Mass Customization comes to food

General Mills, P&G Web sites make consumers product developers.

You’ll find only 50,000 items in a typical supermarket. But if you visit General Mills’ new cereal customization site, MyCereal.com, your preferences could steer you toward any of more than 1 million blends of cereal alone. At PersonalBlends.com, the new custom coffee site of Procter & Gamble Co.’s Millstone brand, more than 36 billion individual “tasteprints” are theoretically possible, allowing for plenty of coffee choices even if everyone on earth logged on for a cup of joe.

After years of trying to streamline supermarket retailing by trimming slow-moving stock-keeping units, two heavy hitters are embracing variety in a big way. The new wrinkle: direct-to-consumer Web sites that tailor products to individual tastes.

While mass customization has been an intriguing intellectual parlor game among some food and beverage executives for at least a decade, General Mills and P&G are finally putting it into practice–at least on a limited basis. And while neither company is painting mass customization as a force that will fundamentally change the industry, both are hoping to turn their fledgling ventures into full-fledged businesses.

Dell Computers turned direct-to-consumer Web-based customization into one of the most respected names in the technology industry. But other industries have been slow to follow its online customization model. Maybe with good reason.

“I think (customization) may make sense in specialty foods,” says Sheryl Tullis, brand manager for PersonalBlends.com and other Millstone interactive ventures. “It doesn’t make sense to customize a lot of commodity-type products. But it does make sense if people are willing to pay more for something that’s an integral part of their lives. Coffee is just one of those categories that people are really passionate about. They have to have it–maybe physically–but even more for social needs. You have to have it for comfort.”

Tullis is perhaps the most seasoned veteran in the young and so-far tiny world of interactive food customization. She was involved with the original, low-key launch of Millstone’s customized coffee in 1997, a mail-order program that evolved to the brand’s Web site, Millstone.com. Millstone pioneered the online mass customization concept in packaged goods two years before P&G launched the better-publicized Reflect.com, a high-end beauty-care e-tailer that, like Millstone, customizes products based on consumer responses to questions.

Millstone’s first venture into online mass customization was ahead of its time in more ways than one. Its complexity restricted access to a relatively elite group even among the Web savvy of 1997. P&G relied on Shockwave’s Flash technology at a time when many Web users didn’t have the necessary plug-ins or the wherewithal to download them easily. Those who found the software’s complexity meant slow-loading Web pages.

P&G shut down the original Millstone customization project after about a year but didn’t give up on the idea. Tullis and her team, spilt between the Seattle area around Millstone’s roastery and P&G’s Cincinnati headquarters, worked on a revamp.

“We were (originally) doing a direct-to-consumer program, and we added the Internet part on very late in the game. We never really fully explored the Internet possibilities. When I stopped the test, what I realized was that… my systems and order processing were set up for legacy systems that weren’t going to allow us to have the speed and flexibility we needed to really have a personal program. So, I kind of shelved it for a while, waited…and went back out when I could get new partners to help me with the interactive piece.”

PersonalBlends.com, the new version of Millstone’s custom coffee, teams with iGourmet.com, which plays a role both in marketing and fulfillment, rather than selling coffee totally direct to consumers. “One of Millstone’s philosophies is trying to build the Millstone brand through retailers,” Tullis says. “So we’re not going to neglect the Krogers of the world. And we also want to start looking at more of the specialty retailers–people who can build our brands. So even though we’re exploring direct-to-consumer, we’re also exploring working with retailers and handling it that way.”

PersonalBlends also does away with the continuity model, similar to Kraft Foods’ Gevalia gourmet coffee brand, in which consumers sign up to receive regular shipments.

PersonalBlends.com and MyCereal.com aren’t just about picking from a list of options and features, a la Dell Computers. Instead, both sites offer product recommendations based on consumer responses to questions about their preferences. PersonalBlends, for example, asks about visitors’ taste preferences in chocolate and salsa as a way of developing coffee “tasteprints.” MyCereal.com asks about individual health concerns, including cardiovascular health, osteoporosis prevention and diabetes.

Thus, PersonalBlends offers consumers the chance to store a number of tasteprints and tweak settings on existing blends in follow-up orders. Likewise, MyCereal.com allows visitors to create several blends and tinker with them on their return visits.

Tullis also noticed early on that consumers were interested in developing blends to give as gifts, so Millstone reconfigured its site to allow for gift cards and wraps by early December. General Mills has noted a similar interest in customized food gifts. Among early brand names chosen by consumers was “Jen’s Way to Pete’s Heart,” purchased by a woman for her significant other.

General Mills launched its test of MyCereal.com in November and began opening its virtual doors to a broader group of e-mail registrants in late December. General Mills still describes MyCereal as a test, but says early results are encouraging.

“The initial response has exceeded our expectations,” says General Mills spokesman Greg Zimprich. “We’re processing a lot of orders and getting good feedback at this point.”

MyCereal bills its site as offering “cereals that don’t exist until you create them,” and part of the creativity people are showing is with the names. One woman, who has a cereal blend high in calcium in hopes of preventing osteoporosis, dubs her product “Chocolatey Calci-YUM.” A schoolchild has a blend branded “Better than School Lunch.”

Both P&G and Big G charge premiums for their customized foods. MyCereal charges about $1 per one-serving bag, plus shipping and handling. Millstone PersonalBlends charges $9.99 per 12-ounce bag, plus shipping and handling, or about 69 percent more per ounce than bulk coffee sold in stores.

But while the idea of custom foods may sound appealing, doubts remain about the practicality.

“I don’t know how profitable it can be for the manufacturers,” says Robert Rubin, analyst with Forrester Research, who heads the company’s Netquity joint venture with Information Resources Inc. “It has lower margins than the box in the grocery store, and I don’t know if the market is actually that big…. There are also a lot of supply chain issues that would have to be ironed out before you could do it on a large scale.”

Plus, Rubin feels the consumer appeal may be fundamentally off. “I just feel that people who want to buy things online are trying to save time,” he says. “I guess I have a problem in the perceived value….I don’t think individual food and beverage products have the kind of relevance that would make it worthwhile for people to (customize).”

For their part, P&G and Big G don’t know how big the market is either, but they remain committed to finding out. Tullis estimates 20 percent of coffee drinkers buy premium brands but isn’t sure how many of them will take the extra step to customize.

PersonalBlends may also help P&G develop some new products for conventional retail distribution and balance consumer need for variety with supply chain efficiency demands for fewer products on the shelf.

“We’re trying to get more people access to Millstone and great gourmet coffee,” Tullis says. “Where we can do it through retailers that’s great. But retailers can’t really carry the Internet SKUs that we have for custom blends.

Procter is really focused on category management, and we want to help our retailers … so we want to find a way to deal with variety and not have to use so much shelf space.”

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