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November 11, 2006
The Power of Channel Differentiation (And The Shifting of Power!)
If you have ever been in a Whole Foods Market, you know how hard the company has worked to create not just a unique experience, but a literal culture among its shoppers. The company's motto -- Whole Foods, Whole People, Whole Planet -- reflects a philosophy that goes beyond the selling of products to customers. They get above average prices for products from customers who are less likely to "sticker surf" than to simply "try something new."
The company has sheparded numerous organic brands to success by introducing them to the legions of Whole Foods loyalists. Simply by carrying a brand, Whole Foods delivers an implicit endorsement. Which is why a story in this week's Advertising Age about Pepsi's new Fuelosophy product -- a high-energy protein-rich beverage -- is so interesting. Aside from the fact that Fuelosophy doesn't seem very "natural" or "organic" (albeit all the ingredients are naturally occuring products), Pepsi was interested in introducing the product into the healthy lifestyle community without spending lots on advertising and marketing. Enter Whole Foods.
Whole Foods Market has such reach in the organic space that by sneaking onto the shelves at Whole Foods, Pepsi can see how the product performs in the marketplace without spending heavily on product advertising. Pepsi has worked hard to conceal its identity in the Fuelosophy line... there is no company mention on the packaging, the Web or any official company literature. The story is obviously big in the ad community where it is a case-study in new product launch strategies and brand management.
I find it equally educational from a channel differentiation perspective. It shows how a company in the mundane "retail grocery" segment, can identify and excel in a niche and then, in effect, become more powerful than the brands that want to sell through it. Compare that to Stop & Shop or Kroger's or other grocers. The brands doing the selling are more dominant than the retailer in the minds of most consumers. However, Whole Foods has developed its own local brand to the extent that it now is the powerful icon in the consumer's mind. They are not alone. For example, throughout Texas and sections of Mexico, H-E-B has learned that by obsessive attention to its customers, and careful management of its product offerings to reflect a Hispanic bias, it can differentiate from other grocers and dominate its markets. Again, H-E-B customers are part of the culture of the chain.
In my company, we often talk to dealers and emphasize the importance of knowing their strengths and building their brands. This story is a terrific lesson in why that is important.
Posted by jcioban at November 11, 2006 3:58 PM
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Comments
This is a perfect article illustrating why it is so disappointing that Whool Foods even agreed to carry Fuelosophy. People trust Whole Foods and their standards, this product puts that trust at risk and threatens to damage the Whole Foods brand as well as thebrands of the other truly natural and healthy products in the Whole Foods stores.
Posted by: JB at November 14, 2006 1:54 PM
