Alternative Business Models in Food and Nutrition Pinar Hosafci Head Of

ALTERNATIVE BUSINESS MODELS IN FOOD AND NUTRITION

Pinar Hosafci Head of Packaged Food Research April 2018 THE BACKGROUND: WHY THE FOCUS ON ABM? 4 KEY MODELS IN FOOD THE MODEL OF THE FUTURE 3 Packaged food is in the midst of a massive shift

~ 0%

Strategy A: Invest in health and wellness brands

Invest / Boom in health Movement and wellness away from “Big acquire and free-from Food” towards products healthier food “healthier” brands

Strategy B: Maintain portfolio momentum through a focus in fast growth categories

Grow Low staple Strong growth in snack and consumption snack and dairy growth dairy portfolio

Strategy C: Prioritise power brands

Growth of Prioritise modern grocery Retailers retailers and delisting SKUs power private label brands

Regardless of how convenient online shopping is, consumers still like to visualise, feel and sometimes even taste food before purchasing it. It takes time to build trust in online shopping, many shoppers are slow to change, and new processes are complex.

Take a step back

We considered all aspects of consumer lifestyles and made use of our full network of 1,000 industry experts. .The outcome was an authoritative list of 20 megatrends. .Megatrends represent a fundamental shift in behaviour and have the power to transform and disrupt entire categories not just today but for years to come.

• We did this by running a second round of research across our expert analysts.

• Results were compiled and the process enabled us to narrow down to eight focus megatrends that will have the furthest-reaching impact on industries and consumers in the years to come.

Experiential Shopping

Pre-purchase Instant Gratification

Personalisation

Omnichannel Blended Store Formats Engagement

Shopping Reinvented Purchase Value for Money

Seamless Checkout

Post-purchase Last Mile Reimagined

Subscription Services

Personalisation Just-in-time Delivery

Blended Stores

Savoury Stay home Desk snackers snacks in the moms UK

>40% sales US launch and growth 10% > 4000 outlets range rise in in the UK expansion subscription

Partnership Flexible Consumer with Royal Product Data Mail Offering

“For which types of products do you use a subscription service?”

Apparel Beauty Books Accessories Personal Care Toys/Games Home Care Home Décor Food/Drinks Meal Kits Pet Products Arts/Crafts Alcohol

0% 10% 20% 30% 40% % of Respondents

Global Consumer Trends Survey 2017 n:10,763

My Six Pack – meal kits for fitness enthusiasts “physic management services”

Yum in Box – meal plans for Kids

Meal kit for vegans © Euromonitor International Hello Fresh: Purchase and retention delivered to doorstep

Originally from Germany, Hello Fresh, subscription box is now available across 9 countries.

Flexible ordering. free delivery, healthy ingredients, and affordable prices have been key to HelloFresh success. In 2017, Hello Fresh has teamed up with Bosch Hausgeräte to harness digital networking in the kitchen by integrating the Home Connect technology with the HelloFresh app. The integration gives users access to hundreds of recipes and valuable nutritional information. It enables users to save time, while creating a bond between devices in the kitchen and the emotional aspects of food. Add Mykie into the equation with voice commands and recipe speech services like “Drop”, and this becomes a value multiplier. Longer term, it will be interesting to see how the connected smart home benefits specialist healthy food delivery retailers, and how the larger grocery chains try to react and compete 17 What do we mean by just-in-time delivery?

Non- Scheduled digital delivery

Direct Click & Selling Collect

Enhanced S - Placement commerce

In China, South Korea, Japan and Poland retail’s share in mobile digital purchases has reached or surpassed 50%.

.In 2015, the app has expanded Blogging into food delivery through its platform partnership with e-commerce Virtual start-up foodpanda, now owned Free bees wallet by Ola. Users can browse nearby restaurants, receive exclusive promotional offers and order food through the app in not just In-app live China but several South (East) Gifting WeChat chat Asian markets.

.Through WeChat, food brands

Brand can open online stores creating Geolocal loyalty store locator and nurturing a brand at a much programs faster pace than in real time. The Flash sales online payment function facilitates sales and enables free products who spread the word on the brand, to win free products. In March 2018, WeChat hit 1 billion monthly users

Akoko is an artisanal cookie crafted by local producers in China and marketed and sold exclusively through micro blogging platforms. .AKOKO is an artisanal cookie made by .It is one of the many examples of cyberstar local producers that was marketed and products – artisanal unbranded products sold exclusively through micro blogging that spread through word of mouth platforms including Weibo and WeChat. marketing. AKOKO was so successful that .Featuring high-quality ingredients, it rolled out to retail after reaching a exquisite packaging and, AKOKO gained sizeable consumer base. Earlier this year, it popularity rapidly as a brand and sales also filed for an IPO. ©now Euromonitor reachInternation 5,000al boxes a day. 21 Can digital influence bottom line?

.To counter the stale growth characterising several food categories, including gum, manufacturers are resorting to digital solutions to raise purchase frequency. .Amazon’s Dash Button is perhaps the most well-known example. The small Wi-Fi connected hardware device boasted accelerated growth in 2016, with brands expanding over four times faster than in 2015. Dash Button orders now occur over twice a minute. .Last year, over 50 new brands, including Campbell’s Soup, Cascade, Clif Bar, FoodSaver, Pepperidge Farm Goldfish Crackers, Mentos, Trident, Nutiva Organic and V8 Vegetable Juice were added to the programme. © Euromonitor International 22 Going beyond digital: Fan Milk uses bikes to distribute its ice cream

Fan Milk ,one of SS Africa’s most successful dairy brands, developed a unique system in Nigeria whereby frozen dairy and juices are distributed to the consumer in refrigerated vehicles. This unique way of distribution also circumvents traffic congestion which is massive problem in Lagos and other big cities in Nigeria. Impressed by Fan Milk’s distribution model, Danone has decided to invest in the company through Abraaj Capital. Unilever has a similar model in South Africa, although sales are mainly limited to events and festivals.

2005: Handed out Oatie Shake 2011: All to passing supermarkets commuters at across the UK Waterloo to and airlines + 2018: To launch taste the waters offices DIY Muesli Mix

2009: First 2016: Number 1 supermarket Bircher muesli listing w/ brand in the UK Waitrose and airline listing w/ © Euromonitor International Virgin Atlantic 24 What do we mean by the blended formats?

Food Retail Online Offline service

Retail meets foodservice

O O

R D Nutella Café E S Eataly in Canada

T Magnum Pleasure E

A Kochhaus Store in the UK R I

L V I

Loacker Moccaria & C Itsu Chocolate Rice BrandStore in Italy

Cakes E Dunkin Donuts Knorr’s shop- RTD coffee in-shop debuts in select solution in the supermarkets Netherlands

This food hall is an incubator for up and coming chefs and musicians, combining dining with live music and events, and even engages consumers digitally with an app, delivery and mobile ordering.

.London Dairy is one of the UAE’s most .London Dairy uses their ice cream cafes as successful ice cream parlours. Having launch pads for innovation in retail. Typically started the business through its own- they launch the new flavor in the shop first named cafes, they also moved into and roll it out to their retail shop in the form supermarket. of an in-store promotion to attract traffic.

Alibaba wants a slice of China’s rapidly growing online grocery market, which is one of the biggest and fastest growing markets globally. .In late 2016, Alibaba Group introduced .The store offers home delivery within 30 Hema, a food-based concept store that minutes up to a distance of 3km from the has both virtual and physical presence. store. Alternatively, shoppers can dine in Customer transactions are managed via or have the produce cooked by Hema chefs a branded app which helps make and brought to their home ready to eat. product enquiries, place orders, and The key aim of the outlet is to direct make payments via Alipay. potential consumers to Alibaba’s online © Euromonitor International business. 29 What do we mean by Personalisation?

Personalised product

On average, 50% of respondents have used a health app at least once a month Euromonitor International’s Global Personalised nutrition Personalised service Consumer Trends Survey 2016, N = 26090

Note: Surveyed Markets include Australia, Brazil, China, Colombia, France, Germany, India, Indonesia, Italy, Japan, Mexico, the Middle East (includes Egypt, Qatar, Saudi Arabia, United Arab Emirates), Poland, Russia, South Africa, South Korea, Thailand, Turkey, United Kingdom, and the USA.

Personalised labels Personalised products and stores

.3D printing technology also offers great promise for product personalisation. It allows consumers to not only to design and shape their products but also decide what goes into them in terms of ingredients paving the wave for creation of food to meet different dietary needs. Katjes Magic Candy Factory is the world’s first producer of 3D printed gummy candy. It has over 100 printers in 35 locations around the world and also offers online services.

In 2016, The Campbell Soup Co became the exclusive investor in Habit, an American personalised nutrition meal delivery start-up.

.Habit is a personalised nutrition plan utilising .A team of chefs prepares the custom an at-home kit to extract blood and DNA meals, which are then delivered to the samples, which help design a biologically- customer’s door. This system could paves compatible roster of food. Once a nutritional the way for local subscription services strategy has been established, users can work across other industries one-on-one with a nutrition coach.

 Blended Stores  Subscription:  Barilla  Partership with Restaurants Peapod in the US,  Taskspotter: UAE, China Pasta for soups

 Personalisation  3-D Printing  Just-in-Time Delivery  Collaboration  US restaurants with MIT for offer online development delivery of flatpack  Cucina Barilla kit pasta collaboration by Whilrpool and RFID

Pinar Hosafci Head of Packaged Food Research [email protected] @pinarhosafci