When talking about innovation with food and beverage companies, there is this tendency of managers and entrepreneurs on focusing only on product innovation. Product innovation is very important by definition. Product innovation can be applied, it can be deployed in many different ways, But what is important to me is that companies tend to focus a bit more on value proposition innovation. Innovation in the value proposition. Because what customers buy is a combination of benefits and benefits are always related to sacrifices. This is the concept of value proposition: a set of benefits related to a number of sacrifices the consumers have to make in order to get those benefits. If we consider value proposition as a ratio, the innovation can be pursued in many different ways: by increasing the number of benefits, by decreasing the sacrifices, or by a combination of the two. Or, you can consider a different way of decreasing the benefits and with more than proportional decrease of the sacrifices. Because another tendency of many companies is to consider innovation as adding something. Adding benefits. Innovating on benefits. But sometimes, if a company is able to simplify the value proposition, for some consumers into the market, it can be very valuable. In any case, thinking of the value proposition and how to innovate the value proposition basically means how to innovate the ratio between the benefits and the sacrifices. A good example of simplification is in the wine industry. Wine is a very old traditional product especially in European countries where it has been consumed since centuries ago, or maybe thousands of years ago. In this case, wine should be considered very easy, very traditional, very habitual in the consumption patterns and practices of many consumers, but the evolution of the competition in wine industry has made this product very complicated sometimes. Many consumers perceive wine as a broad category to be consumed only by competent consumers, which basically means many consumers think that they need a competence in order to understand and appreciate wine. If that is the case, this basically prevents many consumers from consuming wine. The idea is, “How can I simplify the wine?” One example which is now a very traditional and very powerful case study is Yellow Tail. Yellow Tail is considered one of the best examples in how to simplify wine, how to make it easies to drink for consumers. The story says that Yellow Tail is a brand owned by an Australian company called Casella which has been very successful especially in the U.S. market which is the second largest market for wine consumption in the world because they tended to simplify the product, not the product in itself, but basically the way consumers perceive the product. If you think of a label on a wine bottle, there is a concentration of information which is impressive. Usually, this information is what prevents consumers from approaching the wine, because to understand many parts of this information, the consumer requires some competence. So Yellow Tail basically took most of this information away, simplifying the assortment, and making the wine very easy to appreciate and drink, which basically means it’s very easy to choose. Because by simplifying the information you give to your consumers, your consumers can find it easier to make a choice. So the point is, what are the components of the valuable proposition that I can innovate in order to give more value to consumers than competitors do. There are many different ways. The typical one is product innovation. So, when we talk about product innovation in food, it basically means ingredients, methods of production, so a very technical innovation; But we can’t to forget that consumers consume products in specific occasions of usage. That basically means that a great innovation which is a market innovation is to persuade consumers to consume the product in a different occasion of usage, different from the one they are used to. Let me give you an example, the beer industry. In the beer industry, maybe the two most important product innovations in the last decades are non-alcoholic beer, which has become in many countries the most drunk beer. Think about the U.S., one of the most important markets in the world, the market share of non-alcoholic beer is larger than that of alcoholic beer. The second one is Craft beer. Obviously Craft beers are very traditional, so where is the innovation? Craft beer is basically beer as it was made in the past. But again, it's a market innovation, a market innovation because these beers that usually are produced by microbreweries, very small breweries, very local breweries. It's a matter of lifestyle. If you drink a craft beer, you basically share the same values of the producer. It's much more to do with the values, obviously also the taste, but it's sharing some values with the producers which make these kinds of beers. This is product innovation in beer, but let's focus on a more recent innovation. Let's focus on one company which is Heineken. The two latest innovations of Heineken has been the keg and the sub. The keg is a small barrel of beer which is five liters and basically the idea here is not an innovation in the product, because the product is always the same, but innovation in consumption of usage. Many people have parties at home and the parties at home they buy a lot of bottles of beer. Now, they can buy only a few kegs and this is a way to help them in getting the benefits they want to get. The second innovation is the sub. The idea of the sub is the exact same as the idea of the espresso coffee machine; that is to say, you buy an espresso machine, and then you make coffee by using capsules or other ways of producing coffee. The idea of the sub is you have your machine at home and you buy the capsules, let's call them, of beer that you can include in your machine to have your draft beer at home. Even in this case, the innovation has not been a product innovation but it’s an innovation in the occasion of usage. You can have your own draft beer at home. Then there is the distribution innovation. You can innovate in the channels of distribution. In this case, so again, the product is not changed in any of its features, but what is changed is the way the product is provided to consumers. For example, by selling online instead of offline, there is an innovation. You can reach different customers. You can reach customers in different ways, and this is the real innovation that you can have. Another innovation in the value proposition can be on pricing: different ways of pricing your products. For example, you can have different ways of pricing if you sell your product in different outlets. For example, if a mineral water is sold in a vending machine, the water is exactly the same, what is new is a combination of the channel of distribution and the pricing system. Innovation can also be at the service level. For example, service is very much linked to the package and the portion. Again, the product in itself is still the same but if you sell it with different packages, you can provide consumers with a different benefit. For example, with the sparkling wine, the traditional size of the bottle is seventy-five centiliters, but if you sell smaller bottles, you can be more appropriate for the target customers of singles. If you are single and you want to consume sparkling wine at home, you wouldn’t like to uncork a bottle of seventy-five centiliters, because if you open it and you don't drink it, basically, you are wasting your wine. If you can buy smaller bottles, thirty-three or fifty centiliters, it's much easier for you to open it, and drink it, and enjoy it without wasting any part of that wine. It's a matter of service. The package helps a lot in servicing the consumer. These are many different ways of innovating the value proposition. The question is, “Which way I should prefer?” As a company, “Why should I focus on the product?” “Why should I focus on the price?” Actually, there is no “best-off.” You can choose the best way according to expectations of the target customers you want to serve. Again, by choosing the customers you want to serve you can understand what are the specific combination of benefits they want to get, and what are the sacrifices that they want to make, and by having this knowledge you can design an innovative value proposition.