The Business of Growing Artisanal Brands

Luke Duncan

We asked Luke Duncan to tell us a little about marketing an artisanal brand and what we got was the “vent size” explanation of what goes on in small food marketing.  Here is what Luke told us:

I make and sell a line of premium, small batch cocktail mixers here in Nashville under the brand Eli Mason.  As a small business owner, I love networking with other small food businesses and finding ways we can work together to collectively grow the market for artisanal goods.  But I’ve noticed that sometimes I have trouble giving or receiving advice from other food manufacturers. It’s not that I don’t trust their experience, intelligence, or motives. It’s just that we’re playing in very different fields.

For example, if you make a family-friendly salsa, your path to success may lie in finding a few key distribution partners (including brokers) who can place your product in mid-level grocery stores across the region. You then advertise heavily in 3-6 states and try to push competing salsa brands out of your customers’ pantries, eventually ramping up to a national advertising campaign and truly mass production. Your margins are thin but you make it up in volume on a longer timeline.

Whereas if you sell a super-premium chocolate product, you may rely more on smaller retailers, special promotions, and storytelling to convey a sense of exclusivity. You can command higher margins per piece, but your volumes are much, much lower, and you can never sell in the big chain stores for fear of damaging your reputation.

In the world of premium cocktail mixers, I would be more likely to trade advice with the chocolatier than the salsa maker. Not because the chocolatier is smarter or better. (The salsa maker may be on track to sell their brand for $100 million in 5 years.) It’s just that our approaches are more closely aligned. Close, but not the same.

BLUE OCEAN VS RED OCEAN

I’m beginning to suspect that one particularly important axis of differentiation among small food producers is how we understand and implement Blue Ocean strategy.  Simply put, “Red Oceans” are industries in which the rules are well known, the major players are established, and the markets are crowded. There’s blood in the water from so much competition. Examples include packaged breakfast cereals, frozen pizza, mass-produced candy, inexpensive coffee, dairy products, peanut butter, and rice, beans, and other staples. Even in a Red Ocean, there is still room to differentiate yourself on quality or service, but you will mostly be competing on price.

“Blue Oceans” are markets that have yet to be developed. Deploying into a Blue Ocean requires vision, innovation, and lots of time spent educating your customers. Because very few companies are playing in this space, you get to define the rules and market expectations. But your potential customers may not even know they need your Blue Ocean solution. It’s your job both to educate them on a problem they didn’t know they had, and to show them why your solution is best. Blue ocean strategy is more about differentiating yourself than simply competing on price or service, though price will always be a factor to most buyers.

In the food space, examples of Blue Ocean products include kombucha, alternative sweeteners like agave or stevia, gluten-free mixes, and Greek yogurt, which is currently exploding into a Red Ocean space (and making early-mover Chobani very wealthy).

The energy drink category is a notoriously Red space right now, but when Red Bull got started almost 30 years ago, those waters were Blue. So their long-term strategy hinged on educating the public about what it means to live the Red Bull Lifestyle: Parties, motocross, BASE jumping, skateboarding, etc. They built a marketing vision around this lifestyle because educating the public was critical to gaining marketshare in this new area of consumption. People didn’t always want more energy. They first needed an outlet for it, a way to put this product to use to further their own personal brands and lifestyles.

No market is completely Red or Blue, but you often must choose which strategy to pursue. For a marketer, your approach depends on where you’re competing.  Every mid-sized American city has a jam/jelly maker, a granola person or two, a premium chocolatier, a few innovative bakeries, three BBQ sauciers, and a half-dozen coffee roasters. And every town thinks theirs is the best. This is not a bad thing at all. If you make one of these products, your customers probably already use them. You can start selling your wares tomorrow without having to educate your (potential) customers about how to squeeze them into their culinary lives.  But you will also be limited in your growth potential unless you can truly differentiate yourself through quality, branding, storytelling, and more.

ELI MASON IS A BLUE OCEAN PRODUCT

Eli Mason is a Blue Ocean product. Sure, cocktail mixers have existed for years (usually in the form of corn syrup, dyes, and artificial flavors), but premium concoctions for mixing up classic libations are a relatively new invention. A spirit-forward Old Fashioned in a bottle?! It’s the most delicious heresy.

When I work the Eli Mason booth at artisan food shows, I often get confused looks from customers. I bring them in with the promise of a free sample and then begin educating them about this category and how Eli Mason approaches it. It’s not enough to say, “Premium, hand-crafted cocktail mixer.” I also must explain that our products are spirit-forward (accentuating the base spirit, not covering it up) and use pre-Prohibition ingredients like Gomme Syrup for a rich mouthfeel and smooth finish.

In a Blue Ocean marketplace, everyone you meet is probably experiencing your product and brand for the first time. One of my retail partners likes to say that Eli Mason must be sold before it can be bought. That is, nobody comes in the door thinking, “How can I make a Mint Julep more easily?” But once they try it and find a place for it in their home bar, they usually come back to stock up. And when Derby season rolls around ….

If you want to compete in a Blue Ocean marketplace, you’ve got to be humble and always ready to learn. You’re a teacher now, and your job is to learn the best way to help others learn. You’re constantly experimenting and finding new ways to connect with potential customers: Videos, recipes, demonstrations, samplings, sponsorships, and so much more.

There is no inherent superiority to the Blue Ocean approach. The strategies you pursue and the markets you enter are more about your style than your IQ.  Competing in a Red Ocean marketplace is more about solving problems related to logistics, production, and growth.  Competing in a Blue Ocean is more about solving problems related to communication and branding. How to help someone see the value of your product. How to help them use your brand to further their own personal brand and become an advocate for your cause.

Do not get confused, however, about which marketplace you’re competing in. I’ve seen more than one artisan become frustrated when they keep solving Red Ocean problems and expecting Blue Ocean results.