Call them thumb-rules, must-have or fundamentals, product leadership, customer service and operational excellence are focus areas that must always remain the cornerstone of every F&B retailer’s growth strategy
By P Rajan Mathews
Most food and beverage (F&B) manufacturers and retailers strive for excellence in their manufacturing and retailing operations, which are often a mix of problem-solving, collaboration, and leadership gambits geared toward consistently pushing performance metrics in a positive direction.
Food manufacturing and retailing operations also require strict consistency and operate on thin margins. It means that manufacturers and retailers must be quick on their feet to cash in on the existing and emerging market opportunities. For instance, during the pandemic, grocery spending had skyrocketed, and agile companies were quick to adapt to the fluctuations in demand.
To insure against competitive threats and to thrive in the supply chain system, food manufacturers and retailers must adopt the three following strategies.
- Product Leadership
Most ‘A’ listed brands and food manufacturers and retailers set the standards for the market, which is fundamental to driving consumer loyalty. For most brands, quality is an increasingly important part of their standards for production.
Product leadership in a developed F&B market means understanding the consumer better than the competition, developing new products that will lead rather than follow, combining marketing excellence with product delivery, and investing in technology and unique manufacturing and retailing capabilities and concepts.
But additional product quality brings added competitive advantage only if others are unable to copy it. Still, there will be pressure on players to introduce premium products without compromising on customer service or cost issues.
Manufacturing and retailing costs are obviously important in a competitive market but an excessive focus on costs will put quality and service at risk. Cost reduction and downsizing are dead-end strategies and not growth strategies. But large lean companies face the threat from other brands as they have fixed costs that cannot be changed.
- Customer Service
Quality is not purely a product attribute but includes a wider non-product factor that creates a support or service package. In situations where product standards are largely given and the producer or retailer is not in a position to get closer to the customers, many companies try to differentiate themselves based on the support services they offer.
Customer intimacy is critical in an industry dominated by powerful retailers. Technical support, vendor-managed inventory, and product customization are ways to leverage product quality strategy. But these require greater flexibility in manufacturing, focused distribution, a service ethic, faster product development and close communications by building intimate relationships with the customers.
- Operational Excellence
In focusing on operational excellence, food manufacturers and retailers usually turn to acquisition or cost reduction. But they are ineffective in inefficient markets and their efficiency wanes as the industry reaches a point at which operational excellence has delivered most of the competitive benefits.
The usual objectives of an acquisition strategy are sector leadership, vertical integration to improve supply chain efficiencies and introduction of new capabilities. The one approach that unites all the above alternatives and can satisfy all the uncertainty of the market and customer is to create a ‘Learning Organization’ that is agile to deliver all three.
Achieving it depends on doing two things: first, improving the information flow in the network and, second, getting more out of the knowledge resource that lies with the people in the organization.
Although any process improvements go straight to the bottom line, a random approach is not going to bring in a competitive advantage. The key is to focus on activities that develop skills and one that will equip a producer or retailer to adapt as external forces change.
The article is written by P Rajan Mathews, the Chief Brand Mentor, Pro Next Food Brands Pvt. Ltd. As a Food Marketer, Mathews has worked on brand and product management, market research, sales, advertising and sales promotion management, and in converting food commodity products into successful food & beverage brands. It first appeared in the November 2022 issue of Progressive Grocer.