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HSC was engaged by the a large, European-based food company to assess the dietary supplement market for a possible entry. This company has operations around the globe and within each country there exists a signifcant degree of autonomy. They typically go to market in many different fashions – either directly by creating their own brand or through partnerships. The partnerships have surfaced in a variety of ways focused around: co-branding, distribution, product development, licensing, joint ventures, co-packing, or other strategic licensing. The company markets products in many forms and fill the range of normal foods and beverages. The critcal issue that required this company to go outside of their organization, was in determing the viability of strategically to enter the dietary supplement market.

At the time, the global food market was over $US1.5 trillion, while the global dietary supplement market was slightly over $US50 billion. The U.S. represented about 1/3 of those figures and was experiencing a growth rate about twice as high as the overall food market. The competitoin landscape was highly fragemented, and only a few storng brands existed. Some consolidation occurred, but only at the top of the market. Typical investments in branding is small relative to other industries, and consequently individual power is low.

PROJECT PROCESS AND DELIVERABLES

From looking at the stated objectives and questions from the client, along with conducting specific sessions to probe more specifically what were their needs, it was determined that they needed three key areas of work: (1) understanding the consumer, (2) highlighting the how competition operates, and (3) identifying opportunities and their fit with our clients objectives.

Our effort to educate our client on the dietary consumer required screening several forms of syndicated data and supplementing the effort with primary research amongst key branded dietary supplement players to gain a perspective on their outlook around the consumer. The purpose of this effort was to begin to define what different consumers look like, how their behavior varies, and which ones are attractive to gain as a customer. The net result of this effort was that we delivered a framework to assess and identify target consumers and then to build an economic assessment of the potentail represented by likely and desirable customers.

By quantifying the customer potential, we were then ready to look at competition. The key here was to segment the competitors against offering, distribution channel, positioning, and relative success level. This allowed us to look at the drivers behind the market and to begin to highlight the traits common in successful companies, and to identify the problems areas to consider in the market. We looked at the top players and compiled a set of enviromental conditions that led to assembling a set of market dynamics that were both attractive and cause for concern. This output served as the foundation to determine if there existed room for a new entrant, and under what conditions.

The third element of the project focused on placing our findings around the consumer and competition against the capabilities and objectives of our client to see if the market offered any opportunity. This effort looked at two key questions: (1) was the market attractive, and (2) how could they best enter? Quite simply, determining whether a market is attractive is a relative assessment. In order to answer the question, it requires knowing the other options available to our client. For our purposes, we looked at the market and tried to understand whether our client could earn superior profitability from this market, relative to their existing businesses. Implicit in this analysis was the fact that we needed to look at answers for specific distribution channels. No one anwer existed, as each channel required a different set of criteria in its assessment. Once we looked at the attractiveness of the market, we then looked the options avaialbe and viable for getting into the market. They generally fell into four simple options: (1) build a new brand, (2) reposition an existing brand, (3) create a partnership for a brand, and (4) buy an existing brand. Each option was then evaluated for its strength and opportunity areas, and HSC used this input to formulate its perspective on the best option, based on the previous work on this project and our appraisal of the fit with the clients objectives.

RECOMMENDATION AND CLIENT EFFORTS

Our client was the head of their global practice, and we presented our findings and recommendations to their advisory board.

When assessing our best plan for what our client should do, HSC looked hard at the current positioning of the clients existing brands and their connection with the consumer. This allowed us to gauge how a dietary supplement business would align with their existing operations. The key was not necessarily to ensure an alignment, but rather to determine if it would be something that bonded to their existing brand power, or brought new consumers to the brand. Our net takeway from this analysis was the recognition that our client was not in the food business, but rather they were in the nutrition industry. Therefore, each consumer needs to get a set amount of nutrients everyday, and most people need dietary supplements to meet their daily requirements. This is a big driver in detailing the opportunity for our client: they have opportunity in providing more share of nutrients for their consumers by entering the dietary supplement market.

The competition is tough, and it’s critical that our client finds a way to compete with an advantage. It requires them to bring something special to the market. HSC identiied several key ways the our client could exist in the market in a way that offered uniqueness and sustainability. The final step was to look at how best to get into a business setting that met these conditions.

Our recommendation was that our client should enter the market, and do so by aligning with a major partner to produce products that focus on powders/meal replacements, as an incremental step to expanding their presence from food/beverage forms. Over time the strategy was to be expanded to other forms, including pills, and to expand geographically. As they expanded through other markets, it was recommended that they assess each market for both partnerships, and acquisitions.

The two entry option that were clearly not recommended was to either build a brand from scatch, or reposition an existing brand. Both were viewed as higher risk and required more precision, which would have diluted efforts in other parts of their business. The key is grow this business and not demand resources from other businesses.

Our client accepted many of our recommendations, and they have entered the market in a very controlled fashion. They have formed three partnerships in select European markets, and are continuing to evaluate the proper way to expand their efforts to other regions. A key constraint that has surfaced since the conclusion of the project, is new efforts to drive reveune from existing businesses, and this has required some key managers to focus away from this effort.