Who’s Going To ‘Eat My Lunch?’

Keep a look out for indirect competition.

By Greg Kitzmiller

Who’s going to “eat my lunch?” This is a question every businessperson should regularly think about. For those who are unfamiliar with the phrase, “eat my lunch,” it usually means to take something. In the case of business, it refers to taking away some of a company’s business.

Companies often see one firm as competition but sometimes the loss of business may not go to the direct competitor. So, understanding the competition comes from continual strategic planning. Continual strategic planning is the process of reflecting upon, and hopefully documenting, key issues that affect our businesses. Such reflection and documentation is done by a strategist all of the time. One key issue for this reflection is competition.

Know the Competition

How can you get to know the competition if you don’t even see them coming? Take the example of a Chicago, IL, restaurant owner who was quite successful for many years, but who recently closed his business. He had spent 20 previous years in the restaurant business before starting his own in 1994. His business was booming through 1998 as reviewers raved about his dishes and atmosphere. Then other businesses started “eating his lunch” as patrons started eating THEIR lunch elsewhere.

The problem was not other local Chicago eateries, rather it was the competition from the influx of chain restaurants. Big cities have long been known for fine one-of-a-kind restaurants. However, according to the Wall Street Journal, chain restaurants earned the majority (just over 50%) of restaurant business for the first time in 2001 (WSJ, “Food Fight” 7-09-02, A1).

Traditionally, local restaurant owners thought their competition was other local restaurants, with the big chains sprouting up in the suburbs or near interstates. In the past five years, however, chains of upscale restaurants have flooded the trendy areas of downtown Chicago. It was this competition, from a source not even thought of a decade ago, that caused this very popular eatery to go out of business.

Competition is not always direct. And competition does not always come from the source we, as managers, are watching. Competition comes in several forms. A very common form of direct competition is brand competition and the competition is more acute if two brands compete in the same store. There is also indirect competition (product competition), which may be more important for most businesses to pay attention to. Product competition means there are several products that fill a need. For example, one can take antioxidants from a tablet, from fruit and vegetables, from tea or through a fortified beverage. Each product form provides competition.

Competition may be best examined in layers. The first layer is the direct brand competition. Rainbow Light competes with Twinlab and One-A-Day competes with Centrum. The next layer is competition for the same dollar but among similar products. YourLife and Natrol brands of vitamin C compete for the same dollar against a brand of Pycnogenol® because the consumer who wants antioxidants, may switch between supplement sources. The next layer is usually product form. The consumer may decide that instead of taking a vitamin C tablet that they are going to try a new liquid vitamin supplement that delivers vitamin C. Knowing what is going on with new product introductions in similar categories prepares us for this type of competition. But the big blow usually comes with indirect product competition.

Consumer Behavior

Many businesses don’t prepare for shifts in consumer behavior. A key strategic question to ask is “who’s eating my lunch.” This forces companies to think about the behavior of former product purchasers in a new way. Did those purchasers give up on products or turn to other products? Usually there is some shift in consumer behavior that can be tracked, which may explain why a consumer shifted its purchase(s).

For example, consumers may perceive that they are eating healthier and therefore substitute fruit in their diet for vitamin supplements. This is where a consumer shift to eating more fruits and vegetables can hurt the supplement industry. Some managers will believe there is nothing they can do about a shift of that type, but that is false. If companies understand that consumers think they are eating better, then they should investigate whether that perception is based in reality. For example, I believe I am eating healthier if I eat a cup of yogurt for lunch. However, if I look at the label of the yogurt, it only provides 8% of the daily value for a 2000 calorie diet.

It may be beneficial for companies to show consumers the real intake of their products. Tropicana orange juice did a great job of this when it visually compared an orange on the side of the package to the percent of vitamin C found in a serving of juice.

Understanding where business is flowing can make a real difference in our change of strategy. We might change our product offering, our communication, our price, our method of distribution, the form our product comes in or some other factor if we understand where the business trends are going.

Summary

Often businesses concentrate too much on what the major trends are between direct brand competitors, while having the tendency to neglect the indirect competition. As an example, we hear businesspeople complain about the economy. However, economic factors do not ex­plain why a whole of firms continue to experience double digit growth. Certainly the nutraceuticals business is comprised of all different aspects of competition. Understanding who may be “eating your lunch” may lead you to make much better decisions.NW