Selecting the right market for the product
As a test case, we will focus on the food industry, with the new product we want to market being yogurt. The ideal arenas or ‘playground’ for the new yogurt to be marketed is the institutional market. Our approach to the institutional market will focus on sales and distribution to customers such as institutional kitchens, catering and banquet halls, public and restaurant services, etc.
The selection of these arenas is primarily attributed to the vast market size that comprises customers requiring huge and regular bulk orders over time since huge long-term agreements characterize these entities. The yogurt will be used as one of the essential raw ingredients in the restaurant services to prepare finished products such as gourmet dishes and desserts. It will be sold as a packaged product in and of itself, for example, in institutional kitchens and public sector offices.
Another arena that we believe is attractive for the new product is distribution and marketing. This arena is characterized by cooperation with major food corporations that receive the Company’s merchandise and then market it to stores. For the Company, the customer is a distribution corporation, so that if the customer expresses a greater need for the product, the quantities of the order will increase accordingly. In this case, the food corporation’s supply’s crux is made once the product is finished and packaged ready to eat. The relationship with the corporation is based on a long-term contract that guarantees significant bulk orders.
Selecting the right vehicles for the product:
These platforms are processes that we must advance over the next three years to maximize the potential of the Company and the product (specified in the table):
Financing – 3 major fundraisings over the next three years: 1. Crowdfunding, capital raising round A, and offering on the stock market for securities.
Investments and acquisitions – if the Company employs laboratory services from an external source, which imposes on cash flow, once the Company has been established, a research laboratory that specializes in the area should be acquired. Once the volume of sales justifies it, a small independent factory should be built to reduce the payment to outside sources.
R&D – the Company must maintain its edge in a competitive market and continuously promote research and development. Cooperation agreements – primarily strive to reach an agreement with a distributor for the retail market and then maximize efforts in signing long-term agreements with a distributor for the institutional market.
How can differentiation be created between the new product and similar products?
The strategy selected by the Company will create differentiation between it and its competition in three areas. First, as a substitute to ‘traditional’ non-dairy products (such as margarine, desserts, etc.), the Company will differentiate itself in flavor. The starting point is that traditional non-dairy products are a ‘kosher imitation’ of dairy products (such as butter and dairy desserts) and are generally inferior in flavor compared to the dairy original. In contrast, the yogurt we want to promote is not a compromise compared to the ‘real thing’ but a product that is, first and foremost, delicious and rich with a quality texture. The second area where our yogurt will be differentiated from other yogurts is health.
In contrast with traditional non-dairy products that frequently leave an aftertaste and are loaded with sugar and fat, the health aspects of the yogurt are no less important than taste. Our yogurt in this test case is low sugar and low fat, and high in protein from a quality source.
The third area in which the yogurt will differentiate itself from similar products is sustainability. In contrast with most dairy product substitutes that are made of almonds (a crop that harms the environment) and soy (a genetically engineered and allergenic crop), the raw ingredients in the yogurt are chickpeas, which is natural, not genetically modified, non-allergenic, and non-harmful to the environment (a crop that uses little water).
The Staging Stage – Creating a Market Survey
The Company must first conduct an in-depth market survey among its target customers to understand the exact market size to create a good strategy. This information will be useful in beginning negotiations on introducing the yogurt product into the distribution company. At the same time, the Company must begin negotiations with a dairy for market penetration. Once an agreement has been signed with one of the companies, the Company must begin negotiations with the institutional market for customers such as institutional kitchens, hotel chains, catering, banquet halls, etc. Ultimately, campaigns must be launched to generate buzz around the product so that by the time the product is launched in the market, everyone will know it. Once the Company breaks into the local market and gains time and experience, it must consider ways to market its product to global markets.
The Sales Stage – Creating a Competitive Advantage
Producing a delicious, highly nutritious product without harming the environment is a competitive advantage. The yogurt further overcomes the problem of kashrut that might arise between milk and meat, providing a solution to kosher restaurants, public offices, and tens of thousands of soldiers who consume kosher food in the IDF. To make a competitive advantage sustainable, the Company protects itself by patenting and recruiting the finest food engineers in the market. In our opinion, this is insufficient. The competition can overcome this advantage at a certain stage, hence the need to engage in long-term exclusivity agreements with the institutional market and the distribution company.
As we noted, these markets are characterized by long-term regular suppliers. Therefore, positioning itself with these customers as their leading supplier will ultimately constitute a competitive advantage. When this advantage exists, income grows and becomes stable, reinforcing the Company’s abilities and facilitating the development of other sustainable products while tightening the relationship with significant customers and even penetrating new markets.
Potential disadvantages and challenges:
Agreements with a party in distribution and sales – the agreement may not be profitable for the Company, potential theft of knowledge of product formulas and bypass of the Company to the manufacturer, and its removal from the field. Risk of loss of Company visibility among consumers if the chain appears to be a manufacture, risk of loss of continuity of activity upon the expiration of the manufacturing or distribution contracts. Risk of too rapid of growth and large sales of products in the local market, modification of products and quantities on the shelf to product consumption – incorrect construction of manufacturing, supply, service, the possibility of responding to quality and recall issues.
Excessively rapid growth manifested in incorrect handling of problems resulting in contractual arrangements and contracts, which will shut down activity. Reliance on a single product – if consumers do not like the taste, the price will not be suitable for the public. Consumers will be wary of purchasing the product, unclear the seasonality of purchases. In all of these circumstances, there may be no economic feasibility.
To cope with these challenges, we recommend careful selection of partners and investment in agreements with them, a trial sale at select targets that begin with a concentration of goals that include the yogurt’s primary target audience. Conduction of market surveys to study consumer preferences in flavor, price, and consumer habits, including consumption of products based on a particular ingredient that may be a deterrent.
Continued development for other product formulas with various ingredients, and other products, continued testing of raw material with various manufacturers and initiating long-term agreements with them, review of distribution and sales figures for alternates to entities not interested in initiating or continuing ties. Possible expansion to other markets for other sources of sales – diversity of sales policy, possible expansion of operations, and growth.
The strategy we used in this test case is based on the Business Model Canvas:
First, our customer segments are vegans, environmentalists, and people who keep kosher. We are also appealing to the institution sector: institutional kitchens, catering and banquet halls, public and private restaurant services. The proposed value to our customers: vegans – no animal products, environmentalists – limited use of resources, people who keep kosher – non-dairy yogurt. It should be said that the institutional market includes all listed values relevant to the three types of customers.
Marketing and distribution channels multiple activities of promotion:
1. Cooperation with large distributors in the food industry.
2. Sales promotions in the large food chains.
3. Sample persons in hotels
4. Creative campaigns with a high cost-benefit ratio to increase awareness of the target audience and to increase sales volume.
For example, the Milkman campaign – before the official launch of the product, dozens of sample persons dressed like milkmen will distribute in major cities thousands of units of plant-based yogurt that has ‘search Google for the Milkman” and a QR code that will lead to a landing page that will feature an image clip of the Company headed by the Tagline “Is the Milkman still bringing you yogurt every morning? That’s outdated – plant-based yogurt is the future!” In addition, the page will refer to the early purchase campaign through crowdfunding by way of the head start platform.
5. The presenter who will accompany the Company in the first year of its growth will be a celebrity identified or admired by the target audience.
Customer relations – we aim to be an alternative that simultaneously responds to several target audiences’ needs, solves their problems, and speaks to each other to customize the solution.
1. Ties with the religious sector – to become a leading brand in the kosher culinary scene, a leader in flavor and texture in every entity that serves the general public, and is committed to providing kosher food.
2. Ties with the vegan sector – vegans currently have no plant-based alternative to yogurt, and in the transition to veganism, tens of thousands of people are forced to ‘give up’ eating yogurt every year. The Company helps vegans to find an alternative that does not harm animals.
3. Ties with environmentalists – the global dairy market is responsible for 2 billion tons of greenhouse gas emissions equivalent to CO2, or 4% of all greenhouse gases emitted due to human activity – a significant percentage for one industry.
According to the UN report (April 2010), chickpeas from which the yogurt is produced consume far less water than the other alternatives to cow milk such as almonds, oatmeal, and rice. Company revenue will be generated through the business model of sales to retailers. A direct relationship with retailers or through distribution networks of companies with whom agreements will be closed. At the same time, we will move directly with the institutional sector – bulk sales to large organizations such as institutional kitchens, hotel chains, catering, banquet halls, etc.
1. A unique format that allows for mass production of quality, nutritious, smooth, and rich yogurt.
2. The knowledge accumulated over the years in the development process.
3. Experienced management backbone.
4. The Company’s intellectual property – including brand, trademark, and protocol of trial results.
5. Long-term cooperation agreement with the protein supplier to produce protein from chickpeas.
Cost structure – we expect that the cost structure will appear as follows:
So, Xinergy Global anticipates several directions of activity over the next three years:
- Finalization of deals with the Company. It should be noted that if cooperation with Osem fails to materialize, the Company should attempt to penetrate the market through Strauss or Tnuva with a protein-based product that the Company does not yet sell in yogurt.
- The Company must forge agreements with the institutional market.
- The Company must launch a strong campaign to trigger consumer awareness of the product.