Growth | July 2012 | By Robert Lillegard
How to Win in Retail
“You’re not going to find anything McDonald’s at retail, you’re not going to find anything Subway at retail,” Stibel says. “The vast majority of quick-serve restaurants have done very little or nothing.”
Perhaps one reason for that is that entering retail can be difficult. Licensing arrangements can be complicated, as everything from marketing to R&D to finances must be coordinated in a way that benefits both parties.
“The key is choosing a partner,” Stibel says. “Everybody thinks most licenses succeed—it’s absolutely the opposite. The vast majority of all licensing arrangements or attempts to enter [consumer packaged goods] by restaurants fail.”
Even long-standing relationships can grow sour. Starbucks and Kraft had a very ugly public split in 2011 after the coffee giant claimed that the distributor wasn’t doing enough to promote its products. Kraft sued to prevent the 13-year partnership from dissolving, but was ultimately unsuccessful. Now the two companies compete for shelf space, with Kraft’s Gevalia and Maxwell House going up against Starbucks’ offerings.
Sklar says the best relationships happen when both parties find a good fit. Inventure Foods often goes after companies that it thinks will work with its existing offerings.
“We prefer to pick a category that we want to go after,” Sklar says. “We will approach a company and try to get them to do licensing.”
The Jamba Juice deal came up out of necessity. After acquiring a berry company, Inventure Foods was looking for something to do with the fruit. The leadership team came up with the idea of doing smoothies, then searched out a company with a national reach. The R&D teams at both companies cooperated to create products that were similar to what Jamba Juice sold in its stores, and the partnership flourished.
But it’s not always the retail company that makes the first move. Inventure Foods was approached by a licensing broker working for Burger King, which had selected Inventure Foods after seeing its work with T.G.I. Friday’s. Since Inventure Foods had already been working on a ketchup and fry product, the two sides were able to come to a fast agreement.
“Burger King was a great company to work with,” Sklar says. “We actually got that deal set up and done with very quickly.”
How fast a product gets to the retail market is often a question of research and development. Jamba Juice works with several companies for its various products, and Washington says the fastest products are generally those that take the least research.
“You sort of start where you can get your opportunities,” Washington says. “Apparel is much faster. T-shirts are a little easier than actually coming up with a trail mix formulation.”
The size of the companies involved also makes a difference. While entrepreneurs are often very fast and nimble, larger firms don’t move as quickly. Washington says patience pays when it comes to dealing with big companies. “Nestlé is the largest licensee that we have,” Washington says. “It’s a multibillion-dollar company, so there are a lot of gates you have to go through. It took a lot longer than some of the others.”
Even after several back-and-forth rounds of product development, delays can creep in. Supermarkets often replace products in cycles, and if brands miss a window, they have to wait for the next reset time. The upshot of all this, the experts say, is that marketing takes place on a slower timetable. With all the factors figured in, it can take between several months to more than a year to bring a product from concept to shelf. While quick serves can roll out LTOs based on a short-term movie tie-in or a particular season, retail products must be designed with a long-term perspective.
It’s also important to consider how the product will be produced and distributed, Stibel says. He likens the process to a relationship between a general contractor and a subcontractor. Some quick serves will maintain more control over production and research and only partner with another company to get their product to the stores. Others will cede most of the process to the partner, only maintaining the rights of final approval.
“Everything’s negotiable,” Stibel says. “It’s very delicate territory.”
A final consideration when entering the retail space is the brand itself. It’s important for quick serves to come up with standards for their image. Jamba Juice works with several different licensees, but it wants each product to look like it came from the same company.
“We have some style guidelines,” Washington says. “Even though it’s many different licensees, it should look like it comes from the same brand and manufacturer. “
Sklar says that while most larger companies already have their brand standards in place, smaller companies sometimes operate with a “we’ll know it when we see it” type of approach. But since both companies want to produce a product that looks like it came from the licensor, it’s best to just have things planned out upfront, he says.
“Once their system is set up, then it’s smooth, but getting the system set up is a challenge,” Sklar says. “I would encourage them to think about how they want their brand portrayed in the market, to have some kind of continuity in their look and packaging.”
While none of the brands interviewed would provide exact sales figures, Washington says the total percentage of business from Jamba Juice’s retail products is low. Even so, retail remains a compelling opportunity for brands to get new customers, expand their reach, and reinforce their brand.
The key to success in retail is the same as the key to success in restaurants: Know what sets you apart.
“I think it’s very important for you to know your brand and your brand’s strength,” Washington says. “The shelves are full. You have to have a clear point of difference that’s meaningful to the retailer.”
Food & Beverage