A story of ‘relevant and adjacent diversification’.
Donnelly’s Fruit and Veg. A story of ‘relevant and adjacent diversification’.
There are countless ways for businesses to grow. Some of these include organic growth, which is about growing sales and/or margin with existing customers or by reducing costs. That sales growth might involve additional products related to the existing portfolio, more customers, increasing prices, hiring more salespeople, and so on.
Another option for growth is through diversification. This can be a challenge for any business and the world is full of examples of successes and failures. Virgin is one exception where it capitalises on its unique brand name to exploit opportunities in many ways. But Virgin Cola wasn’t such a positive result. Neither was Cosmopolitan Yoghurt, an offshoot of the international magazine.
Other global brands like Disney with their extension into theme parks, retailing and cruise ships worked amazingly well. So did Hewlett Packard when they ventured from PCs into printers. So what’s the secret to successful diversification?
Conditions for Effective Diversification
Donnelly Fruit and Veg in North County Dublin has diversified over its 39 years of existence with great success. Now one of the top wholesalers of fruit and vegetables in the country, they have a lot to build on for the future. In its case, the key ingredients for successful diversification answered two key questions…
1. Does the new adjacent business significantly improve or take away from the value proposition of the current business?
2. Does it use enough of the company’s unique capabilities to give the company a right to succeed in the new market?
FruitBox.ie is a newly launched business for Donnelly, headed up by Paul Hussey, the Wholesale Fruit and Veg Manager. Capitalising on the very strong health and wellness revolution in society, FruitBox is a B2B business that delivers a box of fresh fruit direct to your business. As organisations look for innovative ways to engage their own employees, this is a novel idea that also supports their health and wellness. Orders can be placed on a fixed basis, say twice a week, or can be ordered at short notice and delivered inside a guaranteed 90 minutes.
Challenges with Creating a New Adjacent Business
Does the new business add to the value proposition of the current business?
The FruitBox concept was born out of a number of industry dynamics. One is the evolving retail landscape in Ireland which is dominated by five big players. Acquiring additional new customers is less of an option. Additionally as it is a commodity business, prices and therefore margins, are very tight. And Donnelly also wanted to ensure they built a B2B model, so that it doesn’t encroach on the existing retail customer base.
The name ‘Donnelly’ is only starting to get recognised by the consumer but has a strong reputation for quality and service built up over its lifetime with its retail customers. Building further on that reputation, it was keen to develop a proposition that was aligned with that strategy. The product mix is an exact subset of the main portfolio in the wholesale collection.
Does it use the company’s capabilities?
Clearly the skills of the organisation such as buying, marketing, selling and delivering fresh fruit and vegetables is being used in FruitBox.ie. No new suppliers or products are being used. Products are already in stock and some systems are in place. The people involved are highly experienced and skilled at what they do, so it seems like an obvious extension or adjacency to the main Donnelly business.
Having answered the two questions above, Donnelly set out to launch FruitBox.
New Diversified Business Launch Tips
1. Invest wisely. The only significant investment made was in technology, packaging and more recently, marketing to launch the concept. The team have been clever in partnering with a new ‘Uber type couriers’ type service called Zendfast. Headed up by logistics industry expert Declan Murray, Donnelly has not had to invest a since cent in delivery vans or drivers. When a customer places an order, a message simultaneously goes to Donnelly and Zendfast, where a Zendfast courier will collect the box from Donnelly and deliver to the customer’s door.
It has been decided to not build an app at this time. It is assumed that all B2B customers will have ready access to a desktop, so orders are placed on-line from a desktop PC or mobile device.
2. Get the message out there. Starting with a social media campaign only for now, Donnelly has also outsourced the digital marketing to a specialist company called Effector.ie, headed up by 22yr old Karl O’Brien. Recognising that this marketing medium is very specialised, Donnelly has decided to embrace this channel, taking comfort from knowing that it can be clearly measured.
Going forward, Donnelly may well face the challenge of using traditional marketing channels and not be so dependent on social media. Industry trade fairs, magazines, press, PR and radio are all worth considering at some point as scaling up is the ambition.
Diversification into adjacent industries is often very doable so long as you follow some careful steps in the initial planning phase. In my view, a key word here is ‘relevance’. Being relevant to your own business model and to your customer is essential.
Alan O’Neill is the Change Agent. Go to www.alanoneill.biz if you’d like help with your business
© Copyright. Alan O’Neill. All rights reserved. 2018