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Leaving competitors in the dust, Perdue Farms stakes its claim on D2C.
Prime Future 018: The weekly newsletter highlighting tech trends throughout the animal protein value chain.
My hypothesis is that D2C will be a meaningful sales channel for meat & poultry processors in the next 2-5 years. (Yes, D2C is a huge opportunity for farmers, but packers aren’t going to just hand over this high growth sales channel.)
Leading processors are sorting out whether to engage in this sales channel directly by building their own platform and investing in their own brand, or indirectly by investing in 3rd party startups in which they can be a supplier; e.g. Cargill invested in CrowdCow, JBS invested in Wild Fork. Ironically, brand-forward (& tech-forward) Tyson Foods hasn’t made a big play in D2C.
Unsurprisingly, the majority of poultry integrators are largely silent on the topic. But this week some market research came directly to me, in this targeted ad Perdue Farms is running on Instagram:
First, notice that this ad is directly from Perdue Farms, not through a 3rd party D2C seller like ButcherBox. Perdue Farms, a $6.7 billion business and the 3rd largest chicken producer, is accustomed to selling high volume through traditional channels like foodservice and retail but they now also market directly and ship small quantities directly to your door.
Let the magnitude of that sink in.
This initiative by Perdue Farms that seemed to begin as your basic box-checking exercise, blew up overnight in mid-March as the pandemic drove consumers online to direct ordering. This ad shows that Perdue Farms is riding that COVID wave to actively grow this business line.
To get a sense of how Perdue is positioning itself, look at the 3 claims in this ad:
Lower Priced Bundles. Processors can’t help themselves. They love to compete on price….they *have* to compete on price. That IS the advantage of scale. So it’s not at all surprising to see Perdue Farms leading with a price message.
USDA Certified. Another advantage of being a commercial processor, a credibility signal.
Processed in the US. I find this one interesting because its Perdue’s link to the local claim. Is “processed in the US” local enough? The beauty of digital marketing is the ability to do extensive & robust A/B testing comparing how many eyeballs convert to customers when presented different messages, so I assume this message is resonating.
Perdue Farms is the first of the major processors to make a big splash in D2C, but there are 2 additional reasons this move is interesting:
Competitive Landscape. Perdue Farms’ historical competitors have been other integrators: Pilgrim’s, Tyson Foods, et al. This move squarely positions them to compete with prospective customers like ButcherBox, but more importantly it squarely positions them to compete with their entire current retail customer base. What impact will be created by this potential channel conflict?
Brand Building. Perdue Farms is largely known as an east coast brand, but that ad targeted me, a consumer in Arizona. Does D2C brand building become the lead generator for greater expansion of Perdue’s retail presence in traditional retail?
I expect to see more action by packers in the D2C space in the next 6 to 18 months, though I expect few packers to act as boldly as Perdue Farms.
**If you are a packer trying to figure out if, why, & how to tackle D2C, email me at firstname.lastname@example.org. I’d love to help you analyze this space & build your strategy to capitalize on the D2C trend.
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From the Prime Future vault: The Real Reason Packers Should Go All In on D2C (link)
To capitalize on the D2C trend, packers must get serious about building capability…soon.
For those who might say this market is still too small for packers to pay attention yet, remember in part 1 we talked about the Innovator’s Dilemma. Quick summary:
“Established companies see the early trends of new markets, they are just not structured or incentivized to act on them. Leaders at established companies must focus on market share and profitability of today’s largest customers & segments….not tomorrow’s.”
Given that D2C isn’t going to be the largest segment overnight, why should packers focus there?
There are 2 obvious reasons:
If COVID has taught us anything, its that a large segment of consumers are comfortable ordering online and want more ways to secure access to protein.
As more companies seek to build brands and move closer to the consumer in order to increase margin, D2C presents an obvious opportunity.
There’s a less obvious reason though, one that could impact the packer’s ability to serve their entire customer portfolio.
The real reason packers should invest in D2C is to capture the broader benefit of drastically increased visibility into consumer behavior.
From the Prime Future vault: A D2C Revolution is On Its Way (link)
Consumers are dialed into companies that allow them to buy what they want, when they want, how they want.
Packers are dialed into selling meat the way we’ve always sold meat, through retail, foodservice, or export channels.
The trick will be, how quickly do packers jump on the growing trend of D2C? Wait too long and there’s the risk of “disruption”. Jump too early and the market may not be fully developed, leaving an unprofitable sales channel in the short run.
Further complicating the matter is that D2C companies stand to not only disrupt packers, food retailers are also at risk.
And with a trend that’s been building for years now compounded by consumers being quarantined in their homes for weeks, potentially months?
Demand for D2C will accelerate. The only question is how the meat industry will capitalize.
Janette Barnard works to enable technologies throughout the animal protein value chain. Janette is now Managing Principal with Rock Road Consulting, helping companies to launch, source, and fund innovation in animal agriculture. She leveraged her commercial experience with Elanco Animal Health, Cargill, and McDonald’s Global Supply Chain team to launch and grow two animal protein focused startups.