Finding your market niche
Article Date: Jan 30 2008As markets mature and consolidate, two things happen: wily entrepreneurs make their fortunes by selling to big businesses, and up-and-coming entrepreneurs need to figure a way to provide an alternative to those high street giants.
Tim Slatter, co-founder of speciality cake-maker The Cake Store has had to adapt to stay competitive: ‘We were part of a family business made up of five bakeries. They were traditional, high-quality bakers and we had a real love of the trade. This was around 25 years ago when large supermarkets didn’t have in-store bakeries. It was a real boom period for the company and we just couldn’t make the products quick enough.
‘Suddenly we began to see supermarkets cutting prices and building in-house bakeries, which hit the industry really hard. Due to the financial muscle bigger supermarkets exerted, they could offer staple products like bread at a loss just to get people into the shop. For us and many like us, it meant that we had to find a niche in which we could still operate profitably.’
Slatter saw the commercial potential in the speciality cake decoration business, a service that large supermarkets just wouldn’t be able to offer. ‘Supermarkets are after very high volumes and profit margins, so if we could offer something with a more creative edge we might have a fighting chance.’
The trick is to go for something that’s tailored and unique, thereby counteracting the blanket, mass-market approach. Take, for example, the beer industry, where smaller brewers are edging their way in and finding success.
As the bigger mainstream lager producers watch sales dwindle, regional specialist brewers of real ale are enjoying a revival, having seen a 7.5 per cent year-on-year growth in sales for the past few years.
Richard Keene founded The Cotswold Brewing Company in 2005 with the aim of brewing and supplying fine-quality lager to the local market. Of the 600 specialist breweries in the UK, his is one of a handful that brews lager as opposed to real ale.
He comments: ‘We wanted to produce something a bit more flavoursome to tap into the growing gastropub market and increasing demand for regional products. Still around 70 per cent of the beer consumed in the UK is lager, which is a bit more difficult to produce, so we decided to try to make something that you could characterise as an ale drinker’s lager.’
This requires a highly targeted approach to sales. In Keene’s case, concentrating on free houses and gastropubs is central to success. Adds Keene: ‘It wouldn’t have worked 20 years ago when there was more of a market for national brands, but as the mainstream lagers begin to lose their premium status, more breweries with genuine character can emerge and take advantage of the niche.’
