Netflix has changed the at-home movie-viewing landscape by offering subscriptions for streaming movies and television shows. Netflix's success should continue, as it has established the most recognizable brand in an industry that it formed. Lovefilm is the U.K. version of Netflix, and it has also been successful. Several of Lovefilm's founders were determined to use this successful business model in another area, which is how Graze.com came to fruition. The Carlyle Group (NASDAQ:CG) is a majority owner of Graze, and it has been pleased with the results seen thus far.
Graze is a subscription-based snack service. For $6 per delivery, customers receive snacks in the mail, whether delivered to their homes or offices. These snacks can be ordered once per week, once every other week, or once per month. You might be wondering if this business model actually has potential. This has already been proven. After five years in operation in the U.K., Graze entered the U.S. market last year. Since that time, Graze has accumulated 55,000 customers, and it's adding an average of 1,000 customers per day.
Graze has strong potential in the U.S. market, but it will have to contend with General Mills (NYSE:GIS) and its new Nibblr service.
Nibbling on a new market
General Mills has seen waning demand for its cereals and core products. I happen to believe that General Mills will market and innovate enough to get demand for its core brands back on track, but that's a story for another time. For now, let's focus on Nibblr, created by 301.
General Mills created 301 to generate more innovative products separately from the company's core brands, which would then help fuel top-line growth.
The Nibblr service is very similar to Graze. Nibblr packages range from $5.50 to $5.99, and they often include dried fruits and nuts. Approximately 70% of the time, these packages will contain 150 or fewer calories. The target market is health-conscious women between the ages of 25 and 35 who want to snack at work. This appears to be a small target market, which limits the service's potential, but given the rise of the health-conscious consumer, this market has the potential to expand in the future.
Marketing from 301 has taken place on social media. While General Mills won't reveal any actual numbers on subscriptions, it has stated that it's pleased with the number of customers it has accumulated to date.
This is how it works. You go to Nibblrbox.com to fill out a profile, preferences, and allergies. Then you determine how often you would like to receive a delivery. Once you receive the delivery and try the snacks, you rate them. This is an important part of the process, because it makes consumers feel important. In reality, they are important. This is a form of consumer insight, and consumer insights are more important now than they have ever been. Your ratings will also help Nibblr decide what types of snacks to send you next time.
Graze vs. Nibblr
Graze's tag line: "Snacking Reinvented." NIbblr's tag line: "Discover Something Delightful." We can call that a draw. As far as marketing power goes, the edge has to go to General Mills. On the other hand, Graze has a strong head start, and it's looking to make its biggest push into the U.S. market this month. Furthermore, Graze has a much stronger online presence. According to Alexa, Graze.com has a global traffic rating of 28,251, whereas Nibblrbox.com has a global traffic rating of 985,044.
The most likely result in this snacking battle is that both companies thrive. There is enough demand to go around for both Graze and Nibblr. In regard to General Mills, this is a small piece of the pie, but look beyond the facts and current situation. Not only does this market have room to grow, but General Mills' 301 has been created to drive new innovative ideas and products separately from the company's traditional offerings. Therefore, you should expect more creative innovations from General Mills going forward, which could prove to be a big catalyst for the company down the road. While there will likely be misses, any hits will be supported by General Mills' strong marketing power.
Wealth: getting there at a methodical pace
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.