The brand that we were managing in China was a >$50M revenue baby foods brand but with a struggling 4th or 5th market share position in China. While we sold a lot of baby products for children from the age of 7 months to 3 years; the product line that accounted for a bulk of the sales were instant cereals. Instant cereals are given to kids once they can consume something semi-soft. The largest part of the infant baby market was instant milk formula, a few billions $ category, just in China. We did not play in the instant milk formula market, which meant our distribution footprint in the baby stores, modern trade stores (think JD, Ali but in large mall-based stores) was limited for instant cereals and within e-commerce, while we could play aggressively, with close to half our sales coming from it, we were still sub-scale from a revenue stand point to the e-commerce retailers.
For a variety of reasons, including the flavor mix of the cereal range, the limited marketing and promotion spends and of course, not the right pricing, our brand had been losing share and size. Well, this is an understatement - we were declining by 25% year-on-year, which is like ground hog day.
THE CONTEXT
While this category was not our biggest revenue driver, the size of its decline was defining the company’s overall revenue drop. What this meant was that it became the top priority to fix, in terms of driving growth for the OpCo. The first port-of-call was to evaluate the product's quality and variant choice; i.e. identifying the right flavours that moms desired for their infants and then referencing them with the international range of flavors the brand had, to finally lock the right set of 4 flavors that we would launch. Once this was done, the next thing was to move to feasibility in terms of checking if the current production process we had, could manufacture these new flavors. Think of this simply - imagine (for example) we had a “veggie” variant for infant cereals and now wanted to launch a “chicken” variant or even a “fruit variant”. It is not necessary that these can be cut, mixed, packed on the same line as a “veggie” variant. We, hence, had to, along with manufacturing, make some modifications to the production line to ensure these capabilities were created to produce the new variants at scale. In parallel, procurement needed to source the raw materials for the new flavors at a reasonable cost, so that we could sell this at the increased price, while maintaining costs and thus improving our profit margins.
In any innovation process, there are trials - a pilot trial on the production line to check the feasibility. During this one, there were no major issues raised in the manufacturing of the new variants.
The second one is a manufacturing trial (called different things in different companies) - where the line is made to run for an extended period of time to ascertain if the production will work, at scale. This is followed by the final batch trial, to create one fairly large batch of the final product.
It’s in the manufacturing trial that the issue first surfaced - During the sealing of the pack (think of your wafer/chips pack - they are sealed from the top, which is a standard “packing” process in factories), there was residual powder from the cereals getting stuck in the seal!! Doesn’t sound like a biggie, right? Except it is - a “compromised” seal means air/dust/particulates can enter the pack. At the very least, the cereal would then get soggy and clump up. At its worst, dirt/dust could enter, making the contents unsafe. This is not acceptable under any circumstances but here we were talking about feeding infants. So it simply wasn’t a risk we, or anyone in our place, would take.
Any of the issues mentioned above would trigger a recall from either the retailers who sold the product, which meant a heavy revenue loss and profitability loss, on account of writing off the whole stock. Worse, it would trigger a mass recall, if moms noticed and complained, which would mean a heavy reputation loss.
THE MISTAKE
When we went back in the process to identify the root cause, the reason came through - for particle sizes under 0.2mm, the current machine didn’t have the capacity to eliminate/dispel the powder off the processing line. Think of it visually - the line had a “fan” type of device to blow away any residual powder before sealing. This wasn’t effective under 0.2mm of particle size.
So how was this missed? - In the design, we didn’t account for this as a necessary condition in the “density/thickness” of the powder. We are talking micro-millimeters here but as one would realize, it was vitally important. And the reason it wasn’t thought of - the current (not the new ones we were designing) variants didn’t have any cereals with particle size above 0.2mm.
THE LEARNING
It’s simple really - when you start to design and have the benefit of knowing that you will likely use an existing production process to manufacture, design your product to fit the specifications of your current production line. It will save the company costs, which will be avoided in production upgrades and time, which is what we lost a lot of.
The fix was painful - the machine needed to be modified with an additional spare part, which the original machine manufacturer had to create, then install, then we had to run trials and then we could produce. It cost the company more than 9 months of time to market and taught me a very, very valuable lesson on design optimization.
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