We find ourselves in a time of extreme data polarization unlike any time in history — a time when only the largest CPG brands have access to the data that enables them to understand their consumer. How can we expect our small innovators to thrive when they don’t have any visibility into the murky world of sell-through, consumer perception, and trade management? This is simply an injustice I can’t abide by.
Data for all is a CPG right.
We see the rhetoric out there — that industry growth is riding on the backs of startups that have the ability to rapidly innovate, to take a chance, to try something new. It’s now time to put placating words into action and demand more for the very best of us. Members of this community, it’s time for a data revolution.
Admittedly, I’ve been a little caught up in the recent debates, but the fact remains that these are troubling times. Conversations I have with small business owners who are struggling to find margin in an increasingly competitive retail environment leave me feeling a sense of anguish reminiscent of the days when we faced the same problems at Little Duck Organics, except it’s gotten worse. The recent closures of three beloved regional grocery chains have put a magnifying glass on an industry that faces consolidation, razor-thin margins, and pressure to grow at all costs.
I was canvassing, er … traveling the other day, and I met a woman who owned a promising natural food company in a growing category. She had just agreed to pay slotting at Earth Fare that came to a kingly sum of $22,000. Eight short weeks later, she learned that all stores were shutting down. This is a very specific and unfortunate example, but my fervent desire is to build a coalition with the common goal of creating access to critical insights, and action to better arm brands in this rapidly evolving environment. I envision a world where all major stakeholders are steadfast in a common goal: to sell better food to more people. The construct to make this happen is what I call Data Capitalism Plus.
The critical step here is that everyone along the value chain has to be properly incentivized to build the business. While sometimes I romanticize about being a data socialist, I’m a capitalist at heart, as long as the system yields a positive outcome. I don’t think that all data should be free as companies like Nielsen/IRI, SPINs — the big distributors, the retailers — all invest a great deal in accumulating, aggregating, and disseminating the data that they own. Each has a right to sell it. Charlie Munger of Berkshire fame has said, “Show me the incentives and I will show you the outcome,” and there’s never been a more precise application of this notion.
Right now in CPG, we have a situation where stakeholders are incentivized to be opaque in an attempt to grab margin to supplement a core business where margin is hard to find. The result is that manufacturers are bearing an inordinate burden which ironically further degrades the core business of retailers, distributors, brokers, and other stakeholders along the value chain. Unexpected chargebacks create cash flow constraints that delay production that damage fill rates that leave retail shelves empty, harming consumer perception and ultimately top-line revenue. From a macroeconomic perspective, countries that fare better are ones in which there is a culture of trust. Trust reduces transaction costs and organizes the incentives around producing wealth by “making,” or creating better products and services that add increased value to people’s lives. Countries that fare far worse are ones where the predominant incentive structure is one of “taking,” or gaining wealth from diverting it from others. From my perspective, the grocery industry is at a precarious point where there has been an erosion of trust and the unfortunate rise of a “taking” economy.
Data Democracy Plus is an ideal that every one of us should support because it will help improve performance across our entire industry. I suggest all major stakeholders come together to help create a unified system that works for all. I think margin for data access should be inherently baked into CPG brands, as it once was for brokerage firms. When entrepreneurs are starting CPG companies, they will often create their pricing structure around that 5 percent and it should be no different for data. How do we properly incentivize big companies like Nielsen/IRI when they sell data sets for huge sums of money to predominantly larger companies? The answer is that we create revenue opportunities downstream. Companies like Rodeo that focus on using data to build decision-making tools create licensing opportunities for the big data firms and alternative revenue streams for distributors and retailers alike. This is no easy task as each stakeholder would have to cede absolute control over some portion of their data, but I believe this level of transparency would allow everyone to sell more groceries, create better experiences, and increase the pie for all parties.
This type of collaboration is difficult, but corollaries do exist in our industry. IX-One has done a good job of creating an item specification depository that allows retailers like Whole Foods to set up new items and make adjustments to existing items with greater efficiency. Though I feel like we’re still caught up in the Betamax-VHS war in the 80s, with a few different platforms vying for ubiquity, it has made things easier. There is so much critical data out there that is underutilized that could facilitate a more efficient system. We just need to build advocates out of the principal owners of this data. Nielsen/IRI, Kroger, Whole Foods, Walmart, Catalina, SPINS, Kehe, UNFI… Data Democracy Plus can work for you.
So in the spirit of ushering all of us into a brighter future, I would love to initiate a conversation around greater access to data. We are blessed to participate in an industry of passion, caring, and ideals and now is the time to call upon our natural instinct to improve. As mentioned before, change cannot happen unless it helps everyone so we aren’t marching toward a world of simple hand-outs but rather a marketplace that can trade the value of data more efficiently. Join the revolution.