Whether this is another urgent consolidation move within Big Food to cope with seismic industry changes or a way to take a huge new step into a bright future—or both—Mondelez has shaken up the food and beverage business today with reports of its offer to acquire Hershey.
According to the Wall Street Journal, the parent of Oreo, Cadbury and other major global confectionery and snack brands made a $23 billion takeover bid for Hershey—$107 a share—with the deal comprised half in stock and half in cash. The report goosed Hershey stock.
Hershey, however, issued a press release stating: “The Board of Directors of The Hershey Company unanimously rejected preliminary, non-binding indication of interest from Mondelez Company.” It went on to say Hershey “determined that it provided no basis for further discussion between Mondelēz and the Company.”
If the deal were to go through, according to the Wall Street Journal, Mondelez reportedly pledged to protect jobs in the event of a merger, locate its headquarters in Hershey, Pennsylvania, and actually rename the company Hershey.
Mondelez’s market capitalization, at about $68 billion, is nearly three times that of Hershey, at $25 billion—but the companies and their brands are complementary, with relatively little overlap. Yes, Cadbury is candy and so is Hershey, but they fit well geographically. Mondelez is strong globally and in cookies, with Oreo, while Hershey, of course, is the epitome of chocolate, along with Mars, and is an iconic snack provider in the US.
Each traditional “junk food” company also has made major strides in shifting their portfolios and concerns to the better-for-you trend in the market.
Mondelez, for example, has innovated with new brands such as BelVita, a breakfast biscuit that includes complex carbs for long-burning energy release and, more recently, a “free-from” cracker brand called Good Thins. Meanwhile, Hershey has taken a strong tack toward more nutritional fare by, for instance, acquiring the Brookside brand of fruit-and-nut bars and by readying to launch its own new brand of fruit-and-protein products, called SoFit.
Both Hershey and Mondelez also have devoted considerable resources, and much of their positioning and branding lately, to making their global supply chains more “sustainable” in terms of both environmental improvements and in the treatment of cocoa farmers and other suppliers. Among other things, such moves give each company more appealing stories to tell western millennial consumers who are greatly concerned about such corporate social responsibility considerations.
Interestingly, of course, Mondelez was created by a split of the old Kraft Foods conglomerate, in 2012, with its new sibling hanging on to the US grocery business and brands such as Oscar Mayer and Jell-O. But by 2013, activist investors such as Nelson Peltz were agitating for Mondelez to acquire the Frito-Lay snack business from PepsiCo.
Then, last year, Kraft was acquired by Heinz as cost pressures, slow growth in the CPG industry, shareholder agitation and uncertain global economies prompted their combination.
Do You Have a DigitalMerchandising Strategy?
How Kimberly-Clark and Rubbermaid boost commerce with product content.
As a busy mother of a newborn, Helen had precious few minutes to go online and order baby wipes. She knew the national brand well and quickly went to their product page on her favorite online store but was disappointed to find scant details of the product she wanted. Were they hypoallergenic? Did they contain dyes? How did other moms rate them? She saw an advertisement for a private label brand and clicked over to find testimonials from other moms, key features, clear benefits and detailed product specs that easily convinced her to buy the private label.
Marketers can improve their digital merchandising by gathering, maintaining and distributing detailed product information across many digital touchpoints, said Jennifer Polk, research director, Gartner for Marketing Leaders. “As consumers opt to browse the “digital shelf” more often and the marketing role in digital commerce evolves, digital merchandising presents a leadership opportunity for marketers,” she noted.
Similar to the “back of the house” kitchen that powers any great restaurant, marketers should engage brand managers, product teams and merchants to design and execute a digital merchandising strategy. First, on the data side, marketers should evolve from sending product information by spreadsheet and email to using global master data management of product data to organize and distribute structured and unstructured data both internally and externally. Second, marketers should make sure consistent data and relevant, compelling content is shown in marketing campaigns, online product catalogs (including retailers’) and on product pages.
Delight the front of the house
While the food that comes from the back of the house must be stellar, the dining experience and service is what makes great food become an exceptional meal. Consumers expect compelling and comprehensive product content as part of the customer experience. Some brands play a dual role as both manufacturer and retailer, but many brands continue to rely on retailers to engage consumers.
According to Ms. Polk, brands and manufacturers should establish a direct relationship with consumers to engage them along the buying journey, help them make buying decisions and gain valuable consumer insight along the way. While this can cause channel conflict, working through those challenges with channel partners is critical to engaging customers throughout the buying joruney. The Huggies (a Kimberly-Clark brand) website in Australia is one of the country’s leading resources for baby information because its content is helpful to parents.
Optimize for better results
As brands get both the back and front of the house running smoothly to establish or expand digital commerce initiatives, marketing should leverage product content to optimize their efforts.
This will enhance customer engagement, sales and commerce results. Three areas to focus optimization efforts include:
Personalize for different buyer personas through customized catalog management
Use guided selling and configuration tools like recommendations, ratings & reviews
Improve cross-channel usability through a mobile-enabled site or responsive design
When marketing owns the digital merchandising strategy, digital marketing improves because marketing assets incorporate consistent, compelling and comprehensive product content. This in turn makes it easier for customers to complete transactions. For example, when Rubbermaid incorporated product ratings and reviews in its direct sales channels and marketing campaigns it saw a 10% lift in voucher redemption when reviews were present in ads, 10% incremental increase in revenue per visit and 5% boost in average order value.
Reality Check: 50B IoT devices connected by 2020 – beyond the hype and into realityBY SYED ZAEEM HOSAIN, CTO, AERISON
How far is the hype surrounding claims of up to 50B IoT and machine-to-machine devices by 2020 away from reality?
For half a decade, the predictions for growth in the “internet of things” and machine-to-machine markets have been staggering:
• 2010, IBM: “A world of 1 trillion connected devices” by 2015.
• 2011, Ericsson’s CEO Hans Vestberg: “50 billion connected devices” by 2020.
• 2013, Cisco: “50 billion things will be connected to the internet by 2020.”
• 2013, ABI Research report: “30 billion” by 2020.
• 2013, Morgan Stanley report: “75 billion devices connected to the IoT” by 2020.
• 2014, an Intel infographic: “31 billion devices connected to internet” by 2020.
• 2014, ABI Research updated report: “41 billion active wireless connected devices” by 2020.
• 2015, Gartner Research: “4.9 billion connected things in use in 2015 … and will reach 20.8 billion by 2020.”
Although the specific predictions and the numbers differ, what is remarkable is that the numbers predicted for 2020 have been consistently extremely large over the years. The IoT market is experiencing explosive growth around the world and the numbers are still performing at what Gartner calls the “peak of inflated expectations” in its well-known “hype cycle” diagrams.
But how realistic are these massive numbers? Even the most conservative prediction – Gartner’s 20.8 billion connected things by 2020 – is predicated on a steady 30% annual growth. Cisco’s oft-reported 50 billion connected things is dependent on linking up “tires, roads, cars, supermarket shelves, and yes, even cattle” by 2020, according to the company’s blog. No one can know if either of these things will happen.
Why the big numbers are hype
First, adoption rates for new technology tend to spike over an initial introduction period and then trail off. Consider the smartphone market – in 2014, worldwide sales passed 1 billion units, and yet in the fourth quarter of 2015, worldwide sales growth was the slowest since 2008, at 9.7%.
Second, while the IoT is a broad category, suggesting that we could slap an IP address and sensor on every possible “thing” on planet Earth is honestly stretching the concept. It is true IoT connectivity could enhance most any industry, but just because it can doesn’t mean it will – and not necessarily by 2020. Some businesses and people won’t want to connect any time soon and, more importantly, some can’t connect their things yet. According to the United Nations, as of 2014, only 40% of the world’s population has internet access. There is not an internet of things without the internet, and counting only the “things” is putting the cart before the horse.
But … what if the numbers are real?
Let’s say those huge numbers are realistic. If an estimated 6.4 billion things are connected today, as Gartner estimates, we’ve got four years to connect another 14.4 billion to 43.6 billion. How will this work? What do businesses, government and standards organizations need to do to prepare for this growth? Turns out, things don’t just connect themselves and the impact of that many connected devices is not subtle.
As we mentioned, connectivity is not yet ubiquitous around the world. To get more things online, we need to expand cellular or perhaps satellite connectivity across the vast, mostly rural spaces. The U.N. reports more than 90% of those not yet online are in the developing world, and getting these people – and their things – connected will be a challenge for businesses and governments.
Certainly, the benefits of IoT technology are already being proven for these distant areas. The organizationSweet Sense has teamed up with government and nongovernment organizations to put IoT sensors on water pumps in rural Africa. This enables the NGOs that install the pumps to track their functionality. In a Rwanda study, only 56% of the water pumps were working consistently. After adding the Sweet Sense technology to track the pumps’ function via cellular IoT systems and analytics, the water pumps were able to be repaired more quickly and 91% of the pumps could be kept working on a regular basis.
With projects like this, IoT connectivity can help provide clean water more days out of the year for more people – however, these systems can be counted in the hundreds of devices right now. They’ve yet to scale up to the enormous numbers in Gartner’s or Cisco’s predictions.
Can we scale up to 50 billion devices?
Scalability is at the heart of this problem. Even if all these people and places can be connected with all these things, that will generate massive amounts of data. Take the example of a relatively simple cellular IoT/M2M device that generates a mere 4 megabytes per month, which is far less than most cellphone data monthly plans. If the world does reach 50 billion devices by 2020, then the number of cellular IoT/M2M devices would be about 2.5 billion, given that these are likely to be about 5% of all connected devices. The data this small subset of all connected things would generate is a whopping 10 million terabytes per month. And again, that’s about 5% of all the data that 50 billion connected things could possibly generate.
How will all this data be transported? How will it be stored? How will it be analyzed? How do you search through it? How will it be kept secure and private? Each of these issues must be addressed. Finding timely, actionable information within these vast data stores could be difficult and expensive. The costs of metered transport, storage and analytics have to be accounted for by industry, and distributed processing of information is vital.
Consider data security: When large numbers of things are creating and disseminating increasing amounts data, security measures have to be built into the process from the start. How do you do that? Today, the news regularly reports on breaches of financial information or hacked devices from baby monitors to connected vehicles. If 50 billion devices are connected by 2020, undoubtedly some of the data they generate will need to be carefully secured, whether it’s financial, health or other personal statistics.
No one wants to serve spoiled food to their families. Conversely, consumers don’t want to throw food away unnecessarily–but we certainly do. The United States Department of Agriculture estimates Americans toss out the equivalent of US$162 billion in food every year, at the retail and consumer levels. Plenty of that food is discarded while still safe to eat.
Part of these losses are due to consumers being confused about the “use-by” and “best before” dates on food packaging. Most U.S. consumers report checking the date before purchasing or consuming a product, even though we don’t seem to have a very good sense of what the dates are telling us. “Sell by,” “best if used by,” “use by–they all mean different things. Contrary to popular impression, the current system of food product dating isn’t really designed to help us figure out when something from the fridge has passed the line from edible to inedible.
For now, food companies are not required to use a uniform system to determine which type of date to list on their food product, how to determine the date to list or even if they need to list a date on their product at all. TheFood Date Labeling Act of 2016, now before Congress, aims to improve the situation by clearly distinguishing between foods that may be past their peak but still okay to eat and foods that are unsafe to consume.
Aside from the labeling issues, how are these dates even generated? Food producers, particularly small-scale companies just entering the food business, often have a difficult time knowing what dates to put on their items. But manufacturers have a few ways–both art and science–to figure out how long their foods will be safe to eat.
Consumer Confusion
One study estimated 20 percent of food wasted in U.K. households is due to misinterpretation of date labels. Extending the same estimate to the U.S., the average household of four is losing $275-455 per year on needlessly trashed food.
Out of a mistaken concern for food safety, 91 percent of consumers occasionally throw food away based on the “sell by” date–which isn’t really about product safety at all. “Sell by” dates are actually meant to let stores know how to rotate their stock.
A survey conducted by the Food Marketing Institute in 2011 found that among their actions to keep food safe, 37 percent of consumers reported discarding food “every time” it’s past the “use by” date–even though the date only denotes “peak quality” as determined by the manufacturer.
The most we can get from the dates currently listed on food products is a general idea of how long that particular item has been in the marketplace. They don’t tell consumers when the product shifts from being safe to not safe.
Here’s how producers come up with those dates in the first place.
Figuring Out When Food’s Gone Foul
A lot of factors determine the usable life of a food product, both in terms of safety and quality. What generally helps foods last longer? Lower moisture content, higher acidity, higher sugar or salt content. Producers can also heat-treat or irradiate foods, use other processing methods or add preservatives such as benzoates to help products maintain their safety and freshness longer.
But no matter the ingredients, additives or treatments, no food lasts forever. Companies need to determine the safe shelf life of a product.
Larger food companies may conduct microbial challenge studies on food products. Researchers add a pathogenic (one that could make people sick) microorganism that’s a concern for that specific product. For example, they could add Listeria moncytogenes to refrigerated packaged deli meats. This bacterium causes listeriosis, a serious infection of particular concern for pregnant women, older adults and young children.
The researchers then store the contaminated food in conditions it’s likely to experience in transportation, in storage, at the store, and in consumers’ homes. They’re thinking about temperature, rough handling and so on.
Every harmful microorganism has a different infective dose, or amount of that organism that would make people sick. After various lengths of storage time, the researchers test the product to determine at what point the level of microorganisms present would likely be too high for safety.
Based on the shelf life determined in a challenge study, the company can then label the product with a “use by” date that would ensure people would consume the product long before it’s no longer safe. Companies usually set the date at least several days earlier than product testing indicated the product will no longer be safe. But there’s no standard for the length of this “safety margin”; it’s set at the manufacturer’s discretion.
Another option for food companies is to use mathematical modeling tools that have been developed based on the results of numerous earlier challenge studies. The company can enter information such as the specific type of product, moisture content and acidity level, and expected storage temperatures into a “calculator.” Out comes an estimate of the length of time the product should still be safe under those conditions.
Companies may also perform what’s called a static test. They store their product for an extended period of time under typical conditions the product may face in transport, in storage, at the store, and in consumer homes. This time they don’t add any additional microorganisms.
They just sample the product periodically to check it for safety and quality, including physical, chemical, microbiological, and sensory (taste and smell) changes. When the company has established the longest possible time the product could be stored for safety and quality, they will label the product with a date that is quite a bit earlier to be sure it’s consumed long before it is no longer safe or of the best quality.
Companies may also store the product in special storage chambers which control the temperature, oxygen concentration, and other factors to speed up its deterioration so the estimated shelf life can be determined more quickly (called accelerated testing). Based on the conditions used for testing, the company would then calculate the actual shelf life based on formulas using the estimated shelf life from the rapid testing.
Smaller companies may list a date on their product based on the length of shelf life they have estimated their competitors are using, or they may use reference materials or ask food safety experts for advice on the date to list on their product.
Even the Best Dates Are Only Guidelines
Consumers themselves hold a big part of food safety in their own hands. They need to handle food safely after they purchase it, including storing foods under sanitary conditions and at the proper temperature. For instance, don’t allow food that should be refrigerated to be above 40℉ for more than two hours.
If a product has a use-by date on the package, consumers should follow that date to determine when to use or freeze it. If it has a “sell-by” or no date on the package, consumers should follow storage time recommendations for foods kept in the refrigerator or freezer and cupboard.
And use your common sense. If something has visible mold, off odors, the can is bulging or other similar signs, this spoilage could indicate the presence of dangerous microorganisms. In such cases, use the “If in doubt, throw it out” rule. Even something that looks and smells normal can potentially be unsafe to eat, no matter what the label says.
Perfectly Imperfect – The First Produce Distributor in the U.S. to Start Ugly Produce Delivery
Cleveland produce distributor Forrest City Weingart breaks the “standards” with perfectly imperfect.
Despite having a large produce terminal and many vegetable farms in Northern Ohio, fresh produce can be tough to come by for many in Cleveland. A recent study found that only 25 percent of Cleveland’s residents have access to fresh produce within walking distance. But now, produce wholesalerForest City Weingart hopes to change all that with an produce delivery service called Perfectly Imperfect.
Forrest City Weingart works in this “huge warehouse with all this fresh food that wasn’t accessible to the public” says Ashley Weingart, the company’s Marketing Director. This is the Cleveland Produce Terminal, a massive bounty of fresh produce that is located in a food dessert.
“Venture out and it's all bars on windows and corner stores with bad food choices” Weingart said. That is where Perfectly Imperfect hopes to step in and change things. The service, which started in early May, offers the community the chance to walk right up to the warehouse on Fridays to pick up boxes of imperfect fuits and vegetables.
Sold at approximately a 40 percent discount of what regular produce costs in a grocery store, customers can also have their boxes of perfectly good, but imperfect, fruits and veggies delivered, within the Cuyahoga County surrounding Cleveland. Forrest City Weingart created a relationship with a local courier, who is on board with the mission and ships for a small additional fee to receive delivery.
Weingart also recently started a partnership with the City of Cleveland’sHealthy Cleveland initiative to get more healthy produce to Clevelanders by distributing Perfectly Imperfect boxes at community centers in the City. The partnership will also help source perfectly imperfect to corners stores and markets in areas with little access to fresh produce right now.
As a produce distributor, Forrest City Weingart ships in produce from all over the world and then sells that produce to Ohio grocers and food service companies. It already donates 100,000 pounds of produce per year of imperfect and surplus produce to food banks. They also aim to increase overall sales of produce for their farmer suppliers with the venture into imperfect boxes.
With their existing base of customers, Weingart says that they also hope to be selling Perfectly Imperfect in local supermarkets. There is plenty of opportunity as growers will often say things to Weingart like “I have these cantaloupes that aren't perfect what can you do?” or “I have oranges with small scars on the peel.” Now, thanks to Perfectly Imperfect, they have a potential solution.
The boxes typically include oranges, zucchini, squash, potatoes, and other produce. In addition to the imperfect produce, the company also includes some surplus produce. Perfectly Imperfect also has the potential to ship outside the County
Goodbye, Linear Supply Chain. Hello, Digital Supply Network
Ready or not, the death of the linear supply chain is upon us. Supply chains built to deliver reliable, cost-effective results are no longer fit for purpose in today's digitally driven world. Enter the digital supply network (DSN).
DSNs intertwine, even harmonize, four supply chains—physical, information, talent, and financial—that businesses have operated separately for decades. The result: A cohesive network that makes sourcing, production, and product delivery more efficient and profitable as it delivers a customer-pleasing order fulfillment experience.
More than that, DSNs give management end-to-end visibility into the supply chain, with control towers that analyze supply, production, distribution, and sales data collected along the way. That valuable information can warn of a problem, or can offer insights about new ways of working and enable execution of a broader digital business strategy.
DSNs allow companies to shorten processes, potentially eliminate functions, and identify ways to be more competitive with new services and products. For instance, companies may not need purchase orders because sensors embedded in products could enable an auto-receipt function upon delivery, and trigger a transfer of funds for payments.
In fact, we know that the value of the DSN to your business is not to import or replicate your existing supply chain into new networks. Rather, it is to reimagine and redesign the value of your business through a DSN lens.
Digital technologies contributing to the Industrial Internet of Things are creating new vistas of opportunity, and companies need these DSNs to help them be more competitive.
MOVING TOGETHER
Companies have traditionally created separate management structures for supply chain components such as human resources, information, products, and financial transactions. It is the physical supply chain that transports goods, which people equate with a supply chain. This narrow view is an anchor that can weigh down companies, and prevent them from making a paradigm shift.
A DSN connects the physical supply chain with the talent, financial, and information supply chains, creating visibility across the spectrum. So as companies begin to redesign operating footprints, they reimagine processes and consider how they can access different suppliers and markets. Done correctly, the DSN operates at the speed companies need to create value.
ONE SIZE DOES NOT FIT ALL
The DSN is a modern strategic approach that deconstructs and restructures supply chain strategies to deliver value. With it, a company can realize its strategic vision as it begins to see new business opportunities—new ways of working.
As such, a company's DSN adoption will be inherently fit for purpose, tailored to that company's needs and future proof. No two DSNs are the same, but they all should exhibit four key characteristics: connected, intelligent, scalable, and rapid. DSNs deliver real-time data, enable real-time decisions, and provide end-to-end supply chain visibility.
Built from modern digital technologies, and bringing all four supply chains into harmony, the DSN of tomorrow is ready to be deployed today. Companies holding on to the dying linear supply chain are closing themselves off from a strategy that operates at a lower price point while doing more to enable growth.
Wednesday, June 29, 2016
'Cool streets' to influence mainstream retail: Report
Retail's edgy present — and its mainstream future — are taking shape in a handful of urban neighborhoods across the country where food concepts like Whole Foods' 365 and Ahold's bfresh have taken root, according to a new report.
The report, authored by Garrick Brown, VP of retail research for real estate firm Cushman & Wakefield, presents an index of the 100 top "Cool Streets" — hip retail districts where retailers focused on millennial shoppers and their preferences for frugality and experience are "an incubator of sorts for what will be the hottest new retail concepts of tomorrow."
The report was based on a survey of local real estate agents who ranked neighborhoods based on their current position in the hipness cycle from "edgy/cool" to "gone mainstream" and gave scores based on livability factors such as pedestrian and bicycle friendliness, and retail flavor, including a foodie score.
Whole Foods' new 365 format "appears tailor-made for Cool Streets." (Photo courtesy of Whole Foods)
The report argued that such hip neighborhoods — driven by young people preferring urban living — are different from bohemian enclaves of a previous generation inasmuch as the current cool streets "are now a mainstream aspiration," and as a result, are evolving along the cycle toward the mainstream faster than in the past.
Retail offerings in these spaces tend to be restaurant heavy and "experiential" in nature, such as 365 by Whole Foods, which opened last month in Los Angeles' Silver Lake neighborhood, the report said.
"The Whole Foods 365 concept appears tailor-made for Cool Streets; the stores use a smaller urban footprint ... and require less parking than normal Whole Foods locations," Brown wrote. "Much of its inventory consists of internal brands, so Whole Foods 365's price points are cheaper... This is important because it connects with one of the touchstones of Millennial consumer: frugality. Yet perhaps most interesting of all is the fact that Whole Foods 365 stores will feature ever-changing pop-up retail space in their stores and will consider anything from vinyl record retailers to tattoo parlors as temporary tenants."
Silver Lake was one of 15 Cool Streets highlighted in the report, along with Sunset Park and Williamsburg, Brooklyn; Logan Square in Chicago; Over-the-Rhine in Cincinnati; River North in Denver; Wynwood in Miami; the North Loop in Minneapolis; Roosevelt Row in Phoenix; Carytown in Richmond, Va.; East Village in San Diego; Jackson Square in San Francisco; the Delmar Loop in St. Louis; Queen West in Toronto; Mount Pleasant in Vancouver, British Columbia; and Shaw in Washington, D.C.
An appendix of 100 top Cool Streets also includes the Boston neighborhoods of Allston and Davis Square where Ahold opened its first bfresh store and has plans for another, respectively.
The Millennial embrace of experience is visible as restaurants outnumber retail businesses in such neighborhoods by 2-to-1
