06 Apr

Food for thought – differentiating in a commodity market

A quick story about fresh food and little Aussie battlers.

In Australia the groceries business is largely controlled by two players, Coles and Woolworths. There are many things wrong with that. For example, you can imagine the negotiating power these guys wield over their suppliers. Or their motivation to give you the best products possible.

As a consumer, I care mostly about the quality of what I buy and the price I pay for that quality. Woolworth and Coles are falling over themselves to tell me that they are fresh food people (just like me, they recently told me in an ad). But I don’t see it.
Then we discovered (through word of mouth) that there is a crowd called Aussie Farmers Direct, who decided that there may just be an alternative to dancing to the tunes of the big boys.

They believed that there was room in the market for an old fashioned milkman, who delivers not only milk but juice, bread and fresh vegetables. We’ve started using this service and now get a weekly delivery of all the stuff that you need to get fresh. The only proviso is that they select the fruit and veg that go into the box, but if you like variety, that’s ok. At pretty much the same price as the supermarket, but at superior quality.

Who would have thought that while they are taking the last remaining bit of service out of the supermarkets (they now want you to scan your own stuff), there is a good business in home delivering high quality produce?

So what are the magic marketing ingredients?

Good model – cut out the middle man, direct to the consumer

Good positioning –  “Helping the Australian farmer” – “The Milkman is back”

Differentiated offering – home delivery, no more lugging the heaviest part of your groceries

Quality – no more good-looking but crappy tasting fruit and veg..

Word of mouth promotion – as a result of all of the above

Who says you can’t differentiate in a commodity market?