Archive for December, 2012

Chobani Expands

December 18, 2012

This week Chobani opened one of the largest yogurt factories in the world. Agro Farma, Chobani’s parent company, celebrated the event with a marching band, Olympic athletes and Idaho’s political leaders.

You can read more about it here:

http://www.idahostatesman.com/2012/12/17/2384277/chobani-getting-ready-to-open.html

The Chobani story remains one of the more remarkable tales in business today. Back in 2005, Hamdi Ulukaya saw an ad for an abandoned Kraft Foods yogurt plant and decided to buy it. He then spent about two years figuring out how to make a good yogurt. He launched the Chobani brand in 2007.

Chobani logo

The established players in the industry, yogurt giants Yoplait and Dannon, looked at the idea and dismissed it. I imagine the thinking went a bit like this:

“Introduce a Greek yogurt? Really? That is a ridiculous idea. We know the United States yogurt market and one thing is very clear: people in the United States don’t eat Greek yogurt. Maybe the Greeks eat Greek Yogurt. Look where that got them.”

Chobani is now one of the largest brands of yogurt in the United States with sales approaching $1 billion annually.

This year Dannon began defending but Chobani continues to do well; Dannon is apparently gaining in the Greek yogurt segment but this growth is coming largely at the expense of Fage.

You can learn a lot about defensive strategy from the Chobani story. Perhaps the most important lesson: It is easy to deal with a new competitor when they are new but exceptionally difficult once they are strong and financially robust and able to build one of the largest yogurt factories in the world.

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This week I’m back in Chicago. I’m well behind on holiday preparations and everything else after my trip to Japan and Denmark. So I’m taking off the rest of the year to catch up. Best wishes for the holiday season!

Learning from Tesco’s US Disaster

December 9, 2012

Last week British grocery giant Tesco threw in the towel and announced that it would stop investing in its U.S. business. The company will either close or sell its nearly two hundred store “Fresh & Easy” chain.

Fresh & Easy

This isn’t surprising news; the U.S. business had apparently been struggling for years. Since its opening in 2007, Tesco has lost more than £850 million on the business and results apparently were not improving quickly.

There are three important learning points here.

First, it is incredibly difficult to enter an established category where people have little motivation to learn. Grocery stores are fine. People aren’t looking for another one. If the concept isn’t dramatically different, like Whole Foods or Trader Joe’s, then people won’t change. Tesco tried to enter the US by creating lovely stores that were modestly different. This just won’t work. It is amazing they tried at all.

Second, when the numbers don’t work people eventually give up. Companies launch new products to build profits. When it is clear that the new venture won’t generate good returns, they stop investing. When evaluating competitors, it is useful to keep this in mind; if you want someone to stop attacking you, just convince them they won’t make any money and they will stop.

Third, defensive strategy really works. Analysts are blaming Tesco’s failure on the company and the economy. But I am quite confident US retailers did everything they could to make Tesco’s life difficult. That would have been a very smart strategy; Tesco was a huge long-term threat to US retailers. Tesco’s failure was very good news for Kroger and Wal-mart.

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This week I am teaching courses in Japan and Denmark. Next week I’ll be doing a breakfast program on defensive strategy with the Business Marketing Association of Chicago. It is on December 18. You can register here:

http://bmachicago.org/bma-events/power-defensive-strategy

Rebuilding the Lincoln brand

December 4, 2012

Ford is in the news today for its efforts to reposition and rebuild its Lincoln Brand. One thing is clear: the company knows how to get attention. The story is everywhere. Ford staged a big media event at Lincoln Center in New York yesterday and CEO Alan Mulally is giving interviews to the big media outlets.

Does this all make sense?

Put another way, should Ford really be devoting billions (and a Super Bowl spot) to the fading Lincoln brand, a mark with some negative associations that makes up just 3% of Ford’s sales?

Ford has done a rather impressive job of narrowing its brand portfolio in recent years. The company killed off the Mercury brand and sold off Range Rover and Jaguar and others. At this point, Ford has just two main brands: Ford and Mercury.

One thing is very clear: without a significant investment, Lincoln will fail. Sales are falling and, more important, the brand is losing relevance. The trend is not positive.

To understand the Lincoln move, it is important to consider a more fundamental question. Could Ford just be Ford? Why not focus all the efforts on the core brand?

The problem with narrowing to one brand is that this will limit what Ford can do. A brand can’t be all things to all people. Ford certainly isn’t a luxury brand. I suspect people don’t often debate between getting a Ford or a BMW. If Ford narrows to just one brand, the company gives up on high-end autos. This might be the best answer but it certainly isn’t a popular answer for employees, the CEO or the board.

Once Ford decides it has to play in high-end autos, the Lincoln decision is easy. Launching a new brand is incredibly expensive. Why launch a new brand when you already have a brand with a long history and broad awareness?

Rebuilding Lincoln will not be easy. Step one is getting people to notice the brand again. As Jim Farley, head of Ford marketing noted, “The most important thing is for people to be aware that there is a transition going on. We have to shake them up.”

Step two is giving people a reason to buy a Lincoln. What is this brand, anyway? Why would I buy it? It isn’t enough to have a good, jazzy car. The brand has to stand for something specific.

Ford has about two years to get Lincoln moving in the right direction. Let’s hope they have a clear positioning to build on.


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