Canada’s maple water producers are trying to create a new category, following in the footsteps of coconut water.
2. Innovation in packaging
Good packaging supports the brand in asserting that it’s “different” and this is key to new category creation. It’s the best way to catch the consumer’s eye – and earn premium prices and better-than-average profit margins. There are many, many good examples of this packaging innovation strategy in action.
3. Innovation in distribution
The supermarket is where most people buy their healthy foods and drinks – but it’s also the most intensely fought battleground. Many managements think that they have to succeed there from day one.
The objections of most CEOs to launching new products not in supermarkets but in alternative distribution are that the volumes sold are too low – but the nutrition business is about creating value, not volume – it’s about serving a series of niches who are willing to pay premium prices for innovative healthy products.

And once you have established a toehold in alternative distribution, created a loyal following and learned about your market, you can graduate to mass distribution.
Start-up Oatworks initially sold its innovative drinks via Jamba Juice outlets, where it stood out and rapidly became a top-selling item – something that would never have been possible had it been “lost” on the shelf of a supermarket.
4. Marketing the benefit of ‘naturally healthy’
The message that a food is naturally healthy is one of the most persuasive in food marketing. Fortunately the consumer groups who look for “naturally healthy” products are the same ones willing to pay much higher prices than has traditionally been the case.
Daisy Brand, Jamba Juice, the producers of maple water – and many, many others – have made a “natural” positioning key to their identity and have been rewarded by consumers.
5. Charge super-premium prices
If you follow rules 1-4 above then you are on the way to earning super-premium pricing. Premium pricing of 100% – 300% is common for successful brands. Premiums are no barrier to consumer enthusiasm.
6. Focus on one brand
Many companies waste time trying to endlessly stretch brands – even though studies by business schools show that stretching brands rarely lifts sales by much. Red Bull, for example, is about one product and one brand and so too are many of the most successful brands.

Most businesses don’t have the time, the resources or the skills to stretch themselves and their brands thinly over a range of products and categories.
As the marketing director of Daisy Brands explains, much of the companies’ success has been about, “doing it in a focused way, while your competitors may be working on many different things….We do very few things but we want to do them exceptionally well.”
7. Consistent brand positioning
“Repackage, reposition, resumé,” is how one R&D director summarised to us his marketing colleagues’ approach to strategy. Brands are endlessly redesigned and re-positioned by marketing people keen to get something clever on their resumé in order to get the next job on their career escalator. By the time they have departed the company the short-term boost to sales from their makeover will have petered out.
Brands that succeed best are the ones that develop and stand firmly on a very clear positioning. Jamba Juice, Daisy Brand and many others have used consistency as a foundation of success.
8. Target the health-conscious niche – not the price-sensitive mass market
The best market to begin with is the people for whom health is part of their lifestyle. At best only 20% – 25% of the population in most countries, they are willing to pay a premium to maintain their wellness and welcome new health concepts that enable them to do so.
9. Internationalisation – a niche in many countries rather than mass-market in one
One of the lessons of the last ten years is that it’s easier to find the health-conscious niches in several countries than to try and battle your way into the mass market in one country. If you do try the latter course, you will of necessity have to cut your selling price to increase volume – since the mass market won’t pay massive price premiums. Why cut your retail price when you don’t need to?

This article from New Nutrition Business’s magazine was first published in its September 2013 edition.

About New Nutrition Business

New Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.

The strategies and success factors it  has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the US to Australia and from Sweden to South Africa.

New Nutrition Business is headed by executive director Julian Mellentin (right), one of the world’s very few global specialists in the business of food, nutrition and health.

He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace. See www.new-nutrition.com