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Innovation and Digital Food Landscape, Part One: Lessons of Dinosaur Entertainment Industries and Digital Food Start-ups


tablet placesettingYes, innovation is important. Of course it is. 

But right now food, retail and food service industries are facing a very specific set of innovation challenges around the flurry of new start-ups in the digital food creation, delivery and consumption space. 

Digital-based food start-ups (currently the media darlings of the investment community) generated more than $200 million in venture capital investments in Q1 of 2014 alone.[1] While that kind of support is surely a source of great anxiety among large food companies and retailers, things only get worse when you try to make sense of all of these new upstarts. They all have playful little names, no two seem alike, and just when you think you have one of the propositions figured out, someone will respond, “well, yes...and no…” This is a carbon copy of the great Internet gold rush of the late 1990s.   

But remain calm. Don’t allow yourself to become distracted by all of the Twitter noise, the social media, the fanfare and so forth. Listen to the voice that will guide you through this chaos: the voice of the consumer. 

That may sound obvious, but it’s pretty clear that leaders in other consumer culture industries such as music, TV and film haven’t listened and in some cases are facing near extinction. 

Whatever trends may be swirling around in the digital food arena, don’t forget that food itself is always cultural. How we eat, when we eat, whom we eat with, those habits and practices are forever embedded in American cultural life. The same is true for how we shop, what we buy and how we cook. And of course our culture industries, like food television, websites and recipe collections, also influence how we cook and eat. 

For digital food companies to succeed, they must first understand this broader food culture where they hope to someday play and reside. They must ensure that their new propositions actually make sense to consumers from a cultural perspective and not from the viewpoint of venture capital fund managers. 

At the same time, currently successful food companies and retailers, those that have evolved in lockstep with our eating culture, need to understand how and where digital models might successfully compete. 

Collectively, it’s likely true that we all understand that none of this is as easy as it may sound. Success moving forward is going to involve a lot of nuance by all parties involved. Digital food start-ups can’t expect new models to work just because they’re new. And traditional food companies and retailers won’t fare well by pursuing traditional strategies and offering a few “me too” solutions designed to emulate rather than innovate. 

Moving beyond this abstract discussion, we think it’s useful to consider how some other cultural industries handled evolving cultural trends and consumer behaviors. If we are concerned with how consumers eat, let’s take a look at how they listen and watch. 

Eating, Listening & Watching… 

Imagine if the music business had been listening to their customers and following trends. 

It was clear 15 years ago that people wanted a way to conveniently share their music with others. So why didn’t the music business invest in innovating streaming services early on as the technologies emerged? Why did they wait for consumer-driven start-ups like Spotify to do an end-around their business model and leave them in the dust? 

Ditto for Hollywood. 

Blockbuster refused to recognize that quirky little company called Netflix offering movie rentals by mail. Where’s Blockbuster today? Extinct. 

Currently Amazon and Netflix, which are now producing their own high-quality entertainment aimed at television viewers, are taking the bold step of allowing their customers immediate access to an entire season of shows. 

Netflix knows consumer culture. Netflix understands how we are living and watching. Why is network television so reluctant to let their viewers watch an entire season of The Good Wife in one sitting? 

Digital Food Lay of the Land 

Our Digital Food Life 2014 report explores the landscape of how digital food companies are fundamentally disrupting and circumventing the traditional paradigm by understanding how consumers are actually experiencing the digital food terrain. The image below depicts a select group of the most relevant start-ups, companies and services in digital food and delivery. 

The categories align with how consumers think about, talk about and use the assorted retailers and services. 

digital food landscape

Which start-ups represent a new way of doing things that may map to your customers’ desires and needs better than your current business models? 

Grocery home delivery currently seems like a sound business proposition. But what happens if your customers begin to view home delivery as something akin to broadcast television? It’s solid. It’s there when you need it. But it’s not everything. Perhaps a subscription service offering the opportunity to craft unique, interesting meals might be much more relevant to the way consumers are living and eating. Maybe traditional food companies and retailers should be more concerned with snack and meal delivery services than home grocery delivery.  

Subscription meal services may not be commanding much, if any, market share. Then again, Netflix wasn’t either at the outset. If there is one lesson we can learn from the examples of the music and television business, it’s that the old-school heavyweights haven’t been faring too well lately. 

Of the companies and services depicted in the chart, it’s likely that only five or six will exist in three years, though there will certainly be others that are not even on our radar at the moment. But to try to guess which ones will win would be to miss the point. 

These are examples of new ways of doing, ways that may be better aligned with consumer behaviors, desires and the larger cultural trends affecting how we shop, how we cook and how we eat. 

The lesson here is don’t follow the lead of the entertainment industry. Don’t believe your traditional business models operating through the grocery home delivery channel will be enough. 

Listen to your consumers. They will guide you through this era of chaos and transformation. Yes, things seem messy, but what a glorious mess this is. 

Next week, part two: What can the fate of those meal-assembly kitchens teach us about digital home meal assembly?


[1] CB Insights, April 2014: The Next GrubHub? VC Appetite for Online and Mobile Food & Grocery Delivery Startups Grows, Hits 5-Year High

Categories

Consumer Package Goods Culture Retail/Shopper Insights Technology/Social Media Foodservice/Restaurant


FOOD SHOPPING IN AMERICA 2017

As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.

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