This post was sparked by some very different approaches to stimulating growth being taken by the Quorn brand of plant based meat alternative, the pioneering Tesla electric powered car brand as its currently known (given Elon Musk's propensity for lane and strategy changes) and the iconic Mini car brand for its electric car offering. On the face of it both consumer sentiment and more importantly legislation are positively aligned and the future for both categories and successful brands within them should be relatively assured. So why the quests to increase the growth rates of these three companies, and why now?
We are living in business times where there is increasing tension between the historic quest for never ending growth and the murmuring of voices suggesting the complete opposite ie the need for society to embrace 'degrowth'. Add to this the wake up call of global economic, political and pandemic fuelled turbulence , putting both profitability and growth into sharper focus as the reality of rising costs and interest rates provoke a spate of job culls ,notably even in the recently untouchable tech sector. In this post the growth issues manifest themselves in markets which superficially should be perfectly in tune with the zeitgeist, namely plant based foods and electric powered cars.
My thoughts on the topic are unencumbered by the pursuit of personal gain*,insider or indeed specific category knowledge or data , and such as they are they rely instead on the accumulated learnings and pratfalls of more than 30 years of marketing packaged food brands internationally to consumers ...please as ever feel free to enlighten and correct me on anything I have omitted or simply got wrong. I won't be going into areas like plant based dairy alternatives because the Quorn brand doesn't have a presence there at this time.
The three brands being discussed here are commonly held to have strong franchises and occupy strong positions in their relative spaces and yet are adopting very different strategies to tackle the slowdown in market growth rates the reasons for which are themselves worth looking at.
The plant based food movement is not new and is well beyond being written off as simply a fad in developed western markets, even if the numbers of fully vegetarian or vegan consumers is still believed to be in single figure percentages here in the UK(source:statista). This is in itself not surprising , as changes to food habits can take a generation or more to take root , take for example the acceptance curve of yogurt or fromage frais in the UK ,both of which I worked on in the dim distant early 80's when they were still in the early stages of mass market acceptance. The pragmatic and well messaged acceptance of plant based products as part of mixed diets is accompanied by an understanding of the benefits of eg reducing meat consumption, and whilst the legal challenges to eg denomination in labeling are a predictable attempt by vested interests to slow the pace of progress, the fact remains that a number of major legacy food multinationals of significant scale such as Nestlé and Unilever and others from within the meat industry itself( eg JBS,Cargill Tyson foods) have invested alongside the now famous startups like Impossible foods; similarly in the QSR fast food sector plant based alternatives have been/are available across the major burger and chicken chains.
Given the presence of favorable consumer sentiment and conditions for plant based foods what is the growth issue The Quorn brand is tackling here and why has it adopted its published new strategy?
The owners of the Quorn brand have decided to pursue in effect an open books food ingredients based strategy to boost the speed of adoption of their product ,by getting more companies and presumably more consumers to use their proprietary technology ie product and expensive manufacturing set up in a wider variety of food products faster than they could undertake on their own. This accelerates the speed of adoption, improves costly plant utilisation ,lessens the investment in both plant or r&d ,and indeed marketing investments the brand owners need to make to kickstart faster macro market growth. They're effectively betting the house on the strength of their own brand to protect their market share and profitability in their core product markets.
This is both a high risk and a low risk strategy because it presupposes for me at least the most watertight of contracts around market definitions and no go areas, the continued growth of Quorn , and legally defendable patent technology around this cheeky loveable mycoprotein which forms the basis of this foodstuff. Given the origins of the product as an unexpected love child of a chemical company and a food company ( source: Wikipedia : ICI and RHM )and the assumed difficulties in patenting foodstuffs I would be class this as an assumption not entirely without risk..
Whilst this strategy has the allure of a real game changer as it grows both category and brand and is potentially at its best like an "Intel inside" but on steroids idea, part of me worries it is either the result of an industrially driven rather than a brand driven strategy ;or more worryingly a consequence of the increasing cost of the financing of the the acquisition debt, this business having changed hands several times in recent years , most recently in 2015 to Philippines based Monde Nissin foods. Arguably a larger multi category player like Nestlé or Unilever would have had the necessary technological and brand /market footprint to accomplish this in house with less risk.
The electric car market has in Europe been growing from a low base with all major established brands plus start up and newer Chinese brands active. This market has recently been dealt a winning hand by the EU, which is in the process of passing legislation outlawing the sale of any purely petrol or diesel cars within the coming generation , by 2035 to be precise. Controversially, the ban I believe ? also includes the sale of new hybrid vehicles which combine electric with diesel or petrol engines which removes the need for charging post infrastructure. The point is that growth is structurally built in by new legislation so surely growth prospects for electric vehicles are almost unlimited as eg older cars come to the end of their useful life? Its just a matter of taking a medium term view and building (profitable ) market share. It's worth reminding ourselves that Wall Street values Tesla above all other car companies listed there, although it ships a fraction of units they currently do.
The growth issues in electric powered cars for now have been primarily structural plus a function of cost: provision of charging points is deemed inadequate by drivers without careful route planning; battery range and life is also a factor ,especially when there aren't enough charging stations; supply chain issues about the provision of and location of battery production are also adding complexity and frustration; the UK for example does not have enough local battery manufacturing capacity to support the requirements of the current ,reduced manufacturing base. Lastly, the purchase cost to drivers of electric cars has been more expensive than comparable non electric alternatives ,whilst more recently the cost of electricity has negated some of the presumed fuel savings; finally ,the provision of government subsidies and incentives to switch to electric has been patchy and in the UK was withdrawn in June 2022.
Given the presence of favorable conditions for electric vehicles what is the growth issue the Tesla and Mini brands are addressing here and why have they chosen the route they have announced ?
Looking at the electric vehicle market I am uneasy about issues the rather crude but well known tactic of list price based price cuts adopted by the Tesla brand. Having achieved miracles by producing from scratch a profitable ,attractive and high performing car using a new supply chain and innovative routes to market such as showrooms in shopping malls , the price drops which are fluid and have been as much as from
20% up to 30%(source: Reuters/ the Guardian ), causing a not inconsiderable immediate depreciation hit and negative brand sentiment for those who have already bought in to this new brand. The owners of the brand clearly hope to spike demand amongst the next, bigger tranche of potential customers , having presumably already garnered many of the early adopters. Also it is possible that the owners of the brand have overexposed themselves to the China market, which brings its own particular dynamics , both as regards unused capacity in its plant there as well as aggressively priced local competition, or the possibility of some form of state intervention. Either way this seems to me to be more of a tactical move which carries risk to the brand reputation and also paradoxically to the scheme itself ( delaying purchase due to uncertainty on future price cuts ?)rather than part of a longer term strategy which might for instance have looked at eg an even more basic , smaller entry level model with a naturally lower price point to thereby improve category entry points through range.
I'm a big fan of how the Mini brand has been reinvented and kept fresh since being acquired by BMW . The electric Mini was not early to market for sure , but they have sought to boost market share growth by addressing a key pain point in the ownership experience , namely home charging. They are currently promoting a free home charging kit as part of the purchase deal. It is a simple mechanic , unlikely to seriously dent profitability, completely unlikely to damage the brand reputation at all and is for me a great example of what @paulmark bailey has called 'commercial creativity' .
As these three brands have only recently embarked on commercializing these ideas we'll have to see how they work out in the real world.
Thanks for reading this far. Start a conversation on Twitter about it ?
Footnotes:
* I'd be tickled to chat and possibly advise on brand marketing and business matters, but I am retired so I'd have to be really excited to do anything other than chat or talk.
- Find me on Twitter for now : @runsforcoffee1
-I've been mulling over brand marketing issues for 8 years or so on:
https://fmcgbrandbuilder.blogspot.com
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