Not that long ago views on ‘craft’ were limited to strange sounding beers offered in small bars and exclusive handmade breads at the artisan baker. Our perception of craft and its market adoption however, is rapidly changing. Craft is delivering unprecedented growth even in declining categories. Beer, spirit and coffee are clear examples, but the craft movement isn’t stopping there. Nowadays when you think of ‘craft’ you may think of chips, breakfast cereal, oils and spreads, dairy products and vegetables. The rise of craft food is undeniable and it is shaking up the food industry. So what is ‘craft’? Definitions take us back to the Middle Ages where educated craftsmen were skillfully producing goods from materials such as ceramics, wood, metal and textiles. Then along came the industrial revolution, and the machine re-defined the type of products we buy and consume. Interestingly, we are now seeing a movement back towards hand-made products and real ingredients, as craft re-emerges, with consumers seeking high-quality products that offer unique experiences. What makes craft products attractive to consumers? In today’s mass-manufacturing world there are so many products competing for the consumer’s attention, it can get overwhelming. Consumers look for simple cues the product they are purchasing is better than the rest. By creating a story around the authentic creation of the product, consumers are able to connect with it. That connection based on a compelling story is crucial in an era where brand loyalty is at an all-time low. A pre-requisite however is that both the product and narrative are perceived to be authentic. This is particularly important in today’s digital world where information is easily accessible and shared, and where transparency is the norm. Designing a compelling narrative is not easy, but once the craft proposition is right, it is highly lucrative. A Deloitte shopper survey found 33% of consumers were willing to pay significantly more for craft versions of products. And local research undertaken by one of our Decision Science Partners, Dr Nuttall, revealed Australian consumers are willing to pay a premium, up to 40%, for products which have an authentic narrative associated with their production. Whether it be a cup of coffee or a piece of art, consumers consistently rated product quality to be superior when the producer was described as authentic – either culturally authentic or in terms of their genuine passion for delivering the product or service. Craft can, however, be a fickle game. The shift towards craft products means traditional consumer product organisations are having to rethink their product portfolios, associated supply chains and business models. This can come with unexpected risks and may require different skills and capabilities. A good example is the Campbell Soup Company which expanded into fresh categories with the acquisition of Garden Fresh Gourmet and Bolthouse Farms. After a challenging period, management recognised the model that works in packaged food doesn’t always work for artisanal products, especially when dealing with the challenges of the fresh departments in supermarkets. Vertical integration into agricultural areas such as carrots also exposed the company to degrees of volatility in the supply chain it may not have been exposed to before. This isn’t holding Campbell’s back. The company is committed to stay the course of its Real Food Journey, but it has provided valuable lessons for them and the industry. So how can businesses start taking advantage of the craft movement whilst navigating its challenges? Consumer product companies can either build their own craft brands or acquire them. In any case, deliberate choices will need to be made around business models and capabilities to ensure success. One of those critical choices when entering craft is whether to integrate the craft portfolio within the current business or to manage it separately. The answer depends on how differently success is defined, whether it requires distinctly different capabilities and whether it needs to be seen by the market as being separate from the core in order for the craft brand to be seen as credible and maintain its authenticity. Finding the right answer for your business isn’t easy and requires careful consideration of the brand positioning and associated consumer brand perception as well as business model implications. It is clear the craft movement has truly taken off and there is premium value to be realised in an otherwise challenging market. Successful companies will be those that have an authentic narrative associated with their craft product proposition and know how to navigate the business model change. Note: This blog is part of a series that explores the Future of Food. Topics that have been discussed previously include food tech, obesity, water sustainability and food waste. Look out for our next blog that explores the adoption of 3D Food printing.