Tuesday, February 08, 2005

swooping up profits from the bottoms of pyramids

An interesting discussion at swoop's gave me pause today. I spent the better part of the day goofing off from work and thinking about some of the issues raised and debated in further comments to the post (of course, that meant i had to stay late to do some 'real' work :)

The original post talked about corporate social responsibility in the context of the fast-food (offical term: quick serve) industry, and its responsibility towards consumers' health. A more specific item of interest to me was the proliferation of fast-food chains (FFCs) in economically depressed areas and its corelation to obesity among the people who live there. Now, the effects of junk food on people's health are well-documented, and of course, open for debate. But, that's not what this is about.

In the spirit of Professor Prahalad's research, I was wondering if there isn't an opportunity to make a fortune at this bottom corner of America's pyramid where food and economics intersect. Well, there is money to be made, as ably demonstrated by the FFCs who seem to have a lock on these markets. This dominance has everything to do with the affordability of their product to their target audience. BUT, this diet has slowly but surely resulted in an obese customer base which is, with due apologies for reusing a phrase so soon in a sentence, slowly but surely being made aware of the associated health risks. And, as is to be expected of megaliths, these FFCs are loathe to pro-actively change their menus to offer healthier options.

So, given this situation, here's the thought: If I were to start a competitively priced healthy (distinct from the chi-chi 'health') food alternative in said areas of the country, would it be successful ?

The obvious question would be : Is there a demand ? This is a tough call, since there is no way to effectively measure this. There would appear not to be an overt questioning of the status quo, since the means at the customers' disposal are so limited. It is also important to note that most of the options available to these customers are FFCs, so a swing from quadruple cheeseburgers to turducken tacos doesn't say much.

So, I've asked, Is there reason to believe there will be demand if presented with an alternative ? I think so, but am going by gut here. My premise is that an overweight person would, if presented with the opportunity, take steps to better their health. For the above statement to be true, though, the 'opportunity' MUST be a filling, relatively healthier, meal that costs the SAME as the current FFCs.

Is this even possible?

On my way home, I decided to stop by a local healthy fast food place called b.good, to check out their menus. I've eaten there before, and the food is awesome. 'Reinventing fast food', they claim, but at $5+ for a burger, they don't even come close on price. Why IS that ? Is it the food itself that makes it expensive ? I actually think not. First, their location - in the same building as Bain, right next to a T station, in the Back Bay of Boston - must cost a fortune. Second, they are a one-off store with all the clout which comes with that in negotiating purchasing deals, which jacks up prices. Finally, their target customer base is not very price sensitive, at least at these prices. I mean, walk two blocks up and you enter $40/dinner territory. I'm assuming these guys have pretty good margins tacked on.

Each of these things can be mitigated, and if done so, a cheaper price tag on some healthy fast food does appear realistic to me. Interesting and worth a closer look methinks. This post probably sounds pretty random and all over the place, but I'm intrigued. More thoughts to follow, but it's time for bed now.
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