On a warm summer Friday, the line at the Magnum ice cream shop in New York City’s SoHo neighborhood nearly spilled out the door. By mid-afternoon, a sign went up to say the shop was out of chocolate ice cream but still had “plenty of our delicious vanilla bars” for customers to dip in chocolate and various coverings not available in Unilever’s supermarket offerings.
On the next corner, at the Chobani Café, all tables and counter spaces were taken by patrons tasting dishes way beyond fro-yo, such as sandwiches made with simit, a bagel-like Turkish bread. Also on the menu, along with sweet and savory Greek yogurt dishes: “Hamdi’s rice pudding,” a nod to the company’s Turkish founder, Hamdi Ulukaya.
Magnum and Chobani are part of a growing group of packaged-goods companies that have ventured into the hospitality business as a marketing strategy, opening both pop-up and permanent eateries that are both a showcase and a laboratory for their brands. The opening of Magnum’s pop-up in SoHo during spring 2016 (closing at the end of 2016) was followed weeks soon after by the opening of Kellogg’s NYC, a café with a menu built around breakfast cereals.
And there is more to come: This month, PepsiCo plans to open Kola House, a bar and event space in New York City’s hip Meatpacking District. Meanwhile, Chobani is doubling down on its café strategy—which also included a pop-up café during the Sundance film festival—with plans to open its first in-store café next month inside the Target store coming to New York City’s Tribeca neighborhood.
“I think we’re only scratching the surface with this idea,” said Peter McGuinness, Chobani’s chief marketing and brand officer, in an interview with CMO.com.
Just as online retailers have discovered the need to expand into the real world—with everyone from Warby Parker to Amazon looking at storefront space to augment their e-commerce experiences—packaged goods brands are following.
“This whole experiential thing is a way to bring the brand to life, and consumers expect that of us. But it is also a way, given mobile and digital technology, to scale something that is an experience and have a much larger impact on consumers,” said Seth Kaufman, Pepsi North America CMO.
A number of factors have combined to make these locations a viable strategy, including changes in retail, demographics, and media.
Shifts in the retail model have reduced the impact of traditional packaged-goods retailers, such as grocers, in building brands and sales, leading CPG marketers to seek out new channels. It’s more difficult to do traditional shopper marketing, such as sampling and in-store promotions, when dealing with online retailers, such as Peapod or Instacart.
“We use the experience at the café to engage with our fans and give them a firsthand look into our brand,” McGuinness said. “We think this idea has a lot of potential, both as a marketing vehicle but also as a business.”
CPG marketers have realized that tasting food outside of a shopping mindset is more memorable and adds more value to the brand, said Marcia Lorente, head of strategic planning at Campbell Ewald. The agency launched a pop-up coffee bar in SoHo last year to promote the DeLonghi coffee maker brand.
“Would you rather dip your spoon into a bowl of milk and cereal at a grocery store aisle or at a nice café?” Lorente told CMO.com. “Clearly, consumers appreciate brands that, rather than try to sell them, find ways to offer a snack and respite in a nice location.”
These new cafés are both a marketing beachhead and a lab to engineer new products and new strategies. “They just basically opened the doors to the lab,” said Charlie Hopper, principal/writer of ad agency Young & Laramore, in an interview with CMO.com.