Mergers and Acquisitions, Selling a Business, Consumer, Food & Beverage
Brand Equity Builds Stockholder Equity
To build enterprise value in the food & beverage industry, build brand equity. Consumer loyalty to a brand generates repeat purchases; repeat purchase patterns create annuity-like cash flows; recurring revenues reduce investors’ and acquirers’ perceptions of risk and increase the valuation paid for the brand marketer’s stock or business.
But how do you cook up a successful food brand? Food manufacturers and restaurateurs speaking at a recent WBZ Business Breakfast say the recipe includes an awareness of consumer needs, an ongoing employee education process, and a flexible balance of consistency and innovation.
Meet consumer needs. Every brand has two owners – the marketer, and the consumer. Frank Carpenito, CEO of Dancing Deer Baking Company, says that for a marketer, brand building should be “all about the consumer and what the brand means to them. What is the brand promise? What does it mean to consumers? What do we want it to mean? Where can we deliver, and where can we not deliver, against the brand’s promise to consumers?”
For the consumer, brand loyalty is built on the marketer’s promise plus the brand’s performance delivering on that promise over time. Carolyn Crowley Stimpson of Polar Beverages says manufacturers must “know the consumer, know what they want. Brand trust is paramount.” Carpenito notes, “Consumers are looking for their needs to be met. Understand, meet and exceed that need.”
The importance of brand loyalty is starkly illustrated in a recent study from Catalina Marketing, which reports that the average shopper purchases only 260 different grocery items each year, less than 0.1% of the average 35,000 UPCs available in-store. The study of 32 million consumers across 10,000 U.S. grocery stores showed this selectivity of shoppers holds true across every department in the grocery store, and across income and age segmentations. Consumer selectivity makes it more important than ever that brands appeal to consumer needs and then build relationships that grow recognition and loyalty over time.
Organizational buy-in. Employees can make or break a consumer’s brand experience, so how do you convince employees to buy in to what your brand message is? First, communicate the brand message internally to employees in a structured, thoughtful way so that they understand what the brand promise means to consumers. Second, educate them about the ways in which their actions help the company deliver on that brand promise.
Third, repeat and repeat. Roger Berkowitz of Legal Seafoods says “It’s about culture and communicating that culture, what’s acceptable and what isn’t, what differentiates what we do from others, and talking about it all the time. It’s like religion – keep espousing the principles over and over again!”
Flexibility and re-invention. As you develop your brand message, be sure to define it with a view not only to the current marketplace but to the future as well. Growing the brand then requires a delicate balance of consistency and innovation as you deliver on your brand promise in an evolving marketplace. Carpenito says, “Your brand has to be a key part of company culture and decisionmaking; use it as a guidepost and don’t wander from the brand promise when presented with strategic opportunities.”
Berkowitz says, “Understand your brand focus, and don’t deviate. But – to stay relevant, you have to change on a dime and acknowledge diners’ desire for change and innovation.” Of the multiple concepts he has opened under the Legal Seafoods banner, Berkowitz says Legal has evolved to offer different dining experiences delivered at different price points in different settings, but all with the shared DNA of Legal’s consistent quality message.
Every panelist agreed, you can never stop re-inventing and re-engineering a successful brand because the competition is doing the same thing. In the food business, innovation is necessary: in many food companies more than 50 percent of the current revenue comes from products that were not in the product line five years earlier. Brands have to change and evolve. As Steve DiFillippo of Davio’s Steakhouse observes, “The Hilltop Steakhouse was once the #1 restaurant in the U.S. and it is now closed… Never stop innovating, or you’ll become the Hilltop!”