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.