1. Don't Play By Big-League Rules.
It was High Noon for Dick Farman when Vlasic Foods Inc. rode into town. A market leader long before its acquisition by Campbell Soup Co. in 1978, Vlasic had used Campbell's manufacturing, distribution, and financial muscle to boost its share of the nation's $550-million pickle business from 25% to more than 31%. In 1982, it started gunning for the Seattle market, long dominated by family-owned Farman Brothers Pickle Co.
"Vlasic's game is to come in and tear up the market," Farman says, sitting in his bare-bones factory office in Enumclaw, an agricultural hamlet 35 miles southeast of Seattle. "With all that Campbell money behind them, they went out for the bottom line." Within months, recalls Farman's veteran operations man Donald R. Grover, one of Seattle's major supermarket chains dropped the price of a 46-ounce jar of Vlasic pickles from $1.89 to $1.19, and finally to 79?, a price Grover believes was below cost of production. Equally important, Vlasic offered stores a $3-a-case discount to take its product, a price Farman couldn't match.
But Farman and Grover had no intention of getting into a price war with Vlasic, something they believed would erode their profitability and, in the long run, their ability to compete. Nor could they even think of matching Vlasic's heavy advertising. Instead, they put their faith in such intangibles as their product's quality image and their close ties to local retailers.
"You can't play the price game with the Campbell Soup Co., because they can stay in there until doomsday," says Grover. "But in the end, we figured it's the people who buy the pickle who make the decision. Vlasic came in with a big splash, with their TV ads and everything, but all they did was expand the category. When people up here think of pickles, they think Farman's."
So far, the strategy has worked. Last year, with sales approaching $10 million, Farman's controlled some 60% of the Seattle-area pickle market, according to Vlasic's vice-president of marketing Jim Dorsch -- more than 10 times the share enjoyed by the Campbell subsidiary.
2. Hit 'Em Where They Ain't.
Baseball old-timer "Wee Willie" Keeler may have said it best: To stay competitive, take what the opposition gives you and "hit 'em where they ain't." Alpha Microsystems president and chief executive officer Richard A. Cortese thinks this kind of opportunism has helped his Santa Ana, Calif.-based company survive the current shakeout in the microcomputer industry.
At a time when other computer makers have been struggling to challenge IBM's conventional business systems, Alpha Micro (with 1985 sales of $52 million) has gone after such specialized markets as municipalities, dentists, doctors, hospital administrators, and even funeral directors. It has strengthened its appeal to these groups by working with value-added software resellers, who concoct programs like "Funeral Master" to meet specialized managerial needs.
"There are all those little pockets of opportunity, and we have to commit ourselves to them," preaches Cortese, whose company enjoyed a 187% jump in net income from 1982 to 1984, although profitability fell sharply in fiscal 1985. "IBM might want to take those niches from us in the long run, but there's a window of opportunity for five or six years. We have to get entrenched before they get there."
3. Innovate -- Then Innovate Again.
As Cortese suggests, small companies that want to grow need something different to offer their customers. Robert Lynch, president of Harmony Foods Inc., credits his Santa Cruz, Calif., company's survival largely to the steady addition of new products -- now averaging 15 to 20 a year -- to its line of natural-food snacks.
Lynch believes that as a small company, Harmony, which had sales in 1984 of $28 million, has a decided advantage in bringing out new products fast. "American tastes in foods are changing," he says. Products like trail mix or granola used to sell indefinitely, and "there was little profit in diversifying your lines. But now the old trail mix doesn't work anymore.
"People like novel items," adds Lynch, reaching for one of his hottest-selling recent inventions, a strawberry yogurt -- covered raisin. "Small companies should be able to take advantage of this trend as long as they innovate."
4. Build a Better Moussetrap.
Innovation becomes a problem, however, when your giant competitor comes out with the product first. DEP Corp. president Bob Berglass faced this predicament when such companies as L'Oreal came out with hairstyling mousse. DEP's main products were hairstyling aids, and Berglass knew he would have to develop his own mousse -- but he also knew it would have to stand out from the pack.
So early this year, DEP hit the shelves with a unique product that, unlike its competitors' mousses, comes in a nonaerosol dispenser and contains no alcohol. "Some consumers realize that alcohol dries your hair," explains Berglass, spraying some conventional mousse into an ashtray, lighting a match, and watching it go up like a can of Sterno. "Look at it burn.
"You make your niche with a better product," he says. "We can't afford to be tied for 10th -- we've got to deliver a better foam."