Many of the world’s leading brands, including Apple, Amazon, Microsoft, Verizon, Toyota and Coco-Cola are dominantly Business to Consumer (B2C) focused. And in the US retail landscape, despite some growth of private label, packaged goods brands command the majority of consumer products purchased. Brands control 82.5% of dollar share vs. private label’s 17.5% in 2014.
In B2B, major consumer brands sometimes have success in leveraging their brand awareness for a business market (see my article “Retail Juggernaut Amazon Earns Much of its Profit in the Cloud”). Foodservice is another area where B2C brand success can translate to B2B market strategies.
B2B and B2C Branding Jointly in Foodservice
Heinz brings its market-leading consumer brand equity to the foodservice channel, for example, in independent restaurants where the brand and its distinctive bottle are displayed on tabletops. In this example, the B2B customer chooses to offer Heinz-branded products, and the Heinz brand is visible to consumers. Tying together both the B2B operator and the B2C consumer, the Heinz brand recently encouraged consumers to upload selfies at restaurants with the Heinz ketchup bottle in order to benefit “Stop Hunger Now.”
A different B2C-visible example in foodservice is found in tabletop sweeteners such as Splenda, with its yellow package or Equal, with its blue package. In most restaurants, consumers are given choices of these and other sweeteners, along with sugar. Foodservice operators provide this choice to consumers based on their preferences instead of going with one option, as in the ketchup category.
Hot sauce provides another condiment example where foodservice operators are increasingly offering more choices to cater to consumer preferences. Bloomberg recently reported the top five retail brands of hot sauce as Tabasco, Frank’s Red Hot, Sriracha, Louisiana “Original” and Texas Pete. In interviews with college foodservice operators, we commonly heard of hot sauce and salsa bars with many brands offered to allow consumers choice, and even discovery.
In addition to condiments, you may have noticed Boar’s Head branding, which encourages consumers to look for their premium meat products in deli sandwiches bought in a variety of sandwich shops.
Consider the Role of the Category and Segment of the Foodservice Market
These categories have in common that the end consumer can visibly see and taste the brand as an important part of the end product. What about a food brand that is used to create the final product, but isn’t visible to the consumer, and is only visible to the operator?
The B2B operator’s needs will vary with their own brand strategy, their menu, the price points they command, and many other factors. The potential value a brand can bring will vary with the category. For instance, we see that value is high for a condiment. Value is also high for a signature ingredient, but lower for a commodity ingredient that lacks a strong taste/texture impact.
Foodservice market segments can also impact the value of name-brands. Within foodservice and retail, there is a wide range of menu adoption for new products. In 2016, Datassentials highlighted fine dining, gastro pubs and fast casual operators as early adopters for new products and menu items. In contrast, K-12 schools, family restaurants and hospitals tended to be slower to adopt new menu items.
One hypothesis is that the familiar, mass-preferred brand, such as Heinz, may carry more value in more ‘traditional’ market segments that are slower to adopt new trends. Menu adoption suggests that the channel/market segment carries an inherent promise either of familiarity or of novelty. So, an emerging brand of hot sauce may find faster adoption in the earlier stage channels.
Understanding Branding Approaches
In foodservice, there are at least three major approaches possible in branding:
- Manufacturer’s brand (e.g., Heinz ketchup)
- Foodservice operator brand (e.g., McDonald’s ketchup)
- Foodservice distributor brand (e.g., Sysco ketchup).
Often, large restaurant chain operators will focus on their own brand (approach #2), which means independents and non-commercial operators are more relevant for either distributor or manufacturer brand.
Compounding this picture, it can be hard to get a read on the size, trend and share of these three groups. Unlike CPG, with IRI and Nielsen data readily available, foodservice data has been more limited, with accuracy varying by market segment. While NPD does provide broadline line distributor data through its SupplyTrack service, the coverage will vary from one segment to the next depending on how much flows through the broadline distributor. The portion of the market controlled by manufacturer brand, operator brand and distributor brand will vary significantly from one product category to the next. Pricing will vary considerably by market segment, as will product mix used.
Companies we know who operate in foodservice weigh these and other considerations when deciding on their approach to branding and broader business strategy. As this survey of the topic shows, success in branded B2B foodservice requires careful (and often difficult) research and analysis to maximize the value operators can provide to their customers.