BCG - The Boston Consulting Group

Tastyco, a leading children's food manufacturer, wants to develop a growth strategy to deliver more than $100 million of incremental revenue within three years. Tastyco holds 50 percent of the market for its main category and is one of the best known and most trusted brands of children's food in the United States.

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BCG began by establishing an integrated team that included six BCG consultants and dedicated client senior managers from marketing, finance, sales, R&D, and packaging. The team then generated hypotheses and structured a four-pronged search for growth opportunities. The modules entailed:

• Consumer research to determine brand stretchability—what other kinds of products could the brand cover? In addition, deep one-on-one consumer research uncovered consumer needs and dissatisfactions in the food category. A subsequent national quantitative survey established the dimensions of the consumer needs identified

• Competitive patterning in France, Italy, Germany, the United Kingdom, and the Netherlands. The team analyzed the positioning, product assortment, communications practices, and pricing of leading competitors to help generate new ideas for the U.S. market

• Trade interviews and trade margin assessment to help the client understand trade needs, the potential appetite for new products, and the financial attractiveness of those products to the trade

• Financial modeling to size prospective new-product offerings on the basis of current category size, aspirational appeal, and potential share and economic attractiveness for the client

Competitive patterning provided the first insights that led to a redefinition of the company's category strategy. Unlike U.S. players, European companies defined the potential market holistically, looking at all of components of a child's caloric intake—an approach the team defined as "share of stomach," as opposed to our client's definition of its category as "share of food type." With this approach, European companies had developed product lines that reached across age groups and food categories.

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This new mindset transformed the way the client thought about its business. Whereas the client had defined its position as a dominant market share in the children's food category, BCG's findings led Tastyco to realize that it had less than 10 percent of a $10 billion market for children's stomachs. As a member of the client team put it: "There was a real 'ah ha' when we identified the huge white-space potential for growth."

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Consumer research showed that parents had an unfulfilled desire for trusted, highly nutritious food products that were also visually appealing and tasty to supplement their own home-cooked meals. Four specific product areas were identified as a primary focus for new launches.

Next, the team worked with the client to analyze the best way to seize the opportunities. The client would have to revamp its R&D and marketing to create and support the new lines. Detailed action plans called for significant increases in marketing and R&D outsourcing.

The team's white-space discovery amounted to a complete change in trajectory for the client—from a focus on nutrition for a relatively narrow market to a focus on all food for a much wider market. The company will launch two new product lines in 2005, and as many as five additional lines between 2006 and 2007. Tastyco expects revenues to grow by 10 percent in the short term and to almost double over the next ten years, for near-term growth of over $300 million, or more than three times the stated target.