Sometimes it’s easier just to crank out new flavors, but is it the right business decision?
If you make one flavor of salsa (or jam, or brownies, or sausage), then you know how tempting it is to add on a second flavor to expand your product line. You’ve got a sweet salsa, but it just takes a couple peppers and you have a hot salsa. It’s that simple.
But, should you expand your product line?
Food businesses of all sizes struggle with this problem. Expanding your product line is a business decision. On one hand, you want more shelf space. But, on the other hand, you don’t want to be sitting on a lot of inventory.
I currently have 9 flavors of mustard in production. And 3 more in development — 12 total. And to think, I remember being made fun of when I only had 4 flavors in 2010. It takes time to develop new flavors and create a bigger line. And launching with too many flavors may hurt you.
Lets look at why a food business would expand their product line and why they wouldn’t:
Reasons to expand your product line
1. Get more shelf space
One product SKU looks lonely on a retail shelf. Your product will get lost on the shelf in the sea of other companies with larger product lines. A benefit of bringing on more flavors means you get more of a brand presence on the shelf. Plus, you give your customers a new flavor to try. Speaking of customers….
2. Respond to customer demand
If your business is anything like mine, you’ve got customers asking for all kinds of crazy flavors. Or maybe they want you to recreate what their Grandmother used to make. Or, maybe you’ve created a great test flavor and people actually want to buy it (make sure to calculate your food product cost first). Customer demand is a great reason to extend your product line because then you know you’ll have proven sales in local retailers.
3. “Always something new”
If you participate in a weekly farmer’s market and you’re looking to increase sales at farmer’s markets, creating new flavors in one of the best ways to do that. Why? It gets people coming back to see what you have. Plus, it establishes brand loyalty. I use this strategy because 2 loyal fans are better than 20 who just buy your product once. Think about how you can test new flavors on your current customers to build your product line.
Reasons to not expand your product line
1. Lots of inventory
It’s no secret: more products = more inventory. With 9 flavors in storage, there are a lot of piles of mustard. Things were a lot simpler when we had 4 flavors (of course), but we decided to expand because test marketing showed everyone clamored for our new flavors. Also, more inventory means more cash going out of your pocket. Plus, you’ve got to finance the expansion. And if you’re small, you may not have the cash to do so. Plan your expansion. Don’t simply do it because you want to.
2. Cannibalizes sales of other products
In both of my food businesses, whenever we launched new products, the sales of other products always declined. New flavors were in and old flavors were out. Know that when you launch new products, sales will be strong for a while and other flavors will take a hit.
3. Might not get shelf space
Yep – it’s on the negatives list, too. Why? Because buyers only have so much shelf space to work with. That means when you create new products, they may not end up on the shelf space – even it’s the “best flavor you’ve ever created.” For some stores, it could take months to make space. Launching new products into the retail channel takes time – keep that in mind.
4. It takes time to promote new products
Just like it takes time for buyers to clear the shelf, it requires your investment to to promote your new product, too. The old adage “If you make it, they will come” doesn’t exactly prove true. You have to get in-front of customers, do store demos, and find a way to get your product into more hands.
When it all comes down to it, expanding your product line has everything to do with profitability and the ability to actually do it. You have to have cash and a recipe developed. If you’ve got both, then by all means, expand your line. Watch your customers clamor over your new products :)