Valio & Lipasu Sweet Cup O’ Mine

Here’s the scoop!

Valio & Lipasu Sweet cup o’ mine

International Design Business Management Corporate Entrepreneurship & Design course 2020

1 The team What is ice cream?

Kirsti Kaila MA IDBM Arts / 815091 [email protected]

Favourite ice cream flavours: My favourite ice cream is plain frozen yogurt but I Ice cream is a frozen dessert made most commonly can rarely find that in Finland. The second best thing is vanilla ice cream with mixed fresh berries. I prefer natural ingredients like, fruits, nuts and berries. from dairy. It contains aerated mixture of a dairy ingredient, sugars and flavours. Non-dairy ice creams Hanna Knaapi MA IDBM Arts / 611295 replace the dairy product with milk or other proteins [email protected]

Favourite ice cream flavours: and vegetable fats. Other styles include e.g. gelato, I love salty caramel! Especially if it has chunks of fudge in it. With the over the top sweetness I always want sorbet, frozen yoghurt. What all different types of ice something fresh, like lemon. cream have in common is that they are sweetened,

Tuomo Kontinen flavoured and contain ice and they all are eaten in MSc IDBM Engineering / 878407 [email protected] frozen state. Earliest acknowledged contributions of

Favourite ice cream flavours: My favorite is definitely salty liquorice ice cream. similar products are either given to Roman Emperor The sweetness of ice cream and the intensity of liquorice complement each other so well. Nero (AD 37-68) who has been said to have eaten frozen fruits chilled with snow from the mountains. Or Yen Pham MSc IDBM Economics & Business Administration / 914536 to Mongolian horsemen whose milk froze while riding [email protected] the horse which cause the milk to be stirred. Ice cream Favourite ice cream flavours: I adore chocolate-mint and salty caramel. If they are in gelato format then nothing is better. A cup of two scopes as it is now commonly known is mentioned in some with a little waffle on the side can always make my day. cookbooks from 16th century.

Phuoc Tho Doan MSc IDBM Economics & Business Administration / 876548 [email protected]

Favourite ice cream flavours: Clarke, Chris. (2012). Science of Ice Cream (2nd Edition) I love all of the ice cream flavours, except the salmiakki! - 1.1 What is Ice Cream?. Royal Society of Chemistry. Recently, I tried to eat more vegan ice creams to feel more sustainable.

2 3 Contents

Overview

7 Ice Cream Market Finland International

10 Megatrends Food Industry – Ice cream

Company Introductions I followed

12 Valio

14 Härtelö / Lipasu

16 SWOT Analysis

18 Business Model Canvas my heart,

Effectuation

20 The Five Principles Valio Härtelö / Lipasu it led me to Role and Value of Design

24 Definition of Design Thinking Valio Härtelö / Lipasu Future Perspective the freezer.

30 The Innovation Ambition Matrix

32 What to Suggest for the Case Companies?

References

4 5 Ice Cream Market Finland

Ice cream consumption in Finland own niche by offering something special. Small Ice Cream Finland consumes more ice cream per capita artisan producers are popping up all around the than any other European country. Ice cream country offering local small batch production consumption estimates range from 12 to 14 liters and freshly made alternatives. per capita annually (Chepkemoi 2020; Laakso 2020). Most of the sales take place during the The Finnish taste summer months (Chepkemoi 2020) but Finns According to Valio’s recent customer survey eat ice cream all year round. the most popular ice cream flavours are choc- The companies that have the biggest market olate, liquorice, caramel, vanilla, strawberry share in Finland are multinational giants Nestlè and mint. Quite many people also have some is cheaper and Unilever (Chepkemoi other special flavours that 2020). they prefer (Laakso 2020). Nestlè and Brittish R&R Flavours like liquorice and have 50/50 ownership of especially the salty liquo- Froneri Finland Oy which rice “salmiakki” are distinctly is the second biggest ice Finnish and distinguish our cream manufacturer in of Finns41% regarded taste from other Europeans Europe and the third big- ice cream as their (Hintsala 2018). than gest in the world (Pingviini Lactose intolerance is com- 1, n.d.). Froneri Finland Oy favourite dessert. mon in Finland and about owns one of the oldest and 70% of the recipient in Va- best known ice cream brands Pingviini which is lio’s survey said that they prefer lactose free already 85 years old (Pingviini 2, n.d.). The oldest products (Laakso 2020). ice cream manufacturer still operating in Fin- In a research commissioned by Nestlé Fin- land is Helsingin Jäätelötehdas established in land in 2013, 41% of Finns regarded ice cream 1922 but their brand is only local to Helsinki (Hel- as their favourite dessert (Nestlé 2013). 50% of therapy. singin Jäätelötehdas n.d.). Finns think of it is a healthy option compared Unilever now owns the originally Finnish brand to other treats (Nestlé 2013). Ingman which is known for the popular one litre According to Valio’s customer survey the carton packaging of ice cream (2020). Those most popular way to enjoy ice cream is the one litre packages are sold 11,6 million each year take-home packages. More than 75% of the (Ylä-Anttila 2020). Ingman was also the first customers preferred this instead of individu- company to introduce premium ice cream bars, al cones or bars. The most popular package paper wrapped ice cream cones and more re- size is 0,5 litres and 0,7-1 litre packing comes cently soy based ice cream to the Finnish mar- second (Laakso 2020). Over 90% of the re- ket (Ingman n.d.). spondents in this survey said that they buy ice There are several smaller independent com- cream mainly for pleasure and to give them- panies in the market who have tried to find their selves a treat (Laakso 2020).

6 7 Ice Cream Market International

The international ice cream consumption According to online statistics provider World At- las the world’s biggest consumers of ice cream 65,6% are New Zealand (28,4 liters per year), the United of the markets’ overall Ice Creams, States (20,8 litres), and Australia (18 litres). value comes from Finland is not far behind in fourth place (Chep- kemoi 2020). take-home and bulk The ice cream market consists of three main ice cream. segments artisanal ice cream (both dairy and water-based), impulse ice cream (includes single serve ice cream tubs, packaged cones ice cream sandwiches, and chocolate-coated ice Nice Dreams creams) and take-home ice cream (includes multiple-serving ice cream tubs and, ice-cream Froneri International Limited with 6.0% and Swit- cakes) (MarketLine 2019). zerland based multinational Nestle SA account- The Global ice cream market has grown ing for 4.4% of the market value (MarketLine strongly during the recent years (2014-2018) 2019). and the growth is expected to accelerate. The The take-home and bulk ice cream segment global ice cream market had total revenues of was the market’s most lucrative in 2018, with $64,187.6m in 2018 (MarketLine 2019). total revenues equivalent to 65.6% of the mar- Europe accounts for the highest share in ket’s overall value. The impulse ice cream - sin- the global market (35.8% in 2018), followed by gle serve segment was 27.4% and the artisanal Asia-pacific (31.9%). Rising middle class popu- ice cream 7% of the market’s value (MarketLine lation, increasing disposable income and rapid 2019). urbanization are the primary factors supporting the growth of this market. This rising purchasing power is creating increasing demand for premium products (MarketLine 2019). The leading players in the global ice cream In this case analysis we are focusing on two market are UK based multinationals Unilever brands in the Finnish take-home ice cream accounting for 24.6% of the market value in 2018, market.

8 9 “One of the most dramatic changes in consumer Megatrends behavior over the next several years is likely to be Food Industry – Ice cream the change in the consumption of food.”

- Deloitte, 2020.

Health movement age industry, the two most common issues are Fava Consumer perceptions of macronutrients are plastic waste and food waste (Innova Market beans Plant evolving, perceiving sugar as the big demon Insights, 2019). From small parlors to big com- Carbon based (Innova Market Insights, 2019). Unfortunately, panies, countless effort is spent on building an reduction while ice cream is one of the people’s most fa- efficient supply chain management process vorite treats, it often harbors a large quantity of and innovative packaging to cut down the added sugar (Healthline 2019). Sensing the call business foot-prints. In New York, Häagen-Dazs Gluten Packaging for less sugar/non-sugar supply, more guilt free ice cream will be delivered and collected in free recycling products made their ap- returnable metal containers Urban Vegan Oats pearances on the shelves by Terracycle service pro- farming to satisfy this need. vider “Loop” from mid-2019 boom In addition, to make ice- onwards (Upakovka, 2019). Dairy cream more approachable Entrepreneur networking for free to 70% of the human popu- SMEs is also important as Holistic lation who are lactose-in- the giants lending a hand tolerant (Intermountain 70% for the growth of a healthy, wellbeing of the human Healthcare, 2019), lac- population are purpose drive market like tose-free, and non-dairy the Unilever’s “Empower- Sustainable ice-cream appears as an lactose-intolerant. ing small-scale retailers for emerging and viable trend growth” program. production Ethical Corporate (Mordor Intelligece, 2019). responsibility Plant-based food is also gaining popularity, The growth of taste food seeing products launched with a plant based- The Global Food World Life Magazine lists their claim witnessed a 68% average annual growth Nro. 1 trend as “taste” (2020). The term is also (Innova Market Insights, 2019). frequent on many other food trends list of 2020. Value driven Locality “The right bite” is the continuation of recent Storytelling Sustainable and ethical trends of holistic health, the mindful consumer The approach of winning with words is a pow- where the food is not only good for the health Waste Superfoods erful trend embraced by many sustainable and but is also delicious. Exotic flavors like florals, management Transparency ethical food and beverage companies. Con- zest, spices, and even smoke are on the rise sumers are more focused on the experience (Food Processing, 2019). Circular Entrepreneur Organic now than ever, and they want to know the story More than ever, consumers pay extra attention economy networking Mission-driven food behind the brand. Such a story does not only to the feel of the bite hence texture becomes companies tell buyers more about the ingredients but also a crucial factor for the purchase motive, es- provides a glimpse of the local specialty, cul- pecially the young customers (Edlong, 2019). It tural celebrations, or the enterprise’s social re- is reported that millennials tend to care more Co-creation sponsibility awareness (Innova Market Insights, for the texture than the ingredient list. This is a 2019). Various businesses went viral worldwide note-worthy insight for brands that own flag- doing so, for example, the Coolhaus ice-cream ship products made of trending ingredients like in the UK with their women supporting business fava beans, fiber, probiotics, charcoal, etc. With model, eco-friendly, and sustainable manufac- the right mix of flavor and texture, along with a turing process. (Forbes, 2019). good story-telling approach, they can build a Branding or not, sustainability is a no joke much deeper connection with even the con- Source: Aalto Design Factory, 2020. DesignBites: From Crisis to Creativity, Entrepreneurial action in Finnish packaged food & beverage products. trend in any industry. In the food and bever- servative buyers.

10 11 19

Valio Established in 1905 Transformational Snacking

Experience Valio is a large Finnish dairy and food company History & product portfolio products which is owned jointly by 4700 dairy farmers. The Valio was established in 1905. Valio was founded company is known for a constantly developed by seventeen co-operative dairies to export but- Products for product offering ranging from all kinds of dairy ter. Valio expanded product offering from butter certain diet products to juices and grain based milk free con- to other dairy products in 1909. In 1916 a laborato- sumables. Valio has also a service for institutional ry was established by valio to develop products kitchens which provides nearly all ingredients and technologies. (Valio 1, n.d.) needed for operation (Valio 1, n.d.). Many products which are still widely available Market change Adjacent were developed in 1930s. During second world Innovation war Valio was in important role in supplying Products Valio is known for it’s innovativeness. One of it’s frontline with food supplies and ensuring availa- for wellbeing most known patents is one for AIV fodder, pat- bility of consumer milk. After the war AIV technol- ented in 1933 which won the nobel price. (Valio 2, ogy was necessary in ensuring food availability n.d.) The main principle of the technology is that to finnish people during the recession. (Valio 3, n.d.) Bulk dairy formic acid is used to improve In 1950s Valio developed milk consumer storage life of fodder. (AIV, n.d.). powders to consumers. A prod- products for Core everyday use The technique is still widely uct which served consumers used around the world espe- well as fridgeration technology B2B cially in temperate and polar was not commonly in use in ingredient climates even though alterna- 25% every household. At the same service tive methods to effect shelf life of all Finnish food time industrial grade pro- are available. Since then valio export is by Valio. duction was established and has accumulated large patent packed milk found it’s way to portfolio of over 350 patents in market. (Valio 3, n.d.) Business domain change 50 countries. (Valio 2, n.d.) New patent applica- During 1960s dairy process technologies de- tions are filed yearly. (Valio 2020) veloped fast and focus was on liquid product Valio is the largest finnish exporter exporting development. For example ultra-high-temper- about 60 countries. The share of Valios exports is ature (UHT) process was taken in use to extend After millenia multiple lactose free products Valio targets a specific consumer segment 25 % of Finlands all food exports. Valio’s net sales the self life of products tenfold. During the time were developed and released which were wide- with their Valio jäälelöfabriikki ice cream were in 2019 1,8 billion of which 1 billion was from carton packaging came also to wide use and ly accepted by market. One of these product product line. The Jäätelöfabriikki products Finnish domestic market. Valio has been largely replaced plastic milk bags. (Valio 3, n.d.) families is Valio Eila™ which has an established represent the market’s ice cream offerings focusing in growth in international markets and Product offering extended to include semi- position in many finnish consumers households. most expensive end, which targets customers it has subsidiaries in Russia, Sweden, Baltics, USA skimmed and low fat milks and vegetable oil Valio has also widely licenced the lactose free looking for experiences with consumables. The and China. (Valio 1, n.d.) based products in the 1970s. Systematic sensory technologies for partner use (Valio 4, n.d.) product line has been branded with a joyful evaluation was established as a standard prac- outlook referring to merry-go-around, a swirl Responsibility & Sustainability tice to ensure uniform product quality of liquid Ice Cream Business of colours. Valio’s pride is their zero tolerance for antibiotic Valio products. (Valio 3, n.d.) Ice cream business is a fraction of Valio’s offering Consumers are attracted by tastes ranging residues in products. They also emphasize their During 1980s and 1990s focus shifted towards and it has always been. Valio’s main portfolio con- from ever classic premium chocolate to more efforts for improving sustainability and animal light products and healthier products following sists of Fresh dairy products, butters and spreads, extreme ones which change seasonally. For welfare. (Valio 2019) Valio releases an yearly re- common trend. lighter product options were cheeses and powdered ingredients, which make example a blue cheese tasting ice cream could port focusing on progress related to animal wel- brought to market along with low lactose con- 95% of all sales, leaving the ice cream in the last be lately found on market shelves. The size and fare and sustainability. Their target is to achieve tent products. R&D focus shifted in development 5% of total sales (Valio 2020). Valio re-established newness of Valio’s Ice cream business means carbon neutrality for dairy by 2035. (Valio 2019) and studying of lactic acid bacteria which make ice cream manufacturing in 2018 after they had that there is less risk in trying out things which Which is ambitious considering that bowines are production of multiple dairy products possible. sold their earlier Ice cream production to Nestlé are otherwise not possible with Valio’s more a large producer of greenhouse gases. (Valio 3, n.d.) company in 2004. (Valio 5, n.d.) established products.

12 13 Härtelö / Lipasu Established in 2018

Härtelö is Lipasu company’s sole product. Fava beans have been used for different Härtelö is a plant-based ice cream that was savory food products but the students wanted originally developed as a food science course to try if it would work as a basic ingredient for project in the University of Helsinki. Härtelö com- something sweet. The ice cream was a curi- bines a new, sustainable base ingredient with ous trial, and blew them all by a surprice with traditional ice cream making methods. it’s delicious taste. The timing was also right The Helsinki-based start-up is owned and ran – the team made three different flavours (pas- by a team of seven students sion-lime, raspberry-rosmary and entrepreneurs: Francesca and mocha-chocolate) to be Åström, Kaisa Andersson, An- sold at Restaurant day nika Ikonen, Hilma Koskinen, (Ravintolapäivä) and it was Roosa Kukkonen, Anni Nis- a huge success. After this, the kakoski and Mirva Sorsila. In idea of a company was born. 2018 they founded a company 7 x 180 named Lipasu. Based on the ECTS credits made Collaboration financial statements in 2020, Härtelö happen. In quite the early stages the the company’s turnover was new entreprenerus got con- 146 000 euros and revenue 72 tacted by Valio. The company 000 euros. The turnover grew was eager to meet with the by 1522,2% and the gains grew 62,3% compared creators of the new plant based ice cream. They to last year. Since fall 2019 the Härtelö ice cream started discussions, which led to a licencing products have been sold in selected stores contract between Lipasu and Valio. Lipasu Oy across Finland. still owns the Härtelö brand and recipes but collaborates with Valio in testing. At the moment, It all started as a trial three Härtelö flavours are sold through Valio’s The group of students were given a challenge to distribution channels: Lime-Passion, Chocolate create a plant based food product as part of a and Mint. food innovation course. The base ingredient of Härtelö is Finnish fava beans. Härtelö is the first Colourful and playful fava bean based ice cream in Finland. The fava The visual identity was also created as a student bean is a very rich in nutrients and contains as work. The Härtelö team was gaining some mo- much as 30% of protein and lots of fibres. It is mentum by attending different fairs and telling considered to be a part of a healthy diet with their story on social media. Graphic designer its slow burning carbs and vitamin B. It’s an Mervi Koistinen contacted them, and asked if important plant from biodiversity point of view. she could desing the visual brand identity for Its beautiful flowers attract pollinators and the Härtelöä as part of her school project. The pink plant releases lots of nitrogen to the soil so that boxes were born, and the collaboration still con- there’s no need to use fertilizers for the next crop. tinues.

14 15 SWOT SWOT Valio Härtelö / Lipasu

Strengths Weaknesses Strengths Weaknesses

• A strong and valued brand in the • Products are old with strong • Fun and appealing brand identity • New, inexperienced entrepreneurs Finnish market emotional connection to customers. • On-trend enterprise and product: • No own large scale production • Ranked the most sustainable brand Changes to those cannot be easily Storytelling approach, vegan • No own distribution network in Finland made options, sustainable and locally • Only one main product • A large company and product • Organizationally relatively heavy, produced base ingredient • Weak market identification portfolio core business is milk production and • Beautiful packaging - a clash with • Poor online presence • Good customer & trend knowledge distribution which cannot be easily subtle Scandinavian design style • Some customers might be reluctant • Dedicated Insight study team altered • Unique innovative product to even try the product (fava bean) • Visually appealing packaging • Too safe and boring, there’s not a lot • Agile start-up company • Small budgets for operational • Strong consumer customer base of novelty • The product is suitable for most activities • Strong technological knowledge in • Brand image is more of family people’s diets and allergies • Small team dairy production friendly, not trendy food for the soul • Appealing, authentic founder story • Fava bean ice cream is new to • Sufficient resources for production, of millenials • A personal and empathetic the market, compared to milk ice R&D and marketing & sales activities • Less flexible to adapt to the trends: approach to marketing cream; not regular ice cream – • Sub-brands with different identities, large corporate system with • Product appeals to ecologically pushes away non-vegan people? room for experimentation scattered sub-companies sensible customers • Only three flavours at the moment, not enough variety

Opportunities Threats Opportunities Threats

• Possibility to expand product • Inconsistency in group identity • Partnership synergies from the Valio • Diet trends come and go offering further beyond milk within due to so many sub brands and collaboration • Signature flavor can be copied current network products • 7 female founderers working • Limited production facilities • Possibility to shift product • Product range becomes too together, possibility to leverage • Big companies will rule over development further to plant based scattered and isn’t recognizable collaboration with other female • New types of vegan ice cream, products anymore entrepreneurs made from other base ingredients, • Possibility to use dairy production • The controversy of dairy products • Possibility that company is bought enter the market techniques with other products, e.g. • Competitive market with a lot of by a bigger player • Dependability to Valio may limit lactic acid bacteria offerings • Expanding the product line beyond further growth • Use strong financial advantage to fava bean based plant based • Competitive market with a lot of test the water via buying small or products offerings lean start-up • A Finnish ice cream innovation for • A small company (running out of • To network and collab with small, export money, internal conflict…) trendy company like Härtelö • Starting a movement (Social • Flagship in the F&B industry in responsibility) creating sustainability values • Impressive and trendy packaging • Extending business more to B2B field -> Instagram worthy, possibility to collab with influencers

16 17 Business Model Canvas Business Model Canvas Valio Härtelö / Lipasu

Valio’s position within the Finnish business environment is strong with a presence supported by a strong For a young start-up Lipasu has an impressive product which answers to wants of environmentally historic brand image and emphasis on R&D of new production technologies and products. Valio has conscious customers. They manufacture their products with licence under Valio which enables market heavy infrastructure on dairy production and distribution to serve consumers and business customers. It’s entry with relatively low risk. Their brand image is distinctive and playful which suits their product well. Their operations require precise control to keep long term profitability on wanted level and radical shifts from core growth may be anyhow limited by their narrow scope of product offering and their relatively small presence. business are challenging to make. Consumers may not be aware of their existence. For their growth wider awareness would be needed.

Key partners Key activities Value Customer Customer Key partners Key activities Value Customer Customer propositions relationships segments propositions relationships segments

• Dairy farmers • Production • Everyday • Recognized • Consumers • Fava bean • Production • Sustainable and • Colourful and • Consumers at availability of as most farmers local production playful brand, stores • Farmer co- • Logistics dairy essentials sustainable • Direct • Development Instagram- operatives brand in Finland distribution to • Valio & Innovation • Having fun and friendly • Influencers • Development • Experiences commercial enjoyign life • Distribution with quality • Loved products kitchens • University of • Marketing • On trend, youtful logistics • Marketing consumables with long history Helsinki • Sharing the product • Ingredients good with • Branding • Healthy food for to food • Colleagues healthy lifestyle • Suits for people agencies healthy life manufacturing in the same with special diets industry • Nutritious food Key for everyday life Channels • Graphic Key Channels designer(s) resources resources

• Milk • Distribution • Fava bean • Valio’s network to distribution • Technology and markets • Valio network to know-how of cooperation markets dairy industry • Direct to business service • Consumer • Consumer insight insight

Cost structure Revenue streams Cost structure Revenue streams

• Raw materials Consumer products: • Raw materials Consumer products: • Fresh dairy products • Plant-based ice cream • Staff expenses • Butter and spreads • Staff expenses • Cheeses • Services • Powdered ingredients • Rented facility & hardware

• Logistics Business customers: • Kitchen ingredients • Facility & Hardware • Production ingredients • Milk protein • Powdered ingredients

18 19 Effectuation The Five Principles You miss 100% of the

Dr. Saras Sarasvathy found in her research that can appear in the future. At that time, entrepre- ice cream the most successful entrepreneurs use a com- neurs can catch those uncertainties and con- mon logic or thinking process, to solve entrepre- vert them to new goals (lemonade principle). neurial problems and she calls this effectuation They can even expand their business by forming (Effectuation n.d.). The entrepreneurs focus on partnerships with people and organizations that what they have in hand (bird in hand principle) are willing to make real commitments for cre- and manage what they can control. They set an ating future products and markets (crazy quilt acceptable downside (affordable loss principle) principle). They also believe that the future is not before doing business, then just focus on what predicted but created through our actions (pilot you don’t they are doing. New means and opportunities in plane principle) (OsloNAP, 2014).

PRINCIPLE WHAT IT MEANS

1. Bird-in-Hand Start with your means. Who I am, what I know, and whom I know. 2. Affordable loss Focus on the downside risk. Understand what you can afford to lose. scoop. 3. Lemonade Leverage contingencies. Surprises as potential to create new markets.

4. Crazy quilt Form partnerships. Co-create the new market.

5. Pilot in plane Focus on activities within your control instead of trying to predict the future. Wayne Gretzky

20 21 Effectuation Effectuation Valio Härtelö / Lipasu

Valio’s core is milk and it’s refinement, it’s the main ingredient upon which everything Härtelö’s origin comes from a food science project at the University of Helsinki has been procedurally built on from the start. Most of Valio’s business consists of the involving the ingredient of fava bean. The students started with available means and logistics and processing of milk and therefore the milk needs to bring in the revenue developed the product together with their peers. They introduced the product to the to justify the existence of that mechanism. Thus it’s rational that most of their local market through offering it at Helsinki Restaurant Day where anyone can start a products are milk based. Expanding to non-milk products poses an increased risk restaurant for one day. profile in Valio’s case, and thus those can be seen as outliers within Valio’s portfolio.

Valio is capable of testing easily new products in the market which can be The Lipasu company was founded with the means of the students and there was manufactured within their current production systems, which are large and flexible. very little risk of making financial losses. The primary sources of Lipasu’s innital This can be perceived to be the case as Valio introduces over a hundred new capital were from student loans. Ever since the start of the journey, they have been products annually (Valio 2020), some of which do not thrive for long, but pose only trying hard to maintain the cost margin at bay through contract manufacturing a marginal effect on Valio’s profitability. and low cash flow.

The larger a company is, the harder for it is to utilize happy accidents or sudden Lipasu founders have embraced the surprises that have come their way. The 2020 market shifts. Valio is a large company and changes for its core operations are pandemic affected their plans to further collaborate with restaurants but it is yet to hard and slow to make. There are no apparent examples of utilization of surprises be seen if they can leverage this new situation somehow. within Valio, even though those might exist.

Cooperation with different companies is not a new thing to Valio, but it’s not in the Early on their journey Lipasu was approached by a graphic designer who wanted core of how they operate. A great example of this is the cooperation with Lipasu. to collaborate on the brand identity and packaging and the founders were open Lipasu has licenced manufacturing and supply of their product. Valio’s existing to the idea. That collaboration is still going on today. Lipasu founders were also production and logistics are so established that further expansion with other approached by Valio to discuss a potential collaboration and again the founders consumable startups could be a viable business expansion method. were willing to find a way to do that. This is how Härtelö found its way to the supermarkets.

Even though Valio tries to answer upcoming trends by designing new products For a new player Lipasu is focusing on solving current weaknesses that affect against consumer insights, their main profitability comes from highly optimized milk their flagship mass market entry, instead of expanding the product category or production. They constantly develop their milk processing technologies and follow production scale, but keeping international markets in mind. Taking the weak online profitability with their own KPI “Milk margin.” Valio tries to master their own field presence and low market identity for example, Härtelö product is well received by while working to ensure that it doesn’t become obsolete if markets shift. the tasters from the early stage. They also might expand their portfolio to other plant based products.

22 23 Role and value of design Definition of Design Thinking

o defiine th ze t e p thi ro a bl p em Em

Point of Sale: Packaging Packaging plays a crucial role in the food in- g n ti s dustry and product development. Firstly, it has e t h 1. EMPATHIZE 2. DEFINE a functional purpose to keep the food fresh and g u o 90% safe during transportation and storage. When it of consumers make r h t reaches the store shelf, the visual appearance s r a purchase after only e s starts to impact. It has been estimated that over

t three-quarters of food and drink purchase deci- u examining the front

b sions are made at the point of sale; 90% of con-

a as for the pro of pack. n ide jec r w t sumers make a purchase after only examining e m

a n s e e te l

L a the front of pack, and 85% of consumers make a re b c o t r s p purchase without having picked up an alterna- e T e h t tive product (Simmonds, G., & Spence, C. 2017). e in ifi ed 5. TEST t r 3. IDEATE ha The size does matter Judging a book by its cover s t T ght est reveals insi Packaging in 2020 is not just a fight for brand- Usually, without pre-planned marketing ac- ing but also a challenge of meeting the con- tivities, the customers don’t get to sample the sumer’s new expectation of customization and food or drink products in-store before making easiness. The ice-cream industry has always the purchase decision. According to Simmonds relied on the sale of bulk buying segments to et al. (2017) it is important for designers and s

a e make the bread. However, this good old busi- marketers to: d i w ness habit may soon vanish as buyers are now e n 4. PROTOTYPE k seeking healthier alternatives with functional 1. Grab the consumer’s attention. r a p benefits due to the busy lifestyles. Single-serve 2. Create positive associations and s o t es snacks like granola bars are leading this cate- expectations in their minds (such as yp ot rot gory phenomenon (Edlong, 2020). the expectation of a great taste/flavour om p Learn fr Speaking of the ice-cream industry, rising experience) in order to ensure the long- demand for small-portion snacks leads to the term commercial success of a product. growth of the impulse ice-cream market and Design thinking is an iterative process, a way of by the Hasso-Plattner Institute of Design at makes a change to the take-home segment as Of course, if the expectations aren’t filled by thinking and a collection of hands-on methods Stanford, which is also known as d.school. well. The market witnessed a significant sys- the actual taste of the product, the appealing to solve problems (Dam, R. & Siang, T. 2020). tematic reduction in the packaging capacity of visual identity of the packaging can easily lose Tim Brown, executive chair of IDEO, has stated The five stages of a non-linear process are family ice creams. A container of 0.5 liters and its value. The inside of the ice cream box has that design thinking is a human-centred ap- the following: less is more likely to be sold than that of 1 - 1.5 to be well-defined first. In the case compa- proach to innovation that draws from the de- liters (Bełżecka, 2013). nies’ products, Härtelö packaging and Valio’s signer’s toolkit to integrate the needs of people, 1. Empathise with the users As stated in the Valio Trend Map 2020, mod- Jäätelöfabriikki both have regognizable and the possibilities of technology, and the require- 2. Define the users’ needs and their problem ern consumers produce a strong sense of playfull appearance. Usually, the packag- ments for business success. 3. Ideate ideas for innovative solutions connection between food and expression of ing colours are based on the flavour (brown Companies nowadays can apply many vari- 4. Prototype to communicate solutions identity. The clean labels trend promotes differ- for chocolate, red for strawberry etc.) like in ants of the design thinking process. In our pro- visually to stakeholders ent dietary and food brand tribes ranging from Jäätelöfabriikki, but in Härtelö the main colour ject, we decided to examine how the companies 5. Test solutions with users to see if the organics, GMO-free, gluten-free to preserva- pink is seen in each package despite the fla- utilize design on the five-phase model proposed solutions solve users’ problems tive-free. vour.

24 25 Design Thinking Valio

Empathise & Define support decision-making. Some of the channels Having a large customer base and sufficient to collect feedback are social media channels, resources, Valio uses different methods to gain phone calls to customer services, and a dedi- customers’ understandings. Then, the company cated page on Valio’s website to receive infor- will use these insights to form new product con- mation on the faulty product and new product cepts that meet the market demand. Therefore, development ideas. before initiating any product concept, Valio has to conduct extensive user research and market Ideate & Prototype research. Valio uses three approaches to ideate and to Unlike typical start-ups’ produce a first version of products, Valio’s new the new product. products don’t initially First, with a broad port- arise from the custom- folio of products, Valio ers’ or users’ problems. The market trends are creates a new product Valio came back to the ice cream business with playfull Jäätelöfabriikki. As one of the largest concept by levelling their dairy manufacturers in the primary drivers existing ones to meet the Nordics, Valio has behind Valio’s the recent trends and the pressure to serve the demand, for instance, Second, Valio encourages radical innovation majority of the market to innovations. through using val- in creating new product concepts. Valio jäätelö- Valio has dedicated maintain and increase ue-adding ingredients. fabriikki product line is an excellent example of the company’s revenue. The usage of such ingre- this. Playfulness is in the core of Jäätelöfabriikki teams of tasters to Valio’s products can’t dients does not lessen brand, which has been branded in cooperation ensure the company focus on particular niche the taste or texture of the with SEK marketing and branding office (Be- customer segments. As a result, market trends product. It gives Valio’s customers alternative hance n.d.). The teams at Valio Jäätelöfabriikki is creating planned are the primary drivers behind Valio’s innova- options to the original one, which is now against are not afraid of combining distinctive tastes like flavours. tions. the trend. gorgonzola cheese and gingerbread cookies, or Valio has a specific team for insight study One prominent example is the creation of basil and strawberries. (Valio 6, n.d.), and the team is continually stu- Valio Eila™ NUTRI F+ lactose-free formulated milk Third, Valio is known to tackle complex prob- dying trends to stay competitive in an evolv- protein powder. This milk protein powder is the lems through open-sourcing of ideas in hacka- ing market (Valio 7, n.d.). Valio’s sustainability result of a trend-adapting development pro- thons. For example, Valio has hosted a hacka- ing the taste, the quality, and the package. In report (Valio 2019) shows how they have so far cess. After recognising the demand for healthier thon to solve problems related to emissions of detail, Valio has dedicated teams of tasters to answered different emerging trends such as products and delicious eating experience, Valio farming (Ultrahack n.d.). ensure the company is creating planned fla- healthiness and wellbeing or need for options funded more than 100 scientists and experts to vours. Besides, Valio has to follow strict regula- of plant-based and lactose-free products. Valio produce the materials. In practice, this powder Test tions during the product development process also collaborates with many agencies to help can replace the sugar to achieve a 30% sugar As a reputable brand, Valio faces constant (Duunitori 6.9.2019) to make sure the products Valio involve the users during the product devel- reduction when making chocolate. With such an pressure to make the products flawless before are safe to consume. Finally, Valio and design opment process. application, this value-adding component helps selling them in the market. In the final phase of agencies have to make sure that the packag- Besides studying market trends, Valio is cur- to create a new line of product as lactose-free, product development, the company often ex- es are convenient to put on the supermarket’s rently collecting tons of customer feedback to sugar-free or less-sugar. amines three areas of the new product, includ- shells and able to attract target customers.

26 27 Design Thinking Härtelö /Lipasu

Empathise & Define bean. The simplified form of the bean can be One aspect of empathising with the customers seen in the Härtelö logo and the colour combi- is understanding the need for allergen free op- nation of pink and green balances the visuality. tions. Härtelö ice cream is dairy-, lactose- and The round shapes also represent the softness of gluten free and suitable for vegans. Even though ice cream. this was not the basis for starting the compa- After the Härtelö visual identity and pack- ny there is a need in aging was designed by the market for options Graphic designer Mervi that are suitable for Koistinen (who also was everyone since a lot of a student at the time and people have special The Härtelö ice cream asked if she could design diets. This also connects was initially tested by the packaging for Härtelö to empathising with as part of her studies) potential restaurant the inventors of the the visual appearance customers who can recipe together with in Härtelö’s social me- offer this ice cream as a dia started to look more desert to anyone need- their fellow students. unified and planned. The ing such alternatives entrepreneurs behind and it keeps very well Härtelö have been very in the freezer reducing open and transparent in potential waste. their communication since day one. They’ve Attending food related fairs has allowed the eagerly been sharing their test lab results and Lipasu founders to connect directly with the describing the study project on social media. consumers and get their feedback, suggestions This felt natural to them, and was not initial- The main colours of and reactions when they taste the ice cream ly a planned strategy. Now, the latest posts on Härtelö brand are present flavours. The development of new flavours in Instagram introduce the seven women behind throughout the different collaboration with Valio now allows them to use the start-up – pictured in front of a pink canvas. touchpoints and customer insights that Valio gathers through The colours are present throughout the different storytelling layers. their channels. touchpoints and storytelling layers. When you look at the packaging at the store and might Ideate & Prototype search for more info, the visuality continues and The Härtelö packaging is colourful and play- adds a sympathetic layer to the product. This to more and more people through the Restau- sideration when deciding on the flavours that ful. The main colour pink was chosen through might have a positive effect on the purchase rant Day and fairs for example. This has been a will end up in the supermarket freezers. market research by the company founders. They decision. possibility to test the product on a small scale If Lipasu is able to offer another type of ice liked the colour, and noticed that it is not com- with low risk and get instant & direct feedback. cream product to restaurants then the process monly used in ice cream packaging in Finland. Test Currently the founding team and Valio product of testing and getting feedback is again a bit According to our interview with the Härtelö The Härtelö ice cream was initially tested by the development team first test the new flavors to- different. It is possible to start with just one res- entrepreneurs they didn’t want the packaging to inventors of the recipe together with their fellow gether. The views and perceptions of the distrib- taurant and offer even more innovative flavours emphasize too much the main ingredient, fava students. Eventually they offered the product uting supermarkets need to be taken into con- that you might not find in the grocery store.

28 29 Future perspective Future perspective The Innovation Ambition Matrix In the case companies

Firms that excel at total innovation management simultaneously invest at Valio on its own three levels of ambition, carefully managing the balance among them. Incremental: Mid level: Transformational: • New flavours and products • New collaborations between • Innovation kitchen -type under the Fabriikki brand Valio and other Finnish of platform for startups to • New products using existing companies collaborate with Valio well-known Valio brands • Increasing collaboration • New products for the B-2-B between Valio and small WHERE TO PLAY TRANSFORMATIONAL market startups like Härtelö Create new markets, Developing • Valio could start using their target new customer breakthroughs and know-how of fermentation needs inventing things for and lactic acid bacteria to markets that don’t make beverages, such as tea MID LEVEL yet exist or beer.

Expanding from Enter adjacent existing business markets, serve into “new to adjacent customers INCREMENTAL the company“ business Optimizing existing products

Serve existing for existing markets and customers customers Lipasu on its own HOW TO WIN Incremental: Mid level: Transformational: Using existing Add incremental Develop new • Develop collaboration with a • Creating innovative lupin • Creating a strong community products and assets products and assets products and assets restaurant bean products (requires movement around the • Produce small batch of educating the public about company & product bringing special flavours and gather this variety that is healthy to people together over ice feedback eat and the difference to the cream • Produce different flavours for toxic weed plant) different restaurants • Offer product development Lipasu & Valio collaboration • Produce a product services to other companies specifically for the fast-food Incremental: Mid-level: sector (Hesburger doesn’t • New ice cream related products & • “Fava bean milk” -based full range of yet have vegan ice cream.) new Härtelö flavours products (ref. Oddly Good) Maybe soft serve in 1l carton. • New product type(-s) under • Increase collaboration with Valio farmers • Develop new products for the the Härtelö brand producing fava bean and connect with the sweet sector zero carbon 2035 • Find new partners for manufacturing new products for example

30 31 Future perspective What to suggest for the case companies?

Valio ideas from outside the company which they it would be wise to use partnerships and affil- breaker” could be a concept that extends to In the ice cream sector we feel there is un- could also choose to licence. The main idea iation systems. For example, building a strong many functions. It would be natural for seven tapped potential in the frozen yogurt style of would be the support of the professionals for engaged community of customers, support female entrepreneurs to connect and identify ice cream since no-one has taken that as their the newcomers, working together with like- network and focus on the business partner- with other female entrepreneurs in Finland so specialty. We feel that Valio’s strong brands in minded people, even playing around a bit while ships that bring mutual value. According to the ice cream break or speed dating over ice cream yoghurt could be developed into healthy and building community and possible new brands crazy quilt principle expert entrepreneurs build at a female entrepreneurship event comes to delicious ice creams. At the very least that and companies. Including a possibility for the partnerships with self-selecting stakeholders. mind. This could be a starting point to test the could be a new variety for the Fabriikki range. consumers to test the products or even be in- By obtaining pre-commitments from these key concept with an audience that is likely to be If Valio would focus more on the fava bean volved in the product development would take partners early on in the venture, expert entre- supportive. Ultimately the ice cream meet- products they could also develop products for this idea to a more user centered direction. This preneurs reduce risk and co-create the new ups could include lonely or elderly people and their B2B customers. Right now Valio is export- would enable Valio to use the design thinking market with its interested participants (Effec- strangers meeting and engaging in a conver- ing milk in powdered form but they could also method more systematically. This idea would tuation n.d.). This is a potential future direction sion together for as long as it takes to eat ice make fava bean powder for food production. be in line with Valio values: consumer and cus- that we recommend for the brand. cream. This powder could be used to increase plant tomer focus, responsibility, renewal and collab- based protein content in different foods. One oration as well as match with their vision to be Valio and Lipasu together example could be to use it in just-add-water the most innovative dairy and food company in We were initially quite impressed that Valio type of cake or pancake mixes. the world (Valio 2019). wanted to support Lipasu to get their product Valio has extensive know-how of fermenta- A strong, known to the market and offered to collaborate. As a tion and lactic acid bacteria. Fermented food is Lipasu Oy and engaged mainly milk based food company they have still known to be beneficial to the gut bacteria and As a small startup company Lipasu has multi- taken an interest to broaden their own offering to has become more trendy in recent years. They ple directions they could take their business in Lipasu community. plant based alternatives like oats and now sup- could further leverage this know-how to make the future. We can see that the way they have port the fava bean based innovation. We sup- new types of products such as beverages like worked so far is in line with the effectuation pose that the crops that can be grown in Finland tea or even beer. principles. It is important to keep innovating to One prominent company to collaborate with and possibly at the milk producers farms would stay competitive with so many bigger players could be Hesburger. They have profiled them- be interesting to Valio. We think there is potential in the market, At the same time they should try selves to be a responsible fast food chain and to increase the fava bean production and inno- to tackle their current problems. From the SWOT the CEO is especially concerned with climate vative food products based on this crop. Innovation kitchen analysis, we identify lack of product diversity change and environmental issues (Salmela Together with the Härtelö brand they could and low branding as the two crucial weaknesses 2020). Currently Hesburger offers only milk make for example “Härtelö Pirtelö” which means -type of platform of Lipasu company. based soft serve ice cream (Hesburger 2020). Härtelö Shake. As the name Härtelö is derived provided by Valio. For the past two years, Lipasu relies solely on Fava bean based ice cream could be consid- from the word jäätelö (ice cream) the use of the fava beans - the “bird in hand” for produc- ered a more sustainable option. Developing that name is somewhat limited to that cate- tion. However, during the interview, the founders a one litre carton of ready-made Härtelö soft gory. The “Härtelö Pirtelö” could be a ready- Valio has now gained some experience in mentioned a potentially interesting ingredient serve mix could increase the likelihood of this made shake that would fit into the Valio product mentoring and working together with the which was lupin bean. We agree that bringing collaboration. portfolio as a plant based option either as their startup entrepreneurs of Lipasu. We believe this an innovative lupin based food product to mar- Transformational future direction we sug- healthy protein shake (ref. Valio PRO-feel) or an kind of collaboration could be taken further. As ket would be sure to get attention and as it is not gest for Lipasu is to build a soft, sweet and pink alternative to a sweet (chocolate) milk shake a more transformational future direction we widely used or recognized yet there is the po- movement based on their values. One idea for (ref. Valio Play). Another kind of incremental suggest that Valio would build a kind of plat- tential to be the first to market especially in the branding in the Ten Types of Innovation frame- product development idea would be to add form to bring together students, startup com- sweet foods sector that Lipasu is interested in. work is values alignment meaning make your to Valio’s existing Fabriikki protein ice cream panies and possibly even individuals who want Performance marketing and traditional mul- brand stand for a big idea or a set of values range a plant based protein alternative with to develop their food product idea. Together timedia branding methods are costly and often and express them consistently in all aspects of the Härtelö ice cream and fava bean based they could work in an Innovation kitchen -type harbor more risks than benefits. For a young your company (Doblin 2013). chocolate brownie crumbs on top. The current of platform provided by Valio. Valio product start-up like Lipasu with a trending flag-ship Ice cream could be used as something that toppings contain wheat so this would also be a development could get new innovative product product and a “winning by telling” approach, brings people together. “Ice cream as ice gluten free option.

32 33 References

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34 35 “When I’m no longer rapping, I want to open up an ice cream parlor and call myself Scoop Dogg.”

Snoop Dogg