Actionable Insights From APT's Retail Practice

Branded Cafes: CPGs Come Face-to-Face with Consumers

January 31st, 2017 | Posted by APT in Manufacturing

Beyond advertising, consumer packaged goods (CPG) manufacturers have traditionally had limited interaction with their end consumers, instead leaving direct interaction to their retail partners. However, more and more companies are taking increased ownership of the consumer-brand relationship.

In the summer of 2016, Magnum New York created a sensory brick-and-mortar experience for some consumers with a seasonal, custom-dipping shop. The SoHo establishment was parent company Unilever’s first pop-up shop in the U.S. – an exciting new offering in a market where the company sold more than 100 million of its Belgian chocolate, prepackaged ice creams bars in the previous year.

Magnum is not the only CPG opening a branded store or café. Another example is the Chobani Café, also in New York, which offers a full menu extending far beyond simple Greek yogurt. Complete with salads, simit (a type of Turkish bread), and even a dessert option, the Chobani pop-up features carefully curated dishes made from artisanal ingredients.

Magnum and Chobani are just two examples of the growing list of CPGs opening pop-ups shops and other brick-and-mortar establishments as part of their branding strategies. While CPGs will continue to sell primarily through retailers in the foreseeable future, these new brick-and-mortar locations open an entirely new realm of possibility for consumer engagement.

Although CPGs may now be launching these branded cafés on a limited basis, physical shops nonetheless allow them direct access to the consumer. This strategy enables them to collect preliminary consumer data, informing how they might be able to provide consumers within the store with the most profitable products. Chobani’s expansive café menu, for instance, offers the company a preview of how consumers will perceive additional, non-yogurt SKUs, providing great insights that they can use to inform what tests they should put in market.

Branded pop-up shops are not the only direct-to-consumer (DTC) strategy CPGs are embracing. To build loyalty, many companies are taking a larger role in the consumer-brand relationship, without working through retail partner stores. One notable example is Unilever’s acquisition of Dollar Shave Club, a grooming subscription service. Unilever already owned Axe and Dove, so buying Dollar Shave Club broadened its product portfolio with razors and various other personal hygiene products – and provided the company with a DTC play in the grooming space.

With more direct involvement in the consumer shopping experience, CPGs can better understand purchase behavior, and test and personalize offerings to keep them coming back. For instance, in response to the increasing consumer preference for personalization, some CPGs are offering online customization options, providing consumers with different ingredient choices to tailor their snacks to their exact specifications.

Will CPGs’ emerging DTC offerings pay off in the long term? As companies continue to innovate and launch new programs in hopes of interacting more directly with consumers, it is important that they evaluate these new initiatives by experimenting before rolling them out more broadly. This Test & Learn approach is an effective way for CPGs to understand which new concepts will best increase consumer interaction to build brand and drive revenue.

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