Thursday, September 19, 2013

Kind Healthy Snacks and Starbucks

BusinessWeek has an interesting article this week about Daniel Lubetzky, founder of Kind Healthy Snacks.  His natural snack bar company has become quite a success, amassing $120 million in sales last year.  The article describes how Starbucks wanted to acquire Lubetzky's firm or engage the company to produce private label snack bars for the coffee giant.  Lubetzky refused.  He explains his thinking:

I’ve had years to internalize the question, and for me the answer is that building a brand that’s obsessed about quality is inconsistent with offering people private-label solutions. If you start competing in the private-label business, it’s all about cost. A competitor might offer to do something for 5¢ less, and now you have to start cutting corners. It’s our reputation.

Note the word inconsistent.  Great strategies exhibit high internal consistency, that is the whole is worth more than the sum of the parts.  The different choices and activities of the firm are well-aligned.  Lubetzky viewed private label production as inconsistent with the premium differentiated strategy that he was pursuing.  He goes on:

We couldn’t see ourselves running two businesses. If you’re training a team to obsess over quality, do you blow the whistle and say: Now we’re going to run a shift where we’re going to focus on cutting costs? If you’re in a volume-driven business, it’s probably OK. But if you’re building a brand and an experience, it’s incompatible.

Too many companies want to be all things to all people.  They don't recognize that it becomes very difficult to operate two fundamentally different strategies within the same organization.  Take a look at the cola business. Cott is a private label giant in the soda business.   They can focus intensely on the notion of driving down costs and operating efficiently.  Coca-Cola produces a premium branded portfolio of products. They can focus intensely on creating a brand that resonates emotionally with customers.  The two each have perfected the activities that support the very different missions.  Trying to do both would, in many cases, mean being not as good as either "pure play" strategy could achieve.   

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