Blue ocean strategy in the food and beverage industry

Blue Ocean Strategy is a busi­ness strat­e­gy that involves doing some­thing con­tra­dic­to­ry; name­ly to cut costs and at the same time offer the con­sumer some­thing new and excit­ing. How is that pos­si­ble? In the 1980s, the cir­cus Cirque du Soleil showed the world how to do it. But what about the food indus­try – can Blue Ocean Strategy make a dif­fer­ence there too?

What is Blue Ocean Strategy?

W. Chan Kim and Renee Mauborgne are the authors behind the Blue Ocean Strategy. It is not a strat­e­gy that they them­selves came up with out of noth­ing, but rather a com­pi­la­tion of data where the authors have drawn con­clu­sions and based on that cre­at­ed the Blue Ocean Strategy.

They have exam­ined 150 com­pa­nies in 30 dif­fer­ent indus­tries, by look­ing at data that stretch­es 100 years back in time.

The basic assump­tion is that most com­pa­nies are locat­ed in the red ocean. There, the com­pa­nies’ busi­ness mod­el and prod­uct offer­ing are almost iden­ti­cal. The com­pe­ti­tion is mur­der­ous and the goal is to gain as much mar­ket share as pos­si­ble; either by being the cheap­est – or try­ing to dif­fer­en­ti­ate and offer some­thing that com­peti­tors don’t offer, but at a high­er price.

In the blue ocean, we find com­pa­nies that have man­aged to get from the red ocean to the blue ocean, by cre­at­ing a new val­ue propo­si­tion – that is, offer­ing some­thing new that cre­ates val­ue for cus­tomers – but with­out rais­ing costs. In this way, com­pa­nies in the blue ocean can cre­ate com­plete­ly new mar­kets with non-exis­tent or min­i­mal competition.

The Blue Ocean Strategy includes sev­er­al dif­fer­ent mod­els and tools. One of the most basic is the four action frame­work. Let’s take a clos­er look at it!

The Four action framework

With the help of the four action frame­work, you can find out which fac­tors you should reduce and which you should increase to poten­tial­ly get from the red ocean to the blue ocean. The four action frame­work helps you to fig­ure out how to reduce costs but at the same time offer the cus­tomer some­thing new and attrac­tive that has not pre­vi­ous­ly existed.

The tool includes four parts with each ques­tion. The parts are: reduce, elim­i­nate, increase, and cre­ate. Let’s go through them!

Reduce: Which factors should be reduced below industry standards?

These fac­tors may include prod­ucts or ser­vices that you have invest­ed heav­i­ly in to cope with the com­pe­ti­tion. The prob­lem is that these invest­ments can cre­ate high costs that do not pro­vide much val­ue in return.

Eliminate: Which factors that the industry has long competed on should be eliminated?

This is the fac­tors that a com­pa­ny may have invest­ed heav­i­ly in but doesn’t increase com­pet­i­tive­ness and pro­vide lit­tle or no return at all. These may be invest­ments that have pre­vi­ous­ly been impor­tant but have lost their rel­e­vance over time.

Increase: Which factors should be raised above the industry standard?

This is the fac­tors that cre­ate val­ue for cus­tomers, but thus far been ignored by the industry.

Create: Which factors should be created that the industry has never offered?

This is the fac­tors that need to be dis­cov­ered to cre­ate new val­ue for customers.

Strategic tools can eas­i­ly become abstract and dif­fi­cult to under­stand. Let’s put the four action frame­work in con­text by look­ing at an exam­ple from reality.

Historical examples

One of the most well-known exam­ples of Blue Ocean Strategy is found in the enter­tain­ment industry.

The tra­di­tion­al cir­cus indus­try had a hard time in the ‘80s. New pop­u­lar amuse­ments sprang up, includ­ing video and com­put­er games, and peo­ple also began to ques­tion the use of wild ani­mals. Revenues began to decline at the same time as the costs of run­ning a cir­cus were high. As if that was not enough, the tick­et prices were fair­ly cheap, which cre­at­ed bad margins.

Out of these con­di­tions, Cirque du Soleil was born. The ani­mals were elim­i­nat­ed but they kept the sup­port­ing ele­ments of the cir­cus: the clown, the acro­bat­ics and the tent. But at the same time, they cre­at­ed some­thing new; the clown did not become as sil­ly, the acro­bats got artistry and the tent was made more lux­u­ri­ous and cosier.

They took inspi­ra­tion from the the­atre world and Broadway. Instead of doing the same num­ber over and over again, year after year, with only minor changes, they wrote a sto­ry and made dif­fer­ent sets. Simply put, they increased the qual­i­ty of the shows.

Cirque du Soleil cre­at­ed a new val­ue propo­si­tion – a sophis­ti­cat­ed mix of cir­cus, the­atre and dance – which attract­ed peo­ple who usu­al­ly go to opera, the­atre and bal­let. This meant that tick­et prices could be raised quite dra­mat­i­cal­ly. At the same time, they avoid­ed high costs by not hav­ing any animals.

Now you may be won­der­ing what it looks like in the food indus­try. What exam­ples can we find there?

Ful Foods

The com­ing decades will be about sus­tain­abil­i­ty and envi­ron­men­tal work, which in turn will affect how we eat and drink. This is some­thing that the com­pa­ny Ful Foods has tak­en note of. Ful Foods is a start­up that has start­ed mak­ing bev­er­ages but not just any beverages.

In the Ful Foods prod­uct range, we find sug­ar-free prod­ucts, with­out addi­tives and with a low-calo­rie con­tent. But is it enough to be called inno­v­a­tive in 2020?

No, what real­ly sets Ful Foods apart from oth­ers is the use of the sea pantry; in their bev­er­ages we find microalgae.

Foods with algae are any­thing but a gim­mick. According to Ful Foods, microal­gae have sev­er­al impor­tant ben­e­fits. They pro­duce more than half of the oxy­gen we breathe and are bet­ter than trees at cap­tur­ing car­bon diox­ide. Nor is any arable land required to grow the nutri­ent-rich microal­gae that are rich in pro­tein and vitamins.

Kind to the planet and the people

In Ful Foods drinks, we get a bev­er­age with few calo­ries, low cli­mate impact, no added sug­ar, but which also pro­motes health by active­ly adding pro­tein and vit­a­mins. In sum­ma­ry, by using microal­gae, Ful Foods has cre­at­ed a prod­uct that is kind to both the plan­et and humans.

Listen to the founders of Ful Foods and what they have to say about their prod­uct and Blue Ocean Strategy.

Insects in food

In the same way that Ful Foods uses microal­gae, you can use insects. Insects are packed with pro­tein and vit­a­mins, are inex­pen­sive to breed and have min­i­mal cli­mate impact.

But even if there are good rea­sons to start par­ty­ing on meal­worm bee­tles and grasshop­pers, it is down­right dis­gust­ing for many people.

But what hap­pens if you make pro­tein pow­der from insects, or cre­ate pow­er bars from the pow­der – and also add oth­er use­ful ingre­di­ents such as sun­flower seeds and pea pro­tein and sweet­ness from ste­vi­ol gly­co­sides?

That’s exact­ly what the German com­pa­ny Isaac Nutrition is doing. By fill­ing con­ven­tion­al prod­ucts with inno­v­a­tive ingre­di­ents that are good for humans as well as the plan­et, Isaac Nutrition cre­ates a new val­ue proposition.

Finally

Finally, suc­cess­ful com­pa­nies in the blue ocean will be joined by oth­er com­pa­nies and the val­ue propo­si­tion will become main­stream. If com­pa­nies like Ful Foods and Isaac Nutrition are suc­cess­ful, more com­pa­nies will try their luck doing bev­er­ages with algae or pro­tein bars on insects.

Blue Ocean Strategy does not promise end­less hap­pi­ness and pros­per­i­ty. There is how­ev­er long-term val­ue in being a pio­neer and active­ly work­ing with val­ue propo­si­tions and con­vey­ing it in mar­ket­ing activities.

Read more!

If you want to learn more about Blue Ocean Strategy, you can do so at www​.blueo​ceanstrat​e​gy​.com which is the strategy’s offi­cial website.

If you want to read more about busi­ness devel­op­ment in the food indus­try, we have many thought-pro­vok­ing arti­cles on Bayn Magazine – every­thing from why you should reduce sug­ar by stealth to what is impor­tant for the new gen­er­a­tion of con­sumers and much more.