BUILDING BRANDS IN AWAY FROM HOME CHANNELS

Easy to Reach, Hard to Connect

For U.S. consumer packaged goods (CPG) companies, the challenge of building and growing brands has never been greater. This reality rings true for brands of all sizes – large, mid-sized, and emerging products alike. The more than 1mm SKUs sitting on retail shelves and an annual onslaught of some 100,000 new products make for a crowded store. To build their brands, CPGs in 2023 spent north of $39.5bn in digital media alone in the U.S. In some respects, it has never been easier to reach consumers but harder than ever to connect. The abundance of media options, including broadcast, digital (search, social, retail media), audio, outdoor, and print, has created an unprecedented level of noise for consumers. The daily ambush of brand messages seems analogous to the teenager passively observing the world through a smartphone - it may appear "social," but it lacks the connective tissue that forms the foundation of any relationship.

An overlooked strategic lever in building brand relationships is the role that Away From Home (AFH) and immediate consumption channels can play. RSP explores the strategic importance of AFH channels in building availability and creating brand preferences that in-turn drive purchase intent in large store and direct-to-consumer channels.

The Evolution of AFH

Post-World War II, the U.S. leveraged its intact infrastructure and emerging superpower status to shift mass production from military to consumer goods. Consumer products manufacturers adopted efficient scale models – mass marketing, production, and distribution to meet growing consumer demand for products ranging from clothes to food. The era also saw the surge of consumer mobility, giving rise to Away From Home concepts and the emergence of consumption on the go.

Restaurant chains, mimicking CPG models, expanded rapidly, offering standardized meals nationwide. This model thrived through direct sourcing from manufacturers and incorporating recognizable food and beverage brands into their menus, such as Coca-Cola and Heinz Ketchup. Famously in 1955, Waddy Pratt, a Coke salesman, sealed a handshake deal with McDonald’s founder Ray Kroc. A new era was born as an increasing number of CPG brands – traditionally available only in retail stores – began to be featured on restaurant menus. Suddenly, marketers awakened to the power of borrowed equity and pervasive availability.

The Underutilized Potential of Away From Home Channels

Today, AFH channels are pervasive and encompass a diverse set of segments ranging from restaurant chains to schools. Each location shares a common thread of immediate or imminent consumption rather than the future consumption purchases typically associated with grocery stores and mass merchandisers. The Away From Home channels provide a vast audience and significant market potential for brands, offering not merely a chance for messaging or creating impressions but also a critical opportunity for product trial and brand adoption.

Segment	No. of U.S. Locations	Annual Traffic
College & University	4,000 post-secondary schools	18mm students
C-Store	150,000 stores	60bn visits
Foodservice & Hospitality		90bn served
Chain	245,000 outlets, 500 chains
Independent	310,000 outlets
Foodservice Non-Commercial
Hospitals	6,200 hospitals, 931,000 beds	36mm stays
K-12	131,000 schools	55mm students
Lodging	52,400 hotels, 5mm rooms	1.2bn stays
Senior Care	28,000 facilities, 1.2mm beds	1.2mm rooms
Airlines	6,000 commercial planes, 500 airports	863mm passengers
Stadiums	400 stadiums	176mm fans

With countless Away From Home touchpoints and brand connections in play, it's puzzling why so many product marketers underutilize this valuable opportunity. The AFH market offers a diverse array of venues where brands can engage directly with consumers in meaningful ways, yet it remains underexploited. Surely, much of this disconnect can be attributed to a lack of awareness about the potential reach and impact of these channels, as well as, a lack of holistic understanding about how winning in Away From Home can drive success at retail.

Challenges in Measurement and Incentivization

Through discussions with a cross-section of RSP clients, we identified three key challenges that constrain thinking and often relegate AFH channels to a secondary position compared to the retail sector.

Less Accretive. The first challenge is the margin profile of AFH channels when compared to traditional retail. In short, the cost to distribute products to upwards of 500,000 outlets is dilutive when compared to the relative efficiency of getting products to grocery stores and other traditional retailers. Lower profit margins, albeit accretive, can serve as a deterrent for brand managers.

Misaligned Incentives. AFH channels are often an afterthought in brand plans because of a lack of incentive. Brand managers tend to be rewarded based on retail measures such as dollar sales and share, not AFH metrics. Traditional retail channels such as grocery, drug, mass, club, and convenience stores are easy to measure. However, very few CPGs treat AFH channels as a measured channel, the c-store segment notwithstanding and brand managers are not rewarded for AFH activation and success.

Difficult to Quantify. Finally, little attention has been paid to quantifying the impact of brand availability in AFH channels. Conversely, extensive science and modeling has been dedicated to determining the ROI on retail media campaigns. Sophisticated marketing mix models tease out short-term impacts and long-tail effects on brand equity. Brand managers don’t understand the value of on-premise availability in relationship to more traditional media measures. And yet, despite these challenges and limitations, some brands understand instinctually that winning in AFH channels translates into winning at retail and approach the opportunity both strategically and urgently.

Be Strategic

Brands that have been successful in building a consumer franchise via AFH channels start with understanding the importance of brand-segment fit. Perhaps one of the more notable examples is the rise of Uncrustables® Sandwiches. The J.M. Smucker Company built this brand in schools with a ground game that drove preference amongst consumers (kids) and shoppers (busy parents) concurrently. Rather than invest limited budget in media campaigns early on, the company focused on availability and building routes-to-market. Today Uncrustables® holds the #1 SKU in the entire freezer aisle in grocery. “Availability in K – 12 schools was a critical part of the growth of this brand early on” says Pete Krogh, Director of Away From Home Marketing at JMS. “Our tremendous growth at retail started in the lunchbox years ago and now those same kids are moms and dads with their own school-aged children.”

A closer look at the journey tells an amazing story. In 2001, Uncrustables® was a $12mm brand. By 2023 the brand achieved $686mm in net sales (a stunning 19% CAGR) and the company estimates that Uncrustables® will be a $1bn by the end of 2026. To be sure, nearly all this growth will come from U.S. retail which accounts for 90% of JMS’s $8.5bn in revenue. Indeed, the JMS Away From Home business unit is only 7% of company sales. In fact, brand Uncrustables® – which has just opened its third manufacturing facility to meet impending demand – is now larger than the AFH business unit itself. Sources: Company financial disclosures, RSP analysis.

Approaching the Opportunity

In our experience, there are other important considerations when crafting an AFH channel strategy.

Understand brand-segment fit. Defining the role of each away-from-home segment is a first order undertaking. For each segment it is important to understand its size (outlets, traffic count,..), who are the primary consumers and occasions, the role of your product in their operation (profit driver, amenity, convenience,..). Defining the brand-segment fit is the result of this work.

Define the strategic role of each segment. Do the work to understand the role that each segment might play for your brand (trial, image,..) in building preference and driving growth.

When KIND® Bar launched in 2004 the company set out to create a new healthy snacking category and establish a not-only-for-profit ethos. By 2008, the brand was selling 15mm bars annually in stores like Whole Foods and other natural grocers. Then after 5 years of KIND® pursuit, Starbucks pivoted to healthier food items and started selling three flavors of its nuts & berries bars in its 7,000 stores. The brand soon thereafter exploded. In 2014 KIND® sold 460mm bars and in 2020 Mars purchased the brand for $5bn. Sources: Company financial disclosures, RSP analysis.

Configure product-pack solutions for away-from-home. Too many brands limit their opportunity by forcing their retail products, suitable for grocery stores, into AFH segments without any customization. And while this approach may be suitable for some segments it is important to understand customer needs and invest where appropriate.

Industry leaders have built solutions that fit on-premise occasions, help the operator, and are profitable for the manufacturer - bag-in-box fountain beverage solutions and portion control packs for coffee rituals are enduring examples of such success.

Understand the value of brand experiences. While media agencies use standard metrics such as cost per million (CPM) impressions to weigh brand-building investment alternatives, forward-thinking consumer packaged goods companies recognize the importance of immediate consumption availability. These leaders Building Brands in Away From Home Channels rigorously analyze the economic benefits of AFH channels – both in terms of brand building, volume, and profitability. They consider questions like how do "pouring rights" in a stadium translate into sales at retail long after gameday.

Conclusion

Away From Home channels represent a significant opportunity for consumer products companies to build their brands beyond traditional retail settings. By recognizing the strategic importance of these channels, measuring and incentivizing performance appropriately, and developing targeted activation strategies, companies can unlock new avenues for brand growth and consumer preference.

Building a Compelling Customer Value Proposition

In a business world that often feels too transactional, we are reminded of Walter Dunn – a friend and mentor to many of us during our days with Coca-Cola. Walter was a giant of a man, in every sense, who both walked amongst industry leaders and shared his friendship and wisdom with all. He understood the essential power of relationships between people – the personal and professional value exchange between a company’s products and services and the customers they serve.

We learned the timeless truth that the quality of our customer brand promise was at the heart of protecting share, price, and margin in the intensely competitive consumer products space. This principle still rings true as industries face continued margin pressures and are compelled to rethink their customer value proposition – from what they sell, to how they sell, and how they deliver on the promise.

The centerpiece of a winning commercial strategy is the design and construction of the promise itself – a value-added and differentiated bundle of products & services; or said another way… brands & capabilities. When done right, products and services companies can elevate their competitive advantage through the development of a distinctive insights-based customer value proposition (CVP) that protects share, helps command a price premium versus the competition, strengthens business partnerships, and even unlocks growth.

Benefits of CVP

A well-constructed CVP defines how a company creates value for its customers by leveraging its unique bundle of brands and capabilities in an ownable way. The approach ensures the entire organization focuses on addressing both consumer and customer marketplace opportunities in a holistic end-to-end manner. The CVP offers other benefits, as well:

· Informs development of company, brand, and go-to-market strategies,

· Drives prioritization, coordination, and alignment of resources across functions,

· Provides a path to both brand and customer-relevant selling stories,

· Helps form better solutions for customers and end-consumers alike,

· Enables stronger customer partnerships, and

· Magnifies the value of a company’s brands and capabilities.

Moreover, the CVP aligns the entire organization, not only Sales & Marketing, to deliver solutions that are relevant for consumers, users, customers, and buyers alike. Said differently, alignment is not just a benefit of this effort, it is the central concept. The aim of any CVP redesign is to “organize for the outcome” to enhance customer value creation.

We have found that just as leading brands invest enormously to build their brands with consumers, best-in-class suppliers also invest in the branding of their go-to-market approach with customers. In other words, building a distinctive CVP requires a disciplined methodology comprised of the following: understanding customer needs and expectations, capability benchmarking, customer brand promise development, and proposition enablement.

Voice of the Customer

Grounding your CVP development relies on a comprehensive understanding of customer needs and expectations. It starts with understanding foundational requirements – what are the table stakes that a supplier must deliver on to earn the right to play and stay? Key characteristics such as product quality, product guarantees, as well as product supply, and order lead time might be examples of the cost of entry.

Earning the right to advance beyond transactional status necessitates understanding customer expectations of their more strategic suppliers – what are the highest value creation opportunities for customers? Key traits such as insights, innovation, and collaboration are characteristic of higher-order requirements that separate good and great suppliers.

Finally, it is essential to understand how you are performing against these customer-identified needs, expectations, and opportunities. Gathering a representative sample of high-value and high-growth customers for this input is key to developing a balanced perspective. Knowing how you benchmark versus customer expectations and your competitors will inform priorities in addressing gaps.

Take Inventory of Thyself

Equally important to customer understanding is assessing how your capabilities stack up and create value for your customers. Self-assessment can be dangerous if it lacks adequate benchmarks and honesty. But if done right a clear picture of both foundational and distinctive capabilities emerges and sheds light on how well you deliver with respect to basic customer needs and more strategic opportunities as you strive to earn a place at the planning table.

The range of commercial capabilities that warrant review is diverse: Brand & Channel Planning, Customer Planning & Management, Product Management, Innovation & R&D Strategy, Data & Insights Capabilities, Workflow Optimization, Customer Service & Support, Brand Marketing, Customer Marketing, Category Management, Education & Thought Leadership.

Recognizing that not all customers value all capabilities equally, it is important to understand your gaps and the relative ROI on the capabilities stack through the lens of high-value and high-growth customer segments.

Building a Right-Sized CVP

Developing a clear articulation of your compelling customer value proposition starts by defining how your business creates value for your customers. Knowing how your evolved customer brand promise – your products, services, and capabilities – impacts the top line and bottom line for end-users is central to quantifying what it is worth.

With a clear understanding of customer needs and existing capabilities, the next critical step in the CVP journey is identifying and prioritizing the commercial capabilities most valued by your customers and required to deliver the value proposition. The creation of a capabilities roadmap that visualizes the build is helpful in forming a consensus for the needed investments. To be sure, closing certain capability gaps is a quick fix requiring minimal budget, while others necessitate more extensive resource investments including OPEX and CAPEX.

This work brings to life the compelling and branded customer promise that differentiates.

CVP Enablement and Execution

Incorporating a well-planned approach for driving awareness, application, and adoption is essential to standing up a new customer positioning both internally and in the trade. Creating a complete plan for building awareness and understanding of the new value proposition requires more than messaging. Doing it right involves upskilling and creating new muscle memory, inclusive of tracking and socializing best practices and wins. Finally, the successful adoption of a robust CVP is about developing the agility to evolve the go-to-market strategy as new opportunities for customer value creation emerge over time.

Retail Strategy Partners (RSP) names Pat Magill Partner and Practice Lead - Restaurant & Foodservice

RSP Founder and Managing Partner, Robert Kennedy, today announced the appointment of Pat Magill, Partner and Practice Lead - Restaurant & Foodservice of Retail Strategy Partners. “Pat brings a wealth of business insight and depth of experience to RSP from his background in foodservice operations, customer experience, and strategic marketing – all with a strong client service orientation. We look forward to partnering with Pat to serve our clients and help enable their continued growth.”

Pat has worked in the Foodservice and Restaurant industry for 25-plus years in a variety of marketing leadership roles. Prior to joining RSP, Pat served as VP of Channel & Commercial Planning for Coca-Cola North America’s Foodservice Division - having worked with QSR, FSR, and several on-premise foodservice customers of all sizes and varieties during his 20 years with the company.

“For nearly 20 years now, RSP has built a reputation as a trusted advisor to many Fortune 500 Retail & Foodservice clients. I’m excited to be working with them because of their unique approach to both value creation and commercial growth. It’s an incredibly strong foundation on which to build the firm's next chapter and I’m thrilled to be a part of it." said Magill.

Retail Strategy Partners is a growth consultancy that delivers B2B commercial transformation for its clients. RSP's expertise is in developing commercial strategies and enabling capabilities that redefine "where to play" and "how to win" for its clients.