$50B Market Opportunity Identified for Innovation Strategy Business Model
Convenient meals for lunch and dinner at home present a $50 billion market opportunity in the US. Despite having strong brand equities and capabilities, a market structure analysis showed that one of the largest branded food competitors in the space was underdeveloped in the complete meal frozen subsegment, which represented around 35% of the total market. The food company’s innovation strategy business model had clear consumer target segments, along with a product line focused on weight management.
Need for an Innovation Strategy Business Model
As the business model was incomplete, the next step was to assess potential external partners to create a stronger innovation strategy business model for frozen entrée manufacturing and distribution. The business model demanded scale, as the company did not pursue innovation strategy initiatives that were less than $100 million.
First Cut Assessment of Frozen Food Manufacturers as Potential Business Model Partners
Over 1,000 frozen food manufacturers were initially identified. Out of this large set, 24 delivered 80% of all supermarket dollar volume. These were prioritized for the first cut assessment. Four criteria were used to examine the candidates:
- Healthy frozen foods business, with positive/neutral sales and volume trends (stable partner that is committed to the business)
- National, not regional (for scale reasons)
- Not DSD (direct store delivery)
- Will benefit from the partnership in that they can individually or jointly (with us) deliver a minimum of 500 million pounds in frozen category volume but not more than 800 million pounds
The four largest players were eliminated because of the last criteria. Since they were so large, they would lack benefit from the partnership. Another seven fell by the wayside as their business was not healthy, and they lacked critical mass. Sorting through the remaining potential partners, six emerged that met the remaining criteria.
Second and Third Stage Review for High Potential Partners
Working with the client’s innovation strategy team leads, we moved into the second stage of the assessment for the six partner candidates. Financial health of the overall organization was the next criteria, considered non-negotiable. This eliminated one of the companies. The third stage included four additional criteria:
- Commitment to frozen business
- Experience with outside partners
- Relative complexity of execution
- No conflict with the new product line, which was in the healthy, weight management space
These additional criteria resulted in three candidates with higher potential as partners and two with lower potential.
Who Did They Choose?
Our food manufacturing client moved forward in conversations with the top three candidates, and ended up entering the market with one. This innovation strategy business model allowed faster market entry and success.
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