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Fri 15th Sep 2017 - Friday Opinion
Subjects: Tackling the food waste phenomenon, the importance of segmentation, and five key things operators need to know about changes to the data protection law
Authors: Glynn Davis, Ann Elliott and Julian Ross 

Tackling the food waste phenomenon by Glynn Davis

Starbucks’ decision to sell leftover food at half-price in the final hour of trading at its UK stores sounds like a great idea to me. After initial trials at 16 outlets in Manchester, Starbucks is rolling the initiative out across its 350 company-owned stores and is looking to convince its franchise partners to follow suit. 

All proceeds from the sale of these near-expiry-date items go to Action Against Hunger. Starbucks’ 11-week trial resulted in £1,500 being donated to the charity so the sums across the whole estate will be meaningful indeed. This is one of those rare occasions when it really is a “win-win situation” because as well as fighting hunger this initiative also helps to tackle the huge issue of food waste.
 
The reality is that as margins come under pressure from a raft of factors, including the continuing rise of the price of raw materials, being able to reduce waste becomes ever more important. Selling food that would otherwise be thrown away at a discounted rate surely makes sense to support your margins or, in the case of Starbucks, convert into a charitable contribution.
 
Food waste is going to be an increasingly important aspect for all foodservice companies. If tackling food waste was initially seen as something good to do, as the market becomes tougher to compete in it will also become a financial imperative for more companies.
 
One interesting business to emerge from this situation is craft brewer Toast, which takes the ends of loaves from sandwich-makers and unsold bread from bakers and uses them to make beer. Initially, Toast only produced a pale ale but it recently expanded its range with the addition of Much Kneaded Lager and Bloomin’ Lovely Session IPA.
 
Toast’s objective is to use some of the staggering 44% of baked bread that goes to waste to make beer while giving 100% of profits from sales to food waste charity Feedback. Tesco, Waitrose and Fortnum & Mason, as well as many pubs and bars, stock the beer through distribution deals with Carlsberg and Matthew Clark. A launch is also planned for New York.

Foodservice companies can also take advantage of technology to reduce waste, with a number of apps coming on to the market that help connect businesses’ leftover food with people who are seeking a bargain.

TooGoodToGo is one such app, which was founded in Denmark and subsequently launched in London with its simple online platform enabling restaurants and cafes to list any leftover meals and their price. Users select their chosen meals from the app and the price they are willing to pay and, if successful, collect the meal as a takeaway at an agreed time.

Another app with the same underlying objective is Olio, which has worked with Sainsbury’s and would be equally applicable for foodservice businesses. Photos of any surplus food are uploaded on to the app, with users able to select items before collecting them from the participating business.

These are experimental solutions and no doubt others will emerge because the issue of food waste is not going to go away. Food waste is rising up the agenda of all businesses that deal with perishable food and will increasingly have an impact on companies –financially and from an ethical standpoint. The awareness of food waste has been significantly enhanced through media campaigns such as the one recently launched by the London Evening Standard. 

This means a growing number of consumers find food waste an unpalatable modern-day phenomenon and will increasingly demand that foodservice companies they choose to buy from address the problem. Otherwise they will take their business to another operator –such as Starbucks – that shows it cares just as much about this unacceptable situation.
Glynn Davis is a leading commentator on retail trends

The importance of segmentation by Ann Elliott

In recent years, more and more operators have been talking about segmentation, and there has certainly been an increase in the amount of references to segmentation in briefs to Elliotts.

For instance, most major pub companies segment their estate. Why? Because every site deserves an offer relevant to its locale, customers and circumstance. As providing a bespoke proposition to 500 locations would be nigh on impossible (certainly from a central support point of view), classifying them into groups of five, ten or 15 based on common shared principles means it’s only necessary to devote resources to 15 propositions at the most and the company will be significantly close to satisfying each site’s requirements.

Customer segmentation is equally important, not least for those brands that by their very nature have to keep their offer super-consistent nationally, most pertinently casual dining brands and branded pub companies.

Where businesses have less freedom to develop different types of site they can obtain empowerment from understanding and segmenting their various customer types. A thorough customer understanding process typically unearths a handful of customer types, for example the millennial who comes in with friends and cares most about the atmosphere, and the young parents who need extraordinary value and a good children’s menu.

By understanding its customer groups and nuances, an operator can tweak its overall offer to ensure there is something to appeal to each target consumer. But is this where segmentation should end? Site segmentation and customer segmentation are now almost always part of a marketer’s arsenal, but what about product segmentation?

A member of our insights team recently showed me a TED Talk by Canadian author Malcolm Gladwell. It was quite an old one, filmed in 2004, but still incredibly interesting and arguably more relevant than ever. Gladwell spoke about the history of the food industry’s pursuit of the perfect spaghetti sauce, conducting research after research.

It’s often the case when conducting food testing to receive mixed feedback, with no clear winner among the trialled products. If, for instance, a food trial is looking to identify the optimum product out of nine or ten potential variants, it is highly likely the most popular product will have been the favourite with only 15% to 20% of participants – hardly a convincing statistic and unlikely to win over the decision-maker. With this in mind, it’s always tempting for researchers to minimise the products tested to ensure there is a clear “winner”.

This was likely the case for legendary US researcher Howard Moskowitz throughout his early career. However, when he was approached by Campbell’s Soup to help develop its Prego pasta sauce product to rival the US-dominant Ragu, he looked at things differently. Instead of finding the optimum sauce, he intended to find the optimum sauce(s).

In total, 45 sauces were created by Campbell’s food development kitchen, varying in every conceivable way. By the level of sweetness, garlic, acidity, sourness, tomato – you name it, they tried it. Consumers across the US were asked to try ten of the sauces within two hours and score each out of 100.

When the results came in, rather than look for the highest-scoring variant, Moskowitz clustered the variants according to what was common between them. The end result? Rather than identifying that Americans had an appetite for a specific sauce, there were three groups – those who like it plain, those who prefer spicy, and those who prefer it chunky. The latter was the most significant, as no product satisfied this need. A line of extra-chunky sauce was added to Campbell’s repertoire and made the company $600m in the following ten years.

Moskowitz’s methods took the food industry by storm, for decades they had known consumer perception was highly subjective and finally here was a way to take this into account and still inform decision-making. Ragu also took note, calling on Moskowitz’s services. It now stocks more than 30 variants in the US. There is no perfect pasta, only pasta to suit different preferences in the same way there is no perfect cola drink (think about the number of variances today), no perfect chocolate bar, and no perfect coffee.

It’s not enough to ask consumers what they want. You have to think in-depth about the right question to ask. Effective research doesn’t necessarily have to analyse in-depth what consumers say they want, but rather analyse in-depth what that means they actually want. Consumers can’t always explain what they want and, critically, consumers often don’t know what they want because it was never an option for them. Henry Ford, of course, famously said if people were asked what they wanted prior to the invention of the automobile they’d have asked for faster horses.

Horizontal segmentation – grouping variants such as the aforementioned pasta example – is one way of identifying a hidden need. This doesn’t have to be complex. One of our researchers explained it really well – if you think about the last time you filled out a survey online, you were probably asked for your age and given brackets to choose from (25-34, 35-44 etc). Each of these age bands is horizontally segmenting the individual ages within it.

But in 2017, amid the age of information, the possibilities are so much vaster, particularly for the hospitality sector. Why wouldn’t a brand do this with likes, dislikes and, of course, food preferences to empower its data?

For instance, traditionally we’d look at sales data of a menu and remove anything less than a certain percentage of the mix. But does this give a full sense of what customers want? Not necessarily. All a menu’s spicy dishes (even across different sections) might account for 30% of the mix when grouped together but could all be low-mix items when viewed individually. This would be a customer base saying they want spicy options but the information could get missed if only individual dish scores are examined.

Moving away from product again, horizontal segmentation has uses elsewhere. Another opportunity perhaps comes via single customer view and having countless pieces of insight on a customer base. A dissection of data to identify points of commonality beyond the obvious could throw up a surprise opportunity. Do a noteworthy proportion of a restaurant’s customer base follow parenting blogs/ tweeters? It might be time to revisit just how family-friendly the venue is. Do a significant number of a bar’s customers like some form of quiz show on Facebook? Perhaps a quiz event is in order? These are really cut-and-dry examples but the truth is a lot of brands probably have such insight lying dormant in spreadsheets somewhere!

There are almost certainly brands out there looking at data in this way already that have even better examples, and I’d love to hear about them. For now, I’m trying to address my new-found TED Talks addiction.
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – www.elliottsagency.com

Five key things operators need to know about changes to the data protection law by Julian Ross

1. Is your outlet at risk of breaking the data protection law?
In light of recent news regarding the new Data Protection Bill, operators need to act quickly to become compliant. Smart companies in the digital economy are setting the standard for data protection and security and, as an industry, we need to ensure we are doing the same.

As of May 2018, the European Union’s General Data Protection Regulation (GDPR) will become law with the new bill entirely replacing the old Data Protection Act.

GDPR introduces tougher constraints on consent for use of personal data, rights of access to data, and a person’s right to erase personal data. Enforcement of these will be strengthened as the Data Protection Law is brought more up to date with today’s digital world. 
 
Failure to comply will result in fines to businesses and the burden is very much on operators to implement new policies and procedures in accordance with proposals in the bill for when it is made a legal requirement.

2. Making consent easier for customers
One of the key features of GDPR focuses on consent and giving people a clear choice on how their data will be used. Operators must ensure they put procedures in place to give individuals genuine choice to opt-in, as well as control over their own personal data. 

3. What does GDPR mean for your Wi-Fi service?
Changes are being made in the log-in access journey for all Wi-Fi services, giving people positive opt-in or opt-out options, including links to concise privacy policies and terms and conditions.

Term and conditions must include the intended usage of such data and provide the public with the ability to opt in for marketing messages and clear instructions on how to opt out at any time. Consent requires a positive opt-in from people without the use of pre-ticked boxes or any other method of consent by default.

4. Act now or lose out!
Right now our industry is not prepared for this rigorous data protection legislation. Proactive operators should be implementing policies and procedures now, as well as continuing to implement changes as and when more detailed information becomes clear.

Updated information will cover data deletion requests, how users can get hold of information more freely, and what an expansion of personal data to include IP addresses and small text files – “cookies” –will mean.

5. Keeping up with the Joneses
With personalised emails seeing click-through rates grow 14% and conversion rates 10%, not acting now will leave companies behind their competitors, who will continue to personalise their marketing activity based on customer data.

Companies can use the data collected through their Wi-Fi provider to send personalised communications to customers, bringing about a whole new way of engaging with them by sending the exact information they want to receive across the right platform at the right time.
Julian Ross is managing director of Wireless Social

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