Food Vision USA 2015: the highlights...
Collaborative innovation can cut costs and jumpstart launches, 7-Eleven exec says
“A lot of time and effort goes into any product innovation, along with a lot of money and resources,” which means the stakes are high for new product development and launches across consumer goods categories, Tom Burkemper, senior director of merchandising at 7-Eleven told attendees at FoodVision USA Oct. 28 in Chicago.
But, he added, the risk often is worth it considering successful innovation drives significantly higher category sales – to the tune of 2.5 times faster in categories with innovation than without at 7-Eleven.
One way to reduce the risk and increase the benefit of innovation is for retailers and manufacturers to collaborate, which if done properly can save companies billions of dollars, Burkemper said.
He pointed to a recent study from Accenture that found collaborative innovation can save partners $15 billion in working capital, $125 billion in operating expenses, $90 billion in manufacturing and distribution and $20 billion in marketing and sales.
“That is close to $250 billion out there that is wasted simply because people are not collaboratively innovating together,” he said.
And 7-Eleven for one, will not turn its back on that type of money, which is one reason why it aggressively pursues collaborative food and beverage innovation opportunities. But it also has a refined process for evaluating potential partnerships and launches, Burkemper said.
Evaluating potential partnerships
The process for evaluating potential partners revolves around three core elements, Burkemper said.
The first is strategic alignment. Burkemper explains: “I want to make sure that you believe in the business and that its strategy aligns with what is important to both of us. I can always provide a win for me, but if I can’t make it work for you, then you are not going to continue to invest in my business.”
The second element is clarity regarding how the partners will define and measure mutual success, he said. “Your leadership is going to challenge you about what results you are producing and that you are getting the results you need. And I need to make sure that at the end of the day when you look at all the metrics you say, ‘Yeah, this is a good deal,’” so that you continue to work with 7-Eleven, he explained.
The third element is organized prioritization of time, resources and activities to deliver mutual success.
High standards for innovation
7-Eleven also holds vendor partners to high innovation standards to ensure that at the end of the 12-18 month development process the product is something consumers will want, Burkemper said.
“Some companies take a little offense to my questions about the innovation standards, but I am challenging them to make sure we are bringing incremental quality and a point of differentiation” that will drive through-put, he said.
The questions include to what extent the product fits 7-Eleven’s niche as a convenient store, whether the product will be exclusive to 7-Eleven, what kind of marketing support the retailer can expect and whether the product meets consumer macro trends, such as healthier, on-the-go products.
Burkemper pointed to 7-Eleven’s partnership with Red Bull to create the 2014 Summer Edition of the energy drink as an example of successful collaborative innovation that met the retailer’s standards and benefited the manufacturer and consumer.
7-Eleven and Red Bull worked together for 12 months to create the beverage and a holistic advertising campaign that would raise brand awareness and create excitement to drive consumers to the retailer.
The careful planning paid off with the limited edition selling more than $10 million in six weeks and becoming the No. 2 item in sales in the energy category, Burkemper said.
7-Eleven also has similar ongoing relationships with other companies, such as Gatorade, which allows the sports drink manufacturer to test new flavors and gives the c-store an exclusive offering.
Partners beyond CPGs
7-Eleven also is exploring partnerships before CPG firms that it thinks will help all players in its store.
These include partnering with competitor Amazon to install pick-up lockers in some 7-Elevens. The idea is that they will draw people who might not otherwise visit 7-Eleven but when they come to pick up a package they also buy a snack or beverage, Burkemper explained.
In addition, the retailer is pairing with Postmates to facilitate delivery of orders from 7-Eleven, which Burkemper says on average are four or five times larger than the basket size of shoppers who visit the store in person.
Ultimately, all these partnerships demonstrate how working together to protect what is most important benefits all players, Burkemper concluded.
