Excerpt
2 Table of contents
1 Abstract
2 Table of contents
3 List of figures and tables
4 Introduction
4.1 Problem statement
4.2 The trend timeline and its current state
4.3 The research aim
4.4 The target audience for this thesis
4.5 The structure of this paper
4.6 Methodology
5 Definition of the terminology
5.1 How are SMEs defined in Europe?
5.2 Fermented functional food and beverage
6 Branding and the positioning strategy in theory and practice
6.1 Market segmentation and targeting
6.1.1 The Sinus-Milieus Model
6.1.2 The use of the Sinus-Milieus Model in the fermented food and beverage niche
6.2 Positioning
6.2.1 Adapted Braunegger‘s positioning model
6.3 The meaning and execution of branding for SMEs
6.4 Chapter summary
7 Three qualities as driving factors of branding in this area
7.1 Authenticity
7.1.1 Why are people buying authentic small-scale products?
7.1.2 Six aspects of authenticity
7.1.3 Authenticity from the consumer perspective
7.2 Sustainability
7.2.1 Packaging, product, processes, distribution
7.3 Independency
7.4 Chapter summary
8 Marketing communications analysis with the focus on authenticity, sustainability, and independence
8.1 Fairment & Completeorganics: How does a well-run SME in the fermented food industry look like?
8.1.1 Fairment
8.1.2 Completeorganics
8.1 Overview of 8 European SMEs from the fermented food and beverage industry
8.2 What the above fermented foods businesses have in common?
8.3 Communicating authenticity
8.3.1 Best practices: How are SMEs communicating authenticity?
8.3.2 Storytelling, appearing as artesian amateurs
8.3.3 Biographical authenticity, sticking to the roots
8.3.4 Procedural, material, and temporal authenticity, love of the craft
8.3.5 Geographical authenticity, being one with the community
8.3.6 Oppositional authenticity
8.3.7 Comparison and possible outtakes
8.4 Communicating sustainability, best practices
8.4.1 Certification
8.4.2 Cooperations
8.4.3 Sustainable packaging and delivery
8.4.4 Comparison and possible outtakes
8.5 Independency, a customer point of view
8.6 Chapter summary
8.7 Conclusion
8.8 Limitations and the need for further research
9. Preliminary list of references
9.1 Scientific articles, books, corporate documets
9.2 Online sources
9.3 Figures and tables
3 List of figures and tables
Figure 1. Sinus-Milieus, Germany
Figure 2. Applied Braunegger's model
Figure 3. Brands reinventing fermented food and beverage
Figure 4. A “4Ps” model for SME self-branding
Figure 5. Fermented products by Fairment
Figure 6. Fermentation kits by Fairment
Figure 7. Founders, Completeorganics
Figure 8. Products by Completeorganics
Table 1. SME Overview
1 Abstract
The purpose of this paper is to examine how privately-owned, European SMEs are using authenticity, sustainability, and independence as part of their branding strategy for selling fermented functional food and beverage. The paper discusses possible promising target groups and gaps in the market by using the Sinus-Milieus and Braunegger's models. A literature review of the authenticity, sustainability, and independence concepts is followed by an in-depth analysis of eight SMEs, which illustrates how these concepts are being communicated by existent entities. The findings show that start-ups in the fermented food and drink industry tend to use phrases and visual materials that can be categorised in five areas of authenticity, while primarily focusing on one to two areas. It was noticed that 75 per cent of analysed SMEs use their website to communicate their sustainability principles. Moreover, the examples exhibit the widespread use of glass and recyclable hemp as packaging materials. In addition, green delivery and C02 emission off-setting were found to play a significant role in today's sustainable SMEs. In the section on independence, the author hypothesises the increasing importance of independence in the food and beverage business. Concludingly, the paper aims to assist companies to find their place in the market, especially while competing with mainstream brands and large corporations. With the help of this toolset, these privately- owned enterprises will be able to spend more time producing healthy, desired products while creating significant added value that directly contributes to the EU economy.
Keywords: SMEs, branding, authenticity, sustainability, independence, marketing communications, fermented functional food
4 Introduction
4.1 Problem statement
Even though the European food and drink industry has the highest turnover worldwide, it has been facing difficulties in terms of relative competitiveness. The sector shows less creation of added value, compared to food producers from other parts of the world.1 With initiatives, such as the EIT Food Accelerator Network, the EU is supporting innovations in food, especially those focused on creating „consumer valued food for healthier nutrition“.2 Generally speaking, there has been an increasing demand for healthier foods among European consumers. The growing segments of vegetarians and vegans lean towards buying functional foods that are high in protein, vitamins, and minerals, while being packaged for snacking.3
The Food Navigator reports that fermented foods have been gaining significant popularity in western markets. This megatrend could be due to their association with gut health benefits, natural production processes, and a thrill for exotics tastes, especially seen in millennian consumers buying Kombucha and Kimchi. Europe has a tradition of fermenting milk products and vegetables, however, with the growing number of plant-based consumers, there seems to be potential for innovation that start-ups have been recognizing and acting upon.4
Mr. Phil Hogan, The European Commissioner for Agriculture & Rural Development stated that the 285.000 European food and drink SMEs are the lifeblood of our economy.5 It should be noted, that researchers have expressed the need to adjust established marketing models for small enterprises as they show difficulties applying them due to resource scarcity and their unique characteristics.6 As most of the existing work in functional foods marketing focuses on large, international brands, there is a need for a type of toolset/guideline to help-start-ups and SMEs with positioning, branding, and marketing communications. Privately-owned enterprises will then be able to spend their time producing healthy, desired products while creating significant added value that directly contributes to the EU economy.
4.2 The trend timeline and its current state
The trend seems to have its origins in the US; therefore, the majority of available studies had been carried out with American consumers. Following the timeline, more European experts start to speak about the trend as well.
In 2014, Packaged Facts, a leading US market research publisher, was one of the first to study the upcoming trend of fermented artisanal foods. Their report claims that the increased consumer interest in artisanal products, combined with affection towards food functionality, wellness, and bolder, foreign flavours, seem to be the driving factors behind its appearance in restaurants and high-end grocery stores all over America. In addition, easier access to global foods with authentic preparation played a role in its spread. This 2014 trend tracking series identified Korean kimchi, lactic-acid fermented craft pickles, fermented Asian fish sauce and dried shrimp (paste), miso, tempeh, and small-batch whiskey as products worth investigating further.7 The 2018 MunuTrends research by Datassentials revealed that the term “fermented” appeared in restaurant menus up to 46% more often than in the last four years. Kombucha was found up to 226% more frequently; kefir increased by 101%, kimchi was up for 92%, and the word pickled itself increased for 55%.8 IRI's New Product Pacesetters found a yogurt fermented in its pot called “Yoplait's Oui yogurt” to be the third best-selling new food/beverage of the year 2018.9 The HealthFocus' U.S. Consumer Trends Survey from 2019 found that 5658% of consumers link their microbiome state with weight management, energy levels, and mental well-being. Therefore, it had been forecasted that the interest in these types of food might stay long-term.10
The health food trend has been accelerated by the Covid-19 pandemic and the European EIT Food Accelerator Network predicts that it will stay one of the top 5 trends post pandemic. Besides the food that increases health and wellbeing, consumers may look for personalized nutrition, online purchasing options directly from producers, alternative proteins, sustainability, and new tastes.11 Mr. Renton, the managing director of the UK-based food and drink consultancy HRA Global is convinced that the products that are meant to stay are those “in the space of natural wellness - kefir, kombucha, sourdough, collagen.” as their benefits are scientifically proven. In contrast, a UK professional from Young foodies believes that gut health and immunity are going to become overpowered by products that are focused on mindfulness and mental health. However, there is no data on why a focus on gut/mental health would be mutually exclusive. Some critics state that the post-pandemic economic situation could make it less likely for people to spend money on expensive functional food.12
In conclusion, the trend is still developing, evolving, and changing. This creates opportunities as well as challenges for enterprises in the food and beverage industry. This research is committed to providing the knowledge needed for facing some of the challenges.
4.3 The research aim
The purpose of this research is to serve as a wholesome and practice-oriented toolset for startups and SMEs, co-creating the fermented foods trend. It aims to answer the following research question: „How are privately-owned, European SMEs successfully using authenticity, sustainability, and independence as a branding and positioning strategy for selling fermented functional food and beverage?“ The question will be answered by firstly analysing and compressing the scientific research behind these individual concepts. Moreover, the existing companies in this niche will be looked at to provide examples for the implementation of these qualities.
Based on the researcher's current knowledge, such scientific yet practice-oriented and easy to follow research made specifically with SMEs in mind is unique. It, therefore, fills a gap in the existing literature that has been only researching the concepts of authenticity, sustainability, and independence as separate entities.
4.4 The target audience for this thesis
Small enterprises tend to struggle with resource scarcity, which can apply to time, money, and knowledge.13 Therefore, it might be challenging for them to spend time reading several academic articles while also searching for practical examples and trying to understand how the concepts fit together. This literature review with an analysis of real companies is designed for teams running or starting their fermented foods businesses. Its goal is to facilitate deep understanding, not only of branding and positioning but especially the concepts of communicating authenticity, sustainability, and independence. In addition, this paper might play a role in the value-setting process of these young, small enterprises. Concludingly, it could make it easier for these companies to find their place in the market, when competing with the mainstream brands, supermarket chains, etc.
4.5 The structure of this paper
This Bachelor paper will consist of three major parts.
In the first part, the researcher will focus on the theory behind branding, positioning, and targeting. To give a more practical perspective, the question of „How does a well-run SME in the fermented foods industry look like?“, will be answered.
The second major part will provide a brief scientific explanation of the three driving factors behind branding in the fermented functional food and beverage area: authenticity, sustainability, and independence.
An in-depth analysis of eight SMEs is going to be the final and most extensive part of this thesis. The researcher aims to identify how authenticity, sustainability, and independence are communicated in real life by the SMEs in the field. The analysis will provide examples for the implementation of the theoretical concepts discussed in the second part.
4.6 Methodology
The author will perform a systematic literature review to determine how SMEs in the fermented functional foods niche are using authenticity, sustainability, and independence as part of their branding and positioning strategy.
For the theoretical parts, the information will be drawn from established marketing books and relevant, peer-reviewed scientific articles, published mainly between 2017 and 2021. For the trend research, trustworthy magazines and reliable trend research agencies will be used as the source of information. The final analysis will be based on real and publicly available media outputs of the companies such as websites, blogs, newsletters, etc. Conclusions will be formed based on logical connections between the theory and the practical examples.
5 Definition of the terminology
5.1 How are SMEs defined in Europe?
SMEs represent a 99,2% share of all European food and drink companies. With their accumulated yearly turnover of approx. EUR 515 billion, they generate 40% of the industry's total turnover. Moreover, they employ approx. 2.9 million people, which is more than half of all jobs in the sectors.14 Due to their importance, it is significant to understand which companies fall into the SME classification.
The European Commission classifies small and medium-sized enterprises, short SMEs, as companies „...which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.“15. Within this category, entities are further divided into medium-, small- and microenterprises. The term microenterprise only applies to those employing less than 10 people, while not exceeding an annual balance sheet total/turnover of EUR 2 million. Small enterprises may employ up to 50 people and reach an annual turnover/balance sheet total of EUR 10 million.16 The remaining entities are seen as medium-sized.
5.2 Fermented functional food and beverage
Science defines fermented foods and drinks as „. those made through desired microbial growth and enzymatic conversions of food components.“17 Fermentation microbes such as mould, yeast, and bacteria, do not only facilitate higher digestibility, unique flavours, textures, and odour but can simultaneously enhance the nutrient density of raw ingredients by creating new vitamins, fatty acids, and minerals. However, this only goes for final products where the microbes have not been removed/killed in the after-fermentation processes, such as baking (sourdough bread), heat-treatment (shelf-stable pickles), filtering (wine), smoking (sausage), etc.18 Fermentation is therefore a way to create food and beverage rich in pro-and prebiotics and antioxidants,19 as the market shifts to desire nutritionally functional foods, which are those offering health benefits.20
This research focuses exclusively on fermented products, still retaining living fermentation microbes. These are for instance yogurt, kefir, unpasteurized fermented vegetables, natto, tempeh, miso, unfiltered beers, most kombuchas, etc.21
6 Branding and the positioning strategy in theory and practice
The role of brands, which can come in the forms of trade marketed logos, images, names, designs, shapes, or other unique features, has been increasing. Product branding helps set the products apart from the competition, assists with retaining customers, fosters loyalty, and allows for more price flexibility.22
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1 cf. Lodorfos (2018), p.122.
2 EIT Food (ed.) (n.d.), n.p. (online).
3 cf. Lodorfos (2018), p.123.
4 cf. Askew (2019), n.p. (online).
5 See Fooddrinkeurope (ed.) (n.d.), n.p. (online).
6 cf. Resnick/Cheng/Simpson (2016), p. 158.
7 cf. Packaged Facts (ed.) (2014), n.p. (online).
8 cf. Datassentials (ed.) (2018), as cited by Sloan (2019), n.p. (online).
9 cf. Levin/Driggs (2018), n.p. (online).
10 cf. HealthFocus (ed.) (2019), as cited by Sloan (2019), n.p. (online).
11 cf. EIT Food (ed.) (2021), n.p. (online).
12 cf. Food Processing Technology (ed.) (2021), n.p. (online).
13 cf. Kraus (2019), p. 416.
14 See FooddrinkEurope (ed.) (2020), p. 7.
15 Commission Recommendation (2003), document number C(2003) 1422, Article 2.
16 cf. Commission Recommendation (2003), document number C(2003) 1422, Article 2.
17 See ISSAP (ed.) (2020), n.p.
18 See ISSAP (ed.) (2020), n.p.
19 cf. Xiang (2019), p. 206.
20 cf. Guiné et al. (2020), p. 9.
21 See ISSAP (ed.) (2020), n.p.
22 cf. Tomczak/Reinecke/Kuss (2017), p.15.