All posts by David Hollister

Branding, Grow Better Brands

Brand Building – Tell Your Story – Build Connection

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It isn’t enough to make a great widget unless it is the one and only product that’s going to save the world.  It’s unlikely your brand falls into this category, so defining your brand in the mind of the consumer must be a priority if you want to survive.  The food industry’s growth is built on innovation; new brands, new products, better solutions to our problems.  The reality is most of these brands and products don’t last.  A statistic I heard many years ago was that over 93% of all new products fail.  As a consultant and sales manager, one of my toughest challenges is figuring out which products and brands have the right stuff to succeed.  It usually comes down to the people, but more than that, it comes down the right people combined with a commitment to brand building.

Telling your story is critical to your success.  If you don’t define your brand in the mind of the consumer your competition certainly will.  Or worse yet, you will just be one of the many invisible brands littering store shelves.  When I first started as a retail buyer, it was obvious products didn’t become winners based on their physical qualities alone.  Just because something was good didn’t mean it was going to succeed.  A brand’s resources played a part, but mostly what separated winners from losers was visibility.  It was romance, storytelling, and personal connection that built loyalty and brand sales.  The difference between then and now is technology more easily allows us to communicate directly to consumers and build emotional connections. 

This doesn’t happen by osmosis.  It happens because brands put actual effort into their packaging, sales materials, websites, social media and messaging.  They make telling a compelling story and building connections with their customers a priority.  Unfortunately, many companies are just going through the motions; and though they may have a communication presence, they haven’t figured out how to put the pieces together for success.  Their websites are digital dust collectors with little traffic and their lack of effort is a self-fulfilling prophesy of communication failure.  When brands focus their efforts, the results can be significant. 

I am an avid listener of podcasts.  Several that I listen to, started running advertising for a brand of socks called Bombas.  ( www.bombas.com )  After hearing the pitch several times, I checked out their website and placed an order.  The site was certainly cheerful and fun, and their products were well explained and compelling; but what got me to order was their commitment to helping the homeless.  This is an issue I care about, and because they care too, they were able to make an emotional connection.  The socks arrived in a few days and they were wonderful.  I love them. I have told my partner, my friends, and pretty much anyone that will listen how great they are.  Bombas created an emotional connection with me and then fulfilled their promises by delivering an excellent product; compelling me to share their story with both friends and strangers. 

It is easy to think Bombas could make great socks and have a cool website, but if they didn’t find a way to tell their story directing me to their digital home, I would have never known about them.  They would have been just one more brand available for sale.  My impetus to order didn’t have anything to do with the quality of their product.  I couldn’t have known if they were telling the truth about how good the product was, but they built an emotional bridge which prompted me to order.  And the reorder was assured by delivering quality goods that exceeded my expectations.  Today’s consumers are overwhelmed by choice and are thrilled to find brands which resonate in deeper places than their wallet.  They yearn for connection, and when they find it, they are likely to tell the world.

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And soon all restaurants will be Taco Bell

Dire predictions of the future often have one dominant company controlling the world.  Discussions of Whole Foods Market and Amazon this last week at the Austin Kehe Natural Show ranged from sorrow to highly concerned agitation.  There is no doubt that the centralization of WFM is a major shift in how the natural channel will be structured or that traditional retailers have been marching toward a showdown with online retail for nearly a decade.  But despite all the sadness and hand wringing with these impending changes, we will get through this.

We have seen such consolidations of major retailers and key distribution before.  These cycles are always followed by breakouts of innovative retailers attuned to their customers.  As WFM grew its power and then isolated itself, new retailers and buying groups such as Natural Grocers, Lucky Markets, Sprouts, Fresh Thyme, INFRA and NCG have grown significantly. And in the wake of recent WFM neglect of their customers, they have gone into overdrive.

I must agree with many of my colleagues who see this time as opportunity for independents and small chains.  Customers still want their retailers to make them feel special.  They want what they want when they want it (at a price they are willing to pay) to paraphrase Joe Albertson.  Our best independents are masters at customer service and building community.  They know their customers, understand and respond to their needs and are not afraid of writing a special order.  They are more than two clicks and a UPS truck pulling up at the house.  That doesn’t mean the path will be easy for independents in the coming years.  They will have to become proficient at innovative technologies, learn to communicate differently, and be diligent in creating experiences for their customers.  But their high-touch connection to the consumer and deep local relationships should shield them from the pain large traditional grocery chains will certainly face.

Growing brands should build a diverse customer base.  Large retailers are part of the package, but there is significant risk in being too dependent.  The big chain stores, including WFM, are notoriously fickle and brands are often one buyer change, shift of strategy, or reorganization away from being discontinued. Additionally, planogrammed placement in hundreds of stores doesn’t necessarily translate into significant volume.  With the right product, promotions and relationship, a handful of stores can sell more in a month than a whole region of Kroger.  New placement investments are also often less at independents and working closely with them also can give a brand insight that years working with chains cannot.  The buyers are just closer to the consumer and most are happy to share what they know. 

As an industry we should help them.  I am all for building relationships with big retailers, but I have said for years that if we don’t support small retailers, all the retailers will be big retailers and then there will be hell to pay.  The same is also true of distributors.  The anxiety for most natural brands is that WFM represents a large part of their sales; in some cases over 50%.  With the coming sku reductions, this means painful days ahead.  Focusing on independent retailers is a great way to offset the losses and diversify; while at the same time getting a better return on investment.  If your goal is to grow sales and build a sustainable brand, then independents are critical to your success. 

Grow Better Brands, Industry

Whole Foods reorganization: punctuation on a decade of change

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No matter whether you are a loyal shopper or a member of the natural foods community, you have been watching the slow-moving disassembly of Whole Foods Market for two years.  As they have embraced a model of centralized category management, important parts have been removed and it’s too early to tell how it will all be put back together.  The pending Amazon acquisition calls into question whether this process will continue or remain partially implemented as a new vision is engaged by the online giant.  In the meantime, shoppers are finding fewer of the items they want, experiencing a lower level of service, and leaving in droves to find equally interesting alternatives.  One only hopes this process doesn’t take too long as competitors step up to fill the void.

Inside the industry, stakeholders of all stripes are painfully trying to assure that their brands, brokerages, and distribution companies survive the changes.  From a larger perspective, food retailers have been merging, failing, growing and reforming themselves regularly for decades.  My career was shaped by a series of mergers in the late nineties that formed the basis of Kroger as a national retailer and before that I experienced both from the inside and outside the first of a series of mergers and acquisitions that involved the Albertsons brand.  In recent years, we have seen the near and total failure of several chains and the acquisitions of key regional players.  We have seen new investment models with larger chains staking crossover formats with considerable resources.  We have seen further consolidation in distribution with UNFI and KEHE gobbling up competitors and complementary partners.

So why does this retailer reorganization feel so different?  Perhaps it isn’t.  Time does allow a certain distance from the confusion of such things.  But at least in my memory, this is the first time we have seen such a radical of change by a significant natural food retailer.  The only thing close was the Whole Foods acquisition of Wild Oats.  But it didn’t really shape anything; except the direction for Whole Foods and perhaps sparking the start of exponential growth for Sprouts, Vitamin Cottage and independent buying groups such as NCG and INFRA.  Internally, the process was painful as usual, but externally, the industry remained relatively unchanged.  In distribution, the more recent acquisition of Natures Best by KEHE was regionally dramatic, but largely left the industry intact.  This time things are different.  This is a major shift and will fundamentally change how the natural channel functions.

Without considering Amazon, the changes to the structure of how decisions are made at Whole Foods is already impacting the natural channel significantly.  In the past, there have been eleven regional decision points and a global team with a growing powerbase.  Relationships at all levels have been important, but being effective at the regional level has been the key to brand success.  Under the new structure, regional contact may still be important, but it is obvious the more critical contacts are at the evolving center of power in Austin. 

Regional natural channel brokers are likely to suffer the greatest impact of these changes.  While certainly Whole Foods isn’t the only significant customer, for many natural brokers they have been central to the services they provide.  Many brokers have reported they are already blocked from doing anything at store level except audits; and it is likely Whole Foods will centralize and outsource the fair share reset functions which have consumed brokers for the last many years.  Without these points of persuasion and ability to effectuate change, how much longer will top brands pay regional brokers full commission for Whole Foods business?  And what is the ripple effect when they start making other choices?  Regional brokers will either need to demonstrate their continued usefulness, find other sources of revenue, or align themselves with other regional brokers or larger entities to survive. 

What happens with distribution is a much tougher question.  Without Amazon, it is likely Whole Foods would continue to work with UNFI and a handful of regional distributors.  But Amazon is already buying from most key manufacturers for their online business.  They have the pricing knowledge and logistical resources to design a more efficient buying and distribution system; stripping out distributor logistics padding, administrative costs and marketing fees.  To be sure, Whole Foods’ sweetheart deal with UNFI is very attractive.  Amazon might choose to continue down the path Whole Foods has set, putting pressure on UNFI to reduce costs and see how far it takes them.  But in the longer term, I think it is only logical to think they will create their own distribution network, largely move away from UNFI, and rely on smaller distributors to handle the bulk of their regional products.

These are only a few of the likely changes as Whole Foods adjusts how they go to market; and what Amazon brings should revolutionize more than just our little natural channel.  In some way, Whole Foods moving to a centralized model was inevitable and is the final frame of the imagined split between natural and the rest of the industry.  Natural products are no longer on the fringe but have become a driving force.  Major consumer goods companies have been actively buying successful natural brands for more than a decade and these acquisitions have become their primary source of innovation.  The line, once very clear between natural products and the industry at large, has blurred into a sea of gray. 

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Manage your landed cost or suffer creeping retails

I’ve spent a lot of time in the last few weeks doing promotional plans, discussing pricing with my clients and how best to control every day and promotional retails.  Managing your landed cost might be the most important external factor in achieving the right retail on shelf.  While you cannot control the margins for distributor or retailer, you can control or at least manage the landed cost.

Landed cost is the everyday price at which the distributor owns the product in their warehouse.  If you deliver your product to the distributor, then the price you sell it to them for is the landed cost.  If the distributor picks up the product, then the landed cost is your price plus the freight burden they add to the product to move it their warehouse. 

For the last 20 years, the large distributors have been both consolidating at a furious rate, following retail consolidations, and ratcheting down their own margins through negotiations with these larger and larger retailers.  The result is that they have talked themselves into contracts with the largest of retailers which are not profitable.  Backed against the wall, they are looking in every direction for revenue streams to return to balance. 

Logistics has always been a profit center for these companies, but in recent years they have gotten more aggressive in padding freight burdens and hiding revenue below the landed cost line.   Freight burdens have miraculously gone up even as fuel prices have gone down.  To reap these revenue rewards, distributors have been pushing manufacturers to let them pick up.  In many cases, the distributor should be able to move goods more efficiently than a manufacturer.  They operate at greater volume and can get better rates from carriers when not using their own trucks.  Arranging freight, dealing with late loads and delivery appointments can be both frustrating and costly for vendors.  That said, it is critical manufacturers have a watchful eye on pricing and underlying freight burdens.  I have seen several cases where new brands and products have nearly been killed by the heavy hand of a distributor’s transportation department.

Even if a manufacturer holds steady with their pricing, creeping freight burdens can create unplanned price increases and upend your retail pricing strategy.  Each time these minute increases happen, retailers take the opportunity to review your pricing; often adding their own margin padding.  In the last year, we have seen several examples of key account retails moving from competitive price points such as $1.99 or $2.99 to less attractive pricing due to freight changes alone.  This can be deadly for sales and very difficult to correct.

So, what is a manufacturer to do?  Delivering your products is the only way to truly control landed cost.  It may not however be your best solution; especially if you are a new vendor or have low volume.  Do your homework and know what it takes to move product to each distributor warehouse.  Engage your distributor to review costs; matching these up with your own calculations.  If they seem out of line, say something.  If you are polite and persistent, your buyer and their transportation team will usually be helpful in finding a fair solution. It might not be the sexiest thing you do to build your brand, but the success of your products may depend on it.

Grow Better Brands

Are you ready for 2018?

Deadlines for next year’s promotional plans seem like they come earlier and earlier every year.  I have a love hate relationship with the planning season.  I dread the difficult conversations to come and the sheer effort it takes to do it right.  But I love the opportunity to rethink and reset for the coming year.  Beyond just the promotions, I use this time to review our information gathering and communication processes; looking to find ways to make them better. 

These reviews are more than an internal matter; extending to how we interact with our distributors and retailers and most importantly how we engage with our sales team and brokers.  It is about setting up systems and building tools to quickly design and communicate hundreds of promotional plans nationally.  And, it is about leaving a trail of information that is easily accessed by all team members as the year progresses.

In the late nineties, I was the specialty, ethnic and natural food buyer for Ralphs Grocery Company.  I realized early on it would be impossible to manage over 20,000 items and review all our categories if we didn’t find a better way to handle our promotional calendar.  Managing the process monthly meant I was always chasing money and facing an ongoing time deficit.  My team and I, which included the account executives at A1 International, put together six-month planning sessions which greatly streamlined this effort.  It was an arduous three days of meetings, followed by a few intense weeks of paperwork, but the result was a full book of ads, negotiated price points, and many constructive conversations with manufacturers leading to increased sales.

I use this methodology with my clients now; developing twelve month promotional plans for each of our distributors and key retailers.  The process helps us communicate our commitment to customers, set a direction for brokers and distributors, and free up our time to work on new distribution, marketing and new item development.  It is probably the most important thing we do as brand managers all year.

That doesn’t mean it goes smoothly every time.  After all these years with clients, I can’t offer any magic formula.  Every company culture is different.  I can tell you that the best results and systems come from honest discussions about where there is pain in the process and working together to solve those issues.  As a brand manager leading several brands nationally, my biggest challenge is managing the insane amount of data and turning it into useful and transparently shared information.  Luckily for all of us, technology is offering an ever-improving array of solutions.

Below is link to some questions and guidelines to help you with your planning process. 

12 Month Planning Guidelines

Grow Better Brands

New Adventures

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I like to wander.  The summers of my youth were spent exploring the country in a Volkswagen camper bus with my parents and brother. Twice we made the full loop from Washington State to Pennsylvania then Florida and back through Texas, Colorado and Utah in a quest to visit all our relatives; overdosing on state capitals, national parks, museums, battlefields and historic homes along the way.  On one trip, we learned the words to Sound of Music, Camelot, Annie and a few other Broadway musicals that my mother had recorded on cassettes from her original records.  Another summer, I managed to memorize all the Trivial Pursuit cards in the six weeks we were on the road.  We always had planned destinations for each leg of the trip, but often the day to day to getting there was a bit uncertain.  Hollister rules outlined that you could never backtrack or go the same way twice.  We therefore spent a lot of time on winding country roads and discovered many things you can’t imagine from the freeway.

As I grew up, the straight-line trajectory of my life seemed pretty laid out; go to college, get a job, get married, a family, house, dog, cat etc.  Life doesn’t always go as planned.  My management and marketing degrees got shelved in favor of a philosophy degree early.  And the grand plan of becoming a Wall Street executive dissolved as I learned more and decided it wasn’t for me.  The food industry was familiar, both my dad and uncle had run grocery stores and I had worked in restaurants throughout college.  My first job as a Buyers Assistant at United Grocers was to start ten years in buying positions at large supermarket chains.  This was followed by an MBA and seventeen years of consulting, sales and sales management; none of which I could have predicted.

My team and I have worked with variety of entrepreneurs and established companies developing new brands, products and markets.  I have crisscrossed the country to work with broker teams, introduce brands and build relationships with distributors and retailers.  I have had my share of successes and some notable failures.  I am still learning how to be better at both.  Looking back, two of the most prominent threads to my journey have been education and curiosity.  Perhaps this is not surprising given both my parents are retired teachers.  As a buyer, I wanted to know everything about my categories and products.  As a seller, I am most effective when I know my brands and categories exceptionally well.

But product and industry knowledge only takes us so far; especially in a quickly evolving landscape driven by technology.  We have to be constantly learning and pushing ourselves beyond what is comfortable.  I suspect these new adventures will involve some wandering and more than a few back roads.  I look forward to your company along the way.