Demand_Creating What People Love Before They Know They Want It

by Adrian Slywotzky

  This kind of thinking is essential in today’s complicated multilevel global economy. And it’s exactly the kind of thinking at which Tetra Pak has learned to excel.

  To foster demand at the food packager level, Tetra Pak has developed a remarkable array of innovations that go way beyond the aseptic carton itself.

  The ten-year process of solving the complex combination of problems that Ruben Rausing and his team had to master before the first Tetra Pak system could be installed in a Swedish dairy helped Tetra Pak develop a tremendous array of talents in process management, equipment design, materials science, microbiology, and techniques like homogenization, evaporation, and filtration. Today they put those skills to work on behalf of their corporate customers, developing ways of trimming costs, improving efficiencies, reducing downtime, and, most important, opening up new revenue opportunities by developing new products for new markets.

  An example is Tetra Pak’s development of the Tetra Hoyer DeepBlue Ice Cream Freezer, a system for improved ice cream production that grew out of Tetra Pak’s close relationships with its dairy customers. Based on a design created by Swiss scientist E. J. Windhab that transforms the freezing process during ice cream manufacture, DeepBlue offers companies a fairly remarkable list of benefits, including a shorter and simpler production process, reduced capital expenses, less downtime, and less waste. Even more impressive, the creamier taste and smoother “mouth feel” of the ice cream produced by DeepBlue allows manufacturers to reduce the amount of cream or butter fat in their products by as much as 40 to 50 percent. As consumers grow increasingly health conscious, this is a huge business advantage—and a fantastic backstory driver of demand for healthier frozen desserts.

  Those who savor the new low-fat ice creams that DeepBlue makes possible will never see Tetra Pak’s innovative freezer design. But it’s just one of many bright demand creation ideas that Tetra Pak has generated that have made it a crucial part of many food companies’ backstories.

  And Tetra Pak’s magnetic appeal for food processing businesses runs even deeper than technological creativity. If Magnetism = Function × Emotion (M = F × E), the emotional tug exerted by Tetra Pak derives from the intimate work relationships it establishes with the client companies it serves.

  Here is where Tetra Pak’s unusual approach to business design becomes crucial. We noted that masters of the backstory always ask, “Is my organization optimized to serve customers and to learn from them?” The executives who run Tetra Pak have asked that precise question repeatedly, and redesigned the company as necessary to improve the answer.

  Most business-to-business relationships run through departments labeled “sales” and “procurement.” In effect, two people are involved: a salesperson and a procurement officer. Others in both companies have to request, design, build, ship, use, and service the products, but these individuals don’t generally consider themselves part of the business-to-business connection, nor do they behave that way.

  Tetra Pak operates quite differently. When it takes on a new client—a dairy in China, a juice producer in Spain, or a nectar company in India—it sends a team of food processing and packaging experts to work at the client facilities, examine their operations, and analyze their needs. They study the flow of products into, through, and out of the factory, typical production goals and shipping schedules, causes of bottlenecks and equipment failures, rates of waste and spoilage, and opportunities to reduce costs and maximize efficiencies. Tetra Pak employs several thousand scientists, engineers, and design and development specialists who work intensively on-site with client companies, mapping their hassles in excruciating detail and searching for ways to reduce or eliminate them. (“Wherever waste is being produced,” a Tetra Pak spokesman says, it indicates “a non-perfect system”—and that’s something Tetra Pak considers unacceptable.) Finally, specific Tetra Pak equipment is recommended for installation—along with thorough training of client staff and continuous monitoring and upgrading, as needed, by Tetra Pak’s own experts. Actual manufacturing of packaging equipment is outsourced to several hundred locally based “system suppliers” and “component suppliers”—but Tetra Pak’s unique contribution, its proprietary understanding of food processing systems, remains in-house.

  The result isn’t a typical sales relationship—transactional, centered on “the deal”—but rather a profound embedding in the life and work of the client company, centered on a continuing relationship with many touch points, whose purpose is to find new ways to make things work better. Sales and procurement departments are involved, but so are engineering, product development, quality control, marketing, customer service, inventory management, logistics, finance, human resources, training … and dozens or scores of individuals who work together constantly, not just two people negotiating a contract once or twice a year.

  All of this changes the role of the sales manager for Tetra Pak as well. “Unlike a [traditional] salesperson,” a Tetra Pak spokesperson explains, “the key account manager goes beyond mere sales. He holds responsibility for helping the customer grow his business, not just pushing his company’s products.… His attitude has to be, ‘I am your partner in growth.’ ”

  It’s important to stress how unusual Tetra Pak’s customer-centered business design is. The leading competitive company, the Swiss-based SIG Combibloc, has a more traditional structure in which so-called line functions (production, technology, procurement, and so on) operate separately and in parallel with market-centered functions (such as sales, service, and business development). In most companies organized this way, the result is “dotted-line” connections between customer-facing managers and the engineers, scientists, and designers who actually create the products, often leading to unclear roles and confused priorities. Perhaps this is one reason why SIG Combibloc is a distant runner-up to Tetra Pak in the race to satisfy global demand for aseptic packaging.

  Tetra Pak’s customer-centered business design penetrates very deep into the organization. Even the company’s research and development arm was reconfigured in the early 1990s to abolish traditional functional units based on technologies and expertise, replacing them with cross-functional teams organized around specific projects for particular customers. Partially as a result, demand for Tetra Pak’s research and development services increased several-fold between 1994 and 1999, as did the number of patents earned by its engineers.

  For an example of how Tetra Pak’s unique design helps it enrich the backstory of its business customers, consider how the company has helped to shape and build the booming Chinese dairy industry. Beginning in 1998, the company has worked with government health officials and educators to make milk drinking part of the daily routine in schools around China. The design of packaging systems for Chinese dairies—operational infrastructure—is just one part of Tetra Pak’s contribution. Other programs focus on the behavioral infrastructure surrounding dairy products, educating families and teachers about the nutritional benefits of milk for schoolkids and training dairy workers to improve the quality of the raw milk produced and processed in China. In 2008, for example, 260 farmers attended a “dairy school” supported by Tetra Pak to learn new, productivity-enhancing techniques for cattle raising. And in 2009, Tetra Pak opened a technology center in Pudong (near Shanghai) that specializes in researching and solving engineering, business, and marketing challenges specific to the Chinese food market—for instance, analyzing rural road conditions to provide expertise and guidance on local transportation issues.

  China is not the only location in which Tetra Pak is actively shaping demand for its client companies’ products—and even creating new demand where none previously existed. School milk programs similar to the one in China have been set up in cooperation with government agencies, nonprofit organizations, and local dairies in more than fifty countries around the world, improving children’s access to milk and the nutritional benefits it offers. Ulla Holm, the director of Tetra Pak’s Food for Development program, describes the goal
as creating a “milk-drinking generation” as well as developing business for both Tetra Pak and the companies it serves.

  Reviewing the breadth of Tetra Pak’s involvement in China’s social, educational, and health ecosystems, one Chinese newspaper observed that the company has been “so often dubbed by the media as a ‘nosy person’ ” (that is, an intrusive external force). But the article went on to say, “However, people seem willing [for] Tetra Pak to be a ‘nosy person.’ ”

  The lesson: A company’s intimate role in shaping a customer’s backstory might be seen as threatening—but when the results lead to magnetic products and ever-growing demand, such intimacy is appreciated rather than feared.

  In fact, this kind of connection is the source of the emotional energy that makes Tetra Pak a magnetic backstory company. A consumer product like Wegmans, CareMore, or the Kindle sparks an emotional connection by making daily life better in unexpected and delightful ways—more delicious, more creative, more fun, more healthy, more convenient—and provoking customer comments like “I love it so much that I can’t imagine living without it!” A business product like the service provided by Tetra Pak sparks emotion in its customers through the power of its people to multiply a client company’s productivity, efficiency, and innovation, generating reactions like “My Tetra Pak team is so valuable that I can’t imagine tackling a production problem without them!”

  Different contexts, different benefits—and an equally powerful emotional appeal.

  Building an enduring emotional tie between companies based on human connections can require thousands of employees with an unusual array of attributes—technical talent, yes, but also strong people skills, broad business insights, and intense personal commitment to the goals of both companies. And while Tetra Pak is a privately held company that shares few of its organizational secrets, it’s possible to catch glimpses of the system it’s created to nurture just such a team.

  For example, Tetra Pak recently hired its first full-time vice president of internal communications. Her mandate is to ensure that every employee has a deep understanding of Tetra Pak’s business strategy, knows how that strategy relates to specific assignments, understands the goals of client companies, and is intensely dedicated to helping them achieve those goals. Many companies pay lip service to these concepts; few give them the level of importance and concrete investment that Tetra Pak has.

  For another example, the LiVE Tetra Pak program is a four-hour employee engagement and team-building event that includes speeches, music, games, interviews, question-and-answer sessions, slide presentations, documentary-style films, and audience-participation activities. It’s a huge investment that has been presented around the world and translated into twenty-five languages, and it will eventually reach all twenty-one thousand Tetra Pak employees—an investment of eighty thousand participant hours, which suggests how seriously the company takes its internal communications mission.

  Talk to Tetra Pak customers and you begin to get a sense of how this commitment translates into results. Phil Mazza and Nick Marsella are executives with Byrne Dairy, which has been in business in upstate New York since 1933. They talk about how, when Byrne enlisted Tetra Pak’s help to expand into extended-shelf-life milk and cream products, the relationship got off to a slightly rocky start. “We felt their service wasn’t strong enough,” Nick recalls. Tetra Pak’s response was to send their North American vice president to meet with the new client and jointly develop an action plan for improving the alliance. Then Tetra Pak sent its entire service department to Sweden for retraining and skills upgrading—and not for a day or two, but for a full month.

  Now Tetra Pak not only addresses Byrne’s problems swiftly and efficiently, it proactively works with the dairy to help it become more efficient, sustainable, and profitable. “We had some issues last year where there really weren’t any issues,” Nick explains with a smile. “We just wanted to learn more. So Tetra Pak sent in a team just to brainstorm—three people spent two days with us, walking through our operation, meeting with our people, figuring out ways to improve our operations.” The shared goal: to understand the challenges Byrne faces and to devise innovative ways to help it succeed.

  Hear me, know me, grow me—this is the message Tetra Pak executives say is implicit in every customer conversation. It’s also the customer service mantra that Tetra Pak swears by. The six words certainly seem to capture the dynamic of the company’s relationship with Byrne Dairy.

  Like Wegmans and many other great demand-creating organizations, Tetra Pak understands that its team members are the key source of its magnetism—and it invests in them accordingly.

  TETRA PAK HAS GROWN enormously, and generated huge flows of demand, working almost exclusively behind the scenes with client companies. Its customer-centric approach to creating manufacturing systems that enhance its clients’ businesses has worked brilliantly. But it requires a continual stream of innovations and improvements in response to market changes. As CEO Dennis Jönsson points out, the nine thousand production lines that Tetra Pak has developed over the decades are both the company’s greatest strength and its greatest vulnerability. “With an average age of thirteen years,” he notes, “a very large part of our machines [will need] to be replaced in the near future. It opens the door to competitors unless we can offer new solutions that lead to increased profitability for our customers.”

  There are also limits to growth as a pure backstory company—especially in the vast American market, where customers have been reluctant to sample products packaged in aseptic cartons. If Tetra Pak wants to bring the benefits of its know-how to U.S. companies other than juice makers, it needs to step out of the backstory and help consumers discover the safety, convenience, cost savings, and improved taste that aseptic packaging can provide.

  Today the company is working on several fronts to make Tetra Pak as magnetic for American consumers as it is for Europeans.

  One approach has been to seek a foothold for Tetra Pak in emerging product categories where the behavioral infrastructure is unformed. Contrast the dairy aisle in your local grocery with the display of soy milk. The former section is refrigerated and filled with traditional plastic or cardboard cartons; the latter is (mostly) nonrefrigerated and features brightly hued Tetra Pak containers. It’s tough to persuade Americans long accustomed to chilled milk to switch to aseptic packaging; we have no such limiting expectations regarding soy milk, which was unknown in the United States until 1979, when Hong Kong–based Vitasoy introduced the first soy milk in a few stores in San Francisco’s Chinatown. That virgin market represented an opportunity for innovation, which Tetra Pak seized.

  Today the gourmet foods market offers another opportunity. In the mid-nineties, a Florida-based company called Chef Creations was searching for a better way to offer its specialty food items to restaurants, caterers, hotels, cafeterias, and other food service providers. Deploying the backstory magic they’d perfected in Europe, Tetra Pak offered to support them. A team from Tetra Pak worked with Chef Creations to adapt the Tetra Brik technology to their sauces and dessert items. The taste quality had to be high—a restaurateur serving hollandaise sauce from a Chef Creations pack had to be sure that customers would accept the product as worthy of a gourmet kitchen. And of course there could be no question of spoilage, since nothing destroys a food business faster than a safety issue.

  Food packaged in Tetra Pak cartons from Chef Creations has now built a significant presence in the U.S. gourmet foods market. You’ve almost certainly enjoyed some of their sauces or desserts when dining at fine restaurants around the country. Spokesmen for Chef Creations like to tell stories like the one about the caterer who needed three hundred crème brûlées for a wedding—a demand he would have been hard-pressed to satisfy a few years ago, but which the arrival of Tetra Pak cartons made possible.

  Tetra Pak cartons have also found their way into other backstory niches. Restaurateurs are serving puddings, soups, even eggs from Tetra Pak cartons.
Carol White, a Houston coffeehouse owner, says she uses soy milk packed in aseptic boxes because “it’s shelf-stable and I want to save refrigerator space.” And then she adds, sotto voce, “My customers don’t see it. They don’t know the difference.”

  But for the leaders at Tetra Pak, today’s big question is, Can Americans learn to love aseptic packaging when they do see it?

  Little by little, the old No answers are changing to Maybe, then to Yes.

  Americans are finally beginning to warm up to the idea of grown-up food and drink in boxes. Self-proclaimed foodies—chefs, gourmets, and adventurous eaters—are leading the way.

  In 2004, one of the foodies’ favorite magazines, Cook’s Illustrated, performed extensive comparisons between boxed chicken broth and the traditional canned variety. Executive editor Jack Bishop declared, “The broth in a box clearly tasted better. You can really tell the difference.” And he added this advice to would-be home chefs: “Get rid of your can opener.”

  Soon thereafter, Kate Murphy, a New York Times reporter, conducted her own experiments: “I compared chopped tomatoes in a box (Pomi from Parmalat) to chopped tomatoes in a can (Del Monte). The boxed tomatoes had better consistency, flavor, and color. I also made the crème brûlée from Chef Creations, a brand available only to restaurants and other food service companies, for a gathering of food snobs. They all loved it and asked for the recipe.”

  Murphy’s reference to Chef Creations is just one link in an intriguing tale of new demand in the making. At the time of her article (March 2004), the company’s boxed specialty foods were sold only to restaurants and other wholesale food purveyors. Today, the retail market—consumers and home cooks—is slowly making room for Tetra Pak. Six-and-three-quarter-ounce Tetra Wedge Aseptic pouches of alfredo sauce, poultry gravy, and—yes—hollandaise sauce are now available at Kroger, Safeway, Winn-Dixie, and other grocery chains. So are a growing number of other specialty items in Tetra Pak containers, from Wolfgang Puck soups and Brazil Gourmet fruit nectars to Souk Wild Garden hummus and ArteOliva extra virgin olive oil. (On your next shopping trip, keep an eye out for Tetra Pak containers. You’ll be surprised at how many grocery aisles are now home to these once-unfamiliar packages.)