Major packaged-food companies lost $4 billion in market share alone last year, as shoppers swerved to fresh and organic alternatives. Can the supermarket giants win you back? ... While consumers have long associated the stuff on the labels they can’t pronounce with Big Food’s products—the endless strip of cans and boxes that primarily populate the center aisles of the grocery store—they now have somewhere else to turn (more on that in a bit). And that has brought the entire colossal, $1-trillion-a-year food retail business to a tipping point. ... Shoppers are still shopping, but they’re often turning to brands they believe can give them less of the ingredients they don’t want—and for the first time, they can find them in their local Safeway, Wegmans, or Wal-Mart. Rather than carry traditional products with stagnant sales, chains like Target are actively giving increasing space on their shelves to a slew of New Age players like yogurt-maker Chobani, Hampton Creek (which sells a popular plant-based mayo), Nature’s Path, Amy’s Kitchen, and Lifeway Foods, which makes a yogurt-like drink called kefir. Retailers are creating their own brands too.
To an outsider, Wawa appears like a normal, run of the mill convenience chain — except to residents in Pennsylvania, Delaware, New Jersey, Maryland, Virginia and Florida. To them, Wawa is a community hub that deserves praise, fan mail and even country songs. ... On a separate occasion, a Thanksgiving food drive supports employees and customers in need. Whether it’s helping out store associates or donating thousands of dollars to charity, many Wawa stores take pride in their communities. It might seem unusual for a store that sells gas and Sizzlis. ... Later, Wawa became a go-to milk delivery company, but the service unraveled during the late 1950s and early '60s. ... Wawa opened its first food market on April 16, 1964 in Folsom, Pennsylvania. ... It’s not out of the norm for Wawa employees to stay with company 30 to 40 years. At HQ they've pasted photos in their cubicles, work memories throughout the years, alongside kitschy memorabilia. ... 41% of the company is owned by employees through Wawa's employee stock ownership program. ... “You think of a Wegmans, you think of an In-N-Out Burger, they are very slow growth, very deliberate — and i think there’s an element of that cult status that’s attached to that in some regard," Gheysens. ... Annually Wawa brews more than 195 million cups of coffee, sells 80 million built-to-order hoagies and serves 600 million customers. In 2015 the company ranked No. 34 on Forbes’ list of America’s largest private companies, bringing in $9.7 billion in revenue each year. In 2016 Wawa plans to open 47 new locations.
Five years ago, after growing Fossil into a $2 billion accessories behemoth, Kartsotis hatched Shinola, a high-end watch brand famous, mostly, for being manufactured in Detroit. ... This is just the latest postmodern layer Kartsotis has baked into Shinola, which is no longer an experiment in manufacturing authenticity, but a fast-growing business. "The coolest brand in America"--as recently ordained by Adweek--can now be found in boutiques from Paris to Singapore. Shinola retail stores have surfaced in more than a dozen cities; plans are to almost triple that by late 2017. The brand isn't slowing down for anyone--not even the Federal Trade Commission. In November, the government agency went after Shinola's "Built in Detroit" tagline, accusing the company of embellishing its made-in-America claims. ... Kartsotis has spent his career finding creative ways to boost the value of ordinary products. Born to a Greek American family, he dropped out of Texas A&M, discovering his entrepreneurial flair as a ticket scalper. In his early 20s, he ventured to Asia with a plan to import cheap toys, until he was tipped off that the market for moderately priced Asian-made watches was growing. With $200,000 that he'd earned scalping, Kartsotis opened Overseas Products International, an importer of watches from Hong Kong. But it wasn't until Kartsotis came across Life and Look magazines from the 1950s that Overseas morphed into the brand called Fossil.
When Papadellis first arrived at Ocean Spray, prices had hit rock bottom because of a massive surplus of cranberries on the market. It was nearly impossible for a farmer to turn a profit, and hatchet men from Bain & Company and Merrill Lynch had advised company brass to trim the fat and dump the brand while it was still worth selling. Papadellis had a different vision. He set out to bring the juice giant back from the brink, and by 2005 had discovered a company-saving cash cow: Craisins, those addictive little treats that are a whole lot like raisins—sweet enough to soothe a tyrannical toddler’s afternoon tantrum yet packed with enough fiber to kick-start a senior citizen’s GI tract. With boundless consumer appeal, the shriveled hulls of cranberries reduced the industry-wide glut of fruit and blossomed nearly overnight into a bite-size blockbuster that resurrected the cranberry business. ... In reality, though, Craisins were both a savior and a scourge: They hoisted profits, but the more Ocean Spray produced, the more cranberry-juice concentrate it was left holding. As a result, when Craisins sales skyrocketed, millions of gallons of viscous, bitter concentrate flooded Ocean Spray’s storage freezers. With bottled-cranberry-juice sales remaining stagnant, Papadellis worried that this excess of concentrate would soon drown the farmers, saturate the market, and send everyone back to the poorhouse. ... Two harvests after his speech at Disney, the price for a 100-pound barrel of cranberries on the open market plunged from $70 to $18. Since then, the market has continued to flounder, and today much of the cranberry industry is still sputtering in a glut of concentrate while growers increasingly face bankruptcy.
Nestlé, the world’s largest food and beverage company, has sold Maggi (pronounced “MAG-ee”) in India for more than 30 years, and the brand’s ubiquity and cultural resonance on the subcontinent is something akin to Coca-Cola’s in the U.S. In 2014, Indians consumed more than 400,000 tons of the instant noodles—marketed in 10 varieties, from Thrillin’ Curry to Cuppa Mania Masala Yo!—and Maggi accounted for roughly a quarter of the company’s $1.6 billion in revenue in the country. That year Maggi was named one of India’s five most trusted brands. ... On June 5, 2015, less than a month after Khajuria’s phone rang in the middle of the night, India’s central food regulator announced a temporary ban on the manufacture, sale, and distribution of Maggi noodles. In its order the FSSAI pronounced Maggi “unsafe and hazardous for human consumption,” a designation supported by 30 government lab tests showing Nestlé’s noodles contained excess amounts of lead. ... The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed sales. Another $70 million was spent to execute one of the largest food recalls in history. Add the damage to its brand value—which one consultancy pegged at $200 million—and the total price tag for the debacle could easily be more than half a billion dollars. And the fallout continues. ... Nearly a year after the ban, Maggi noodles are back on shelves in India, but somewhat precariously so. The product’s future depends on two legal cases that are working their way through the Indian court system. Both pit Nestlé against the Indian government.
The original deal held that Big Time would supply everything except the specially engineered critters — and the accompanying packets, which von Braunhut would manufacture and sell separately to Big Time, which would then bundle the full kits and handle the sales. Also in the contract was a second deal — to buy the company, including the secret formula. It allowed Big Time to pay a straight-up $5 million fee and then $5 million more in installments. Three winters ago, Big Time called up the widow and announced that it considered its previous payments for the packets to be a kind of layaway deal for the company and that, as far as Big Time was concerned, it now owned the Sea-Monkey franchise. ... Part of what made Sea-Monkeys successful was a scientific breakthrough Harold von Braunhut claimed he achieved in the early years. In 1960, after observing the success of Uncle Milton’s Ant Farm, von Braunhut first started shipping Instant Life — simple brine shrimp that could travel in their natural state of suspended animation. This was the era when a good idea with smart marketing was the dream: D.F. Duncan’s yo-yo, George Parker’s Monopoly game, Ruth Handler’s Barbie. Around the same time, the big-time toy company of the day, Wham-O, started selling a similar product called Instant Fish, which was an immediate dud.
2015 was, by all accounts, not a great year for GoPro. The company, famous for wearable cameras targeted toward surfers, mountain climbers, and anyone else living on the edge, shipped more cameras than ever, but its revenue dropped 31 percent between the fourth quarters of 2014 and 2015. ... Over the last three years, GoPro has been building a software team from scratch, cobbling together acquisitions and a few key hires into what is now a 100-plus employee division that makes up about one-tenth of the company. Woodman acknowledges that the trend of middling sales figures will likely hold until GoPro releases a set of new devices at the end of this year, including the Hero 5, GoPro’s first drone, and a spherical camera made for general consumers. Meanwhile the new software team, and what it’s building, will herald in a new era at the company, inspire investors, and eventually attract new customers. ... In the last four months, GoPro bought, rebranded, and relaunched two powerful mobile editing apps called Replay and Splice — opening up GoPro to users who don’t own any of its cameras. And in the second half of 2016, GoPro will release a desktop editing experience that will rival iMovie and a cloud backend that will tie everything — devices, files, and the overall GoPro experience — together into a single ecosystem. ... Woodman is clear-eyed on the fact that the hardware-first chapter of GoPro is coming to an end. Cameras will still be important, because Woodman believes that vertical integration gives GoPro an advantage over software-focused competitors. ... "We’ve sold a great promise to people but we haven’t followed through on it…. We solved the capture side of it, but then we sort of left them hanging with the whole hassle of the post-production."
Her mission was modest: to make a decent pair of running shorts that didn’t make a fit woman look three months pregnant—was that too much to ask? She’d grown the company patiently, intelligently, considering all the brand “touch points” (hang tags, packing tape), choosing her fabrics with care. ... It is tough to overestimate how influential Nike is in the sport of track and field. The company, which made $31 billion last year, has been the official sponsor of USATF’s national team since 1991 and will continue to be until 2040. With the exception of shoes, sunglasses, and watches, national-team runners must wear Nike, and Nike only, at all international events. ... Oiselle did $10 million in revenue in 2015. It’s targeting $15 million for 2016, still tiny compared with Lululemon ($2 billion) and Athleta (part of Gap’s $16 billion empire). Oiselle is not yet profitable, either. But even so, Bergesen has managed to shape it into a small company with huge, like-minded pros. ... professional track athletes on the whole are surprisingly broke. According to an analysis by the USATF Foundation, an affiliated nonprofit that promotes athlete development, more than 50 percent of American track and field competitors who rank in the top ten in the U.S. in their events earn less than $15,000 a year from their sport.
It’s OK if you haven’t heard of it. The very concept of a blowout isn’t familiar to all women, and it’s largely foreign to men. ... Since opening its first salon in 2010, Drybar has become to blowouts what Starbucks is to coffee. It didn’t invent the blowout but has played a singular role in making them a thing. Like America’s biggest coffee chain, it has obsessed over everything from music to its shelf displays and maintained the kind of fine-grained control over its outlets that is only possible by owning most of them — only about 20% of Drybars are run by franchisees. The result is a carefully honed experience for customers, one that more and more women are willing to pay generously for. ... Drybar has grown fast: The company said it will make more than $100 million in sales in 2016 and will end the year with 75 salons in tony metropolitan markets, up from 61 today. About a quarter of its revenue will come from selling branded hair-care tools and products ... While the company envisions 300 to 400 Drybars in the U.S. in the long run, an escalating number of competitors believe they can do exactly what it is doing — perhaps even better. Canada’s Blo operates 50 salons and plans to end the year with 70 using an all-franchise model. ... Others pepper the nation, from small chains like Rachel Zoe’s DreamDry and Halo in the San Francisco Bay Area, to stand-alones with cutesy names like Haute Air, Pouf, and Hairports.
Over the past decade, Americans have done something that would have once seemed downright un-American: They've given up soda. And when you’re craving a can of pop, LaCroix is a decent substitute. Unlike tap water, it has carbonation and a little flavor. Unlike a countertop SodaStream, it's cheap, readily available, and portable. Close your eyes, wrap your hand around the perspiring aluminum can, and you could be holding a Coca-Cola. LaCroix is succeeding as methadone for the soda addict. ... LaCroix isn’t the only brand to benefit from the sparkling water boom. But it’s the one that’s risen to the coveted status of lifestyle brand, not just generating loyalty but becoming part of how we define ourselves. The secret behind LaCroix’s rise is a mix of old-fashioned business strategy and cutting-edge social marketing. When Americans wanted carbonated water, LaCroix was positioned to give them them fizzy water. Then, sometimes by accident, LaCroix developed fans among mommy bloggers, Paleo eaters, and Los Angeles writers who together pushed LaCroix into the zeitgeist.
Right now, the global bottled water industry is in one of those strange and energetic boom phases where every week, it seems, a new product finds its way on to the shelves. Not just another bland still or sparkling, but some entirely new definition of the element. It is a case of capitalism at its most hyperactive and brazenly inventive: take a freely available substance, dress it up in countless different costumes and then sell it as something new and capable of transforming body, mind, soul. Water is no longer simply water – it has become a commercial blank slate, a word on to which any possible ingredient or fantastical, life-enhancing promise can be attached. ... The global market was valued at $157bn in 2013, and is expected to reach $280bn by 2020. Last year, in the UK alone, consumption of water drinks grew by 8.2%, equating to a retail value of more than £2.5bn. Sales of water are 100 times higher than in 1980. Of water: a substance that, in developed countries, can be drunk for free from a tap without fear of contracting cholera. What is going on? ... There now seems to be no limit on what a water can be, or what consumers are willing to buy. It is no longer enough for water to simply be water: it must have special powers. ... At some point, surely, we will reach “peak” water. Perhaps it will be the moment consumers lose faith in the cellulite-eradicating powers of Buddha water or wonder if it’s really worth paying over the odds for birch sap.
The company’s deliberateness and caution may seem out of step in an age when management gurus celebrate a “fail fast” ethos. But for nearly three decades it has been a pace that has seemed to sit well with health-minded and environmentally conscious consumers, who have made Seventh Generation the biggest green cleaning brand in the U.S. market, with some $250 million in annual sales. In a relatively sleepy industry, the company’s revenues have averaged double-digit growth rates since 2006. ... The deal is a bet by Unilever on the continued evolution of a species: the eco-conscious consumer—an alert, premium-paying shopper. Initially that group was concerned only (or mostly) with what they put inside their bodies. Next they became more selective about what they put on them—and finally with what’s around them. In other words, says Nitin Paranjpe, president of Unilever’s home-care business, “it started off first in food, then moved to personal care, and now to home care as well. The entire natural segment is clearly on trend.” ... These shoppers, the theory goes, don’t just want cleaners that sound as though they’ve got a whiff of sage and citrus, but ones that are actually free of ingredients that consumers can barely pronounce and don’t understand. This demand for purity and simplicity, after all, has been one of the biggest drivers in the food industry for the past few years. ... another challenge for Seventh Generation now isn’t getting things clean, necessarily, but changing shoppers’ minds about what clean means. Consumers typically evaluate a detergent based not only on whether it removes stains and brightens clothes but also on whether it leaves them smelling “clean.” The problem is, clean isn’t supposed to smell like anything.
I could go on about the innovations at Domino’s, but Doyle’s most important lessons are about the mindset required for organizations to do big things in tough fields. Two of the great ills of executive life are what he calls, borrowing from behavioral economics, “omission bias” and “loss aversion.” Omission bias is the tendency to worry more about doing something than not doing something, because everyone sees the results of a move gone bad, and few see the costs of moves not made. Loss aversion describes the tendency to play not to lose rather than play to win. “The pain of loss is double the pleasure of winning,” he argues, so the natural inclination is to be cautious, even in situations that demand creativity. ... Leaders who want to shake things up have to be comfortable with the idea that “failure is an option,” Doyle concludes. In a world of hyper-competition and nonstop disruption, playing it safe is the riskiest course of all. That’s a recipe for reinvention that makes for good pizza and big change.
Why do people like what they like? It is one of the oldest questions of philosophy and aesthetics. Ancient thinkers inclined to mysticism proposed that a “golden ratio”—about 1.62 to 1, as in, for instance, the dimensions of a rectangle—could explain the visual perfection of objects like sunflowers and Greek temples. Other thinkers were deeply skeptical: David Hume, the 18th-century philosopher, considered the search for formulas to be absurd, because the perception of beauty was purely subjective, residing in individuals, not in the fabric of the universe. “To seek the real beauty, or real deformity,” he said, “is as fruitless an enquiry, as to pretend to ascertain the real sweet or real bitter.” ... Over time, science took up the mystery. In the 1960s, the psychologist Robert Zajonc conducted a series of experiments where he showed subjects nonsense words, random shapes, and Chinese-like characters and asked them which they preferred. In study after study, people reliably gravitated toward the words and shapes they’d seen the most. Their preference was for familiarity. ... This discovery was known as the “mere-exposure effect,” and it is one of the sturdiest findings in modern psychology. ... People get tired of even their favorite songs and movies. They develop deep skepticism about overfamiliar buzzwords. ... A surprise seems to work best when it contains some element of familiarity. ... On the one hand, Hekkert told me, humans seek familiarity, because it makes them feel safe. On the other hand, people are charged by the thrill of a challenge, powered by a pioneer lust. This battle between familiarity and discovery affects us “on every level,” Hekkert says—not just our preferences for pictures and songs, but also our preferences for ideas and even people. ... The power of these eureka moments isn’t bound to arts and culture. It’s a force in the academic world as well. Scientists and philosophers are exquisitely sensitive to the advantage of ideas that already enjoy broad familiarity.
Among a segment of hardcore big-game hunters, no brand is as revered as Kuiu. The company's high-performance fabrics — bonded fleece and waterproof breathable synthetics — are pulled directly from the mountaineering world, and its distinct Tetris-like camo pattern looks more like standard-issue SEAL gear than the fake shrubbery so common at Walmart. Today Kuiu camo is as much a status symbol in hook-and-bullet culture as Louis Vuitton's monogram is among the Hamptons set. ... Based on its horns, the largest in the group looks like a shooter, but to get within range we have to hike up and over a 13,000-foot peak, then down and around the back side of the ridge where the sheep were first seen. Doing so takes most of the morning, stopping and starting to catch our breath and continually watch the movement of the rams. ... these days, hunting has been embraced by a new breed of devotees: athletic, tech-savvy, ethically minded professionals who like to play year-round in the mountains.
Nothing about Smith or the simple design of the sneaker itself — neither has changed much since 1971 — explains how Adidas was able to sell 7 million pairs by 1985. Or how that number had grown to 22 million pairs by 1988. Or why Footwear News named it the first-ever Shoe of the Year in 2014. Or how it surpassed 50 million shoes sold as of 2016. Or how the sneaker grew far beyond its start as a technical athletic shoe and became a fashion brand, its basic blank slate evolving and taking on new meaning and purpose. ... The sneakers weren’t even designed with Smith in mind. Adidas heir Horst Dassler made them in 1965 for the French tennis player Robert Haillet. ... It was the most technically advanced tennis sneaker of its time, one of the first made of leather in a field of canvas, with a herringbone bottom designed for use on clay courts.
Along the way there were early signs that things had changed. First was the decline from the greatest bubble in US equity history, the 2000 tech bubble. Compared to the previous high of 21x earnings at the 1929 bubble high, this 2000 market shot up to 35x and when it finally broke, it fell only for a second to touch the old normal price trend. And then it quite quickly doubled. Compare that experience to the classic bubbles breaking in the US in 1929 and 1972 (Exhibit 2) or Japan in 1989. All three crashed through the existing trend and stayed below for an investment generation, waiting for a new crop of more hopeful investors. The market stayed below trend from 1930 to 1956 and again from 1973 to 1987. And in Japan, the market stayed below trend for… you tell me. It is 28 years and counting! Indeed, a trend is by definition a level below which half the time is spent. Almost all the time spent below trend in the US was following the breaking of the two previous bubbles of 1929 and 1972. After the bursting of the tech bubble, the failure of the market in 2002 to go below trend even for a minute should have whispered that something was different. Although I noted the point at the time, I missed the full significance. Even in 2009, with the whole commercial world wobbling, the market went below trend for only six months. So, we have actually spent all of six months cumulatively below trend in the last 25 years! The behavior of the S&P 500 in 2002 might have been whispering in my ear, but surely this is now a shout? The market has been acting as if it is oscillating normally enough but around a much higher average P/E. ... We value investors have bored momentum investors for decades by trotting out the axiom that the four most dangerous words are, “This time is different.”2 For 2017 I would like, however, to add to this warning: Conversely, it can be very dangerous indeed to assume that things are never different. ... I believe it was precisely these other factors – increased monopoly, political, and brand power – that had created this new stickiness in profits that allowed these new higher margin levels to be sustained for so long.