Posted: October 27th, 2015
By: Alexandra Braverman* | Staff Writer
“Subscription snack and food box businesses are popping up everywhere, hoping to cash in on America’s insatiable appetite for novelty, convenience and munchies.” – The New York Times
Since the introduction of Birchbox in 2010, the demand for specialized goods via subscription has boomed. With the option of having personalized boxes delivered monthly, customers are now choosing to buy beauty products, clothes, and food through online subscriptions. According to the New York Times, the competition among the subscription snack market is particularly fierce. Entrepreneurs have exploded into every corner of the food box market, introducing variations on the original box that feature regional, organic, portion-controlled, and novelty-themed options.
While the market for delivered munchies has increased to include 120 businesses over the past five years, the question left on American minds is whether or not these ventures can achieve profitability. The determinants for a successful subscription service are 1) identifying the perfect customer, 2) determining margins, and 3) creating an effective marketing campaign. Failing to effectively incorporate these factors has caused many companies, including giants General Mills and Walmart, to shut down their food subscription services. Other companies, including Graze, NatureBox, and Mouth, have been extremely successful by focusing on niche markets, such as the organic and non-GMO segments. From a revenue perspective, subscription business models focus on customer retention over customer acquisition. This allows companies to benefit from a consistent, recurring revenue stream while also allowing customers consistent access to the service. Proving that the model can work, Graze achieved an astonishing $104 million in sales in 2015. Additionally, revenue is impacted by essential business decisions such as where to source each product. Many snack box companies enter into agreements with snack suppliers that afford them free or largely discounted goods in exchange for marketing the supplier’s products.
Although entrepreneurial snack box ventures are often concerned with the bottom line, there are a myriad of intellectual property issues to be considered when entering the food industry that could affect profitability. First, when selling any consumer product good, effective trademark protection is crucial to any company’s branding strategy, since logos and names become the face of both the business and the product. In this case, trademark licensing should also be considered since retailers often enter into purchase agreements with suppliers. Website-based snack box companies need to be aware of how they advertise and leverage supplier brands when promoting their own brand and business model, as any violation of intellectual property rights could lead to a potential lawsuit. Second, food generally does not warrant copyright protection unless the compiled dish’s recipe is printed in a tangible medium. This aspect is especially relevant for those snack box retailers making their own snacks. Even if the snack recipes were kept confidential enough to be considered trade secrets, there is nothing to prevent competitors from reinventing popular snack mixes. While these are considerations that all companies operating in a highly competitive business climate must face, proper intellectual property protection can help businesses gain market share and enhance product development.
*Alexandra Braverman is a fourth year JD/MBA student at Wake Forest University School of Law and School of Business. She holds a Bachelor of Arts in Political Science and Anthropology from the University of California at Berkeley. Upon graduation, she intends to pursue a career in corporate law.