And now, with Amazon having demonstrated beyond doubt the latent demand for an electronic reader with real hassle-reducing magnetism and a powerful backstory, other players in One-Click World are moving to claim spaces in the burgeoning e-reader industry.
Sony is still in the game. In August 2009, it released a new version of the Reader, known as the Daily Edition, which boasts an increase in the number of grayscale tones from eight to sixteen, making more detailed images possible. And Sony has put a lot of work into improving its backstory. The Daily Edition offers—at last!—free 3G wireless service, as well as a greatly enhanced bookstore. Though still a distinct number two to Kindle, the Sony entrant now enjoys its own steady stream of demand.
Meanwhile, in October 2009, Barnes & Noble launched the third major entrant in the E Ink reader field—the Nook. It closely resembled the Kindle, but added a small color touch screen below the E Ink display as an input device. The Nook’s content source was the vast bookstore of B&N.com, second in size only to Amazon’s.
In March 2010, Apple weighed in from a very different direction with its long-awaited, much-ballyhooed iPad, which eschewed E Ink’s monochrome look in favor of a brilliant full-color, multitouch LED screen. And as we might expect from a master one-click company like Apple, the iPad-as-reader is supported by a magnificent backstory. Apps for both the Nook and Kindle bookstores are available, giving the iPad access to a larger array of e-books than any other device. By the end of 2010, more than 7 million iPads had been sold, and me-too touch-screen tablet devices were beginning to proliferate—including a new Barnes & Noble e-reader with an LED screen, dubbed the Nook Color.
Finally (for now), December 2010 also witnessed yet another major entry into the e-books universe—the launch of Google eBookstore. This new online bookselling site boasted the world’s largest e-book catalog—nearly 3 million free books in the public domain as well as hundreds of thousands of other titles. Google e-books were offered in device-neutral formats suitable for reading on the iPad, the iPhone, the iPod touch, the Nook, the Sony Reader, and on personal computers—in fact, practically any reading device except the Kindle (although hackers quickly created software designed to convert Google e-book files for Kindle use). And in a fascinating backstory twist, Google announced its intention to partner with independent booksellers around the country, providing them with immediate, low-cost access to the e-book marketplace—and a possible way to combat the steady decline in sales they’d suffered at the hands of Amazon and the big chains.
The revolution Amazon sparked back in 2007 is likely to spin off even more new and unpredictable developments. But for now, the Kindle continues to lead the way among electronic readers. By the end of 2010, an estimated 8 million Kindles had been sold (precise figures are proprietary). And as the number of Kindles grows, so do sales of electronic books. Amazon reports that, for books available in both e-book and hard copy formats, Kindle sales now represent almost half of its unit sales.
The e-reader demand breakthrough has happened—in a very big way. But who will capture the lion’s share of demand as this new world of reading evolves? The answer will depend, in part, on which device book lovers find most magnetic in the long run. But it will depend even more on the power and completeness of the backstory each company creates and the strength and creativity of its network of publishers, booksellers, designers, distributors, programmers, and other collaborators.
In the decade to come, as e-books become more and more ubiquitous, what’s behind the screen will loom larger than ever. And this means that the fears some “old media” players have expressed that the digital age may render them irrelevant are groundless—provided they take full advantage of their unique experience as creators and deliverers of compelling content.
Imagine publishers employing the speed and flexibility of technology to multiply the inherent power of well-crafted words—unforgettable stories, amazing characters, mind-expanding insights, passionate and evocative poetry—and provide opportunities for millions of young people to fall in love with reading through the new medium of the e-book. The great publishing phenomena of the past generation, from Oprah Winfrey’s Book Club to J. K. Rowling’s Harry Potter series, offer just an inkling of the demand that can happen when the right reading experience comes along in the right way at the right time. Enabled by powerful backstory connections, the e-reader can multiply the kinds of reading experiences in ways we’re just beginning to understand.
Imagine all this, and then ask: Is there any limit to the future demand for books?
TETRA PAK STEPS OUT FROM
THE BACKSTORY
One of the minor culture shocks Americans experience when visiting Europe comes when helping to make after-dinner coffee in a friend’s apartment, whether in Paris, Berlin, or Rome. “Where’s the milk?” they ask, peering into the surprisingly undersized refrigerator.
“In the cupboard” is the reply. And sure enough, there on the shelf is a square carton of milk—alongside cartons of orange juice, scrambled egg mix, yogurt, pudding, and other items no sensible American would dream of storing at room temperature.
What’s going on here? Are Europeans unaware of the basic rules of food safety as American families have practiced them for generations?
The real explanation leads us to one of the more fascinating corners of the demand universe—and a story that illustrates vividly how culture and psychology influence the shape of demand.
Think about the rich flavor of classic hollandaise sauce, made with fresh egg yolks, butter, and a touch of lemon juice, in a dish like eggs benedict or served as an accompaniment to steamed asparagus spears or a poached salmon fillet. How would you react if hollandaise sauce were poured onto your plate straight from a cardboard box stored on an unrefrigerated pantry shelf?
If you’re like most Americans, you might insist that you’d never eat such an unappetizing and possibly dangerous item. But the fact is that you probably already have. A hollandaise sauce containing the traditional ingredients is now available in special cartons that can be stored without refrigeration, just like the milk in our European friends’ cupboards. The sauce contains no preservatives or other chemicals, meets every health and safety standard, and obviously is much faster and easier to prepare than hollandaise sauce from scratch.
Most shocking, it tastes good—really good. After tasting it, one American chef admitted, “It is very hard to tell the difference between the hollandaise sauce I make and this product.” And ready-made hollandaise sauce is just one menu item from an expanding array of liquid foods in boxes that are increasingly being served, and savored, in restaurants, hotels, and catering halls across America.
Is this some recent scientific breakthrough that has jumped straight from the laboratory to the pantry shelf? Not exactly. The new wave of demand for boxed foods in the United States has taken more than fifty years to develop. And to this day, there are millions of American consumers who simply don’t want to know that part of their gourmet dinner came from an unrefrigerated cardboard carton.
In response, the remarkable company behind this innovation—lauded as the most important food packaging invention of the twentieth century and exhibited in the permanent collection of New York’s Museum of Modern Art as an example of brilliant design—has been carrying out a kind of “incognito revolution,” transforming the way we eat while remaining almost completely obscure. And while very few American consumers have heard of Tetra Pak, executives at the companies that produce the foods you enjoy know the company well and rely on it more with every passing year, creating an enormous stream of demand for Tetra Pak’s unique expertise.
Most intriguingly, today a new chapter in the Tetra Pak story is beginning—one that tests whether a unique and amazing product that almost no one has heard about can step out of the shadows and begin to attract demand, not just as part of someone else’s backstory, but in its own right.
ASEPTIC CARTON PACKAGING was the brainchild of Sweden’s Ruben Rausing
. While studying business at New York’s Columbia University back in the 1910s, Rausing was struck by the spread of modern food retailing techniques, including national product distribution, self-service shopping, and the first supermarkets. Convinced that the same trends would eventually revolutionize Europe, he began thinking about ways to address the challenges they’d produce.
Back in Sweden, Rausing teamed up with an investor named Erik Åkerlund to found Åkerlund & Rausing, a company devoted to creating packaging for the new-era retailing of the twentieth century—for example, a consumer-sized flour package to replace the old barrels formerly used for shipping and selling flour in bulk.
In the 1930s, Rausing’s attention was caught by another traditional commodity whose packaging and distribution badly needed updating: milk. At that time, milk in Sweden was sold either in bulk, using unwieldy metal canisters, or in heavy consumer-sized glass bottles (much as in the United States). Neither system fit well into the emerging world of self-service food stores. Rausing began experimenting with new ways of packaging milk that would eliminate hassles for milk consumers and producers alike.
He first needed to address the problem of sealing the milk flow into the container so that it was not exposed to contaminants that would dramatically limit its shelf life—a surprisingly thorny engineering challenge that took Rausing years to solve.
In 1943, Rausing was chatting about the issue with his wife, Elisabeth, over lunch. Suddenly she exclaimed, “Why don’t you continuously fill milk into the tube and then seal it through the milk?” The idea was that the uninterrupted flow of milk would eliminate air pockets within the package, which were the troublesome source of impurities.
Rausing was dubious. “It seemed impossible,” he later recounted, “as the hot clamps [used] for hot sealing would give the milk a burnt taste.”
But his wife responded with a question: “Have you tried to do it?” Rausing later described this as “a typical, logical answer from this remarkable woman.” After lunch, he returned to the lab, tried sealing several paper cylinders filled with milk without interrupting the fluid stream, and found that no burnt taste could be detected. The sealed-off, milk-filled portions of paper cylinder took the form of a tetrahedral (four-sided) container that Rausing dubbed a tetrapak.
But solving the problem of continuous milk flow and airless packaging wasn’t enough. A number of other innovations were required, including a multilayered paper, plastic, and foil material that was light, flexible, odorless and tasteless, and leakproof; a method for quickly sterilizing both the package and the contents and keeping them sterile; and an interlocking system of machines to perform all the necessary processes quickly, efficiently, and automatically. Even the question of how to pack a batch of tetrahedrons for shipping posed a puzzle. Rausing’s associate Harry Järund solved that one by designing a six-sided “basket” that neatly and compactly held eighteen of the little tetrahedrons.
It took almost a decade to get all these pieces right. (As Rausing later remarked, with Nordic understatement, “Doing something that nobody else has done before is actually quite hard.”) The new Tetra Pak company, originally a subsidiary of Åkerlund & Rausing, delivered its first Tetra Pak machine for tetrahedron-shaped cartons to the Lund (Sweden) Dairy Association in September 1952. Two months later, the dairy began shipping cream in one-deciliter, aseptic tetrahedral packages.
The Tetra Pak system immediately enhanced the dairy industry’s backstory. Some of the benefits flowed directly to consumers. Unlike a can, a Tetra Pak carton required no special tool for opening; the consumer simply tore off a corner of the paper pack and poured out the contents or drank them directly.* Unlike a bottle or jar, a Tetra Pak carton was unbreakable, preventing the loss of contents and the danger posed by shards of splintered glass. Because of the unique flash-sterilizing method Tetra Pak developed, which required fifteen seconds or less of heating, the contents (milk or other liquids) were kept in a close-to-nature state, with minimal effect on their taste and texture. And the sterilized Tetra Pak carton didn’t impart the tinny or “off” flavor sometimes experienced with cans or bottles, even when partial contents were refrigerated after opening in the original package.
Other benefits of Tetra Pak cartons were experienced mainly by food processors, wholesalers, and retailers. Shipping costs were sharply reduced because of the light weight of Tetra Pak packages as well as their unusual geometric design—a fully packed basket held more liquid in a given space than a batch of cylindrical bottles or cans. Even more significant, the fact that perishable products like milk packaged in Tetra Pak remained fresh and wholesome without refrigeration for up to a year eliminated the need to maintain a “cool chain” from processing plant to grocery store. No more refrigerated trucks or train cars were needed. As a result, the practical radius within which products could now be shipped was dramatically expanded, making it possible for a single plant to service a much larger customer base, producing further savings. And the energy savings meant Tetra Pak containers had what today we call a much smaller carbon footprint—an economic benefit whose importance would only grow over time.
In short, Tetra Pak redrew the dairy industry’s hassle map through a dramatically improved backstory—and it soon began to do the same for producers of many other kinds of food.
In its own quiet way, the Tetra Pak was a magnetic product—gratefully accepted by consumers and positively embraced by the businesses whose operations it improved and whose bottom lines it enhanced. Food companies soon began using the refrigerator-free packaging to bring the benefits of prepared foods to a wider marketplace, including in the developing world. The first Tetra Pak Classic Aseptic machine outside Europe went into operation in Lebanon in 1964. The technology arrived along with a training center in Kenya in 1972, in Brazil in 1978, and in China in 1979; the first products to be packaged in China included sugarcane juice and chrysanthemum tea. Today there are Tetra Pak facilities in 170 countries, on every inhabited continent in the world.
Creating this demand wave made Ruben Rausing one of the most successful—and richest—entrepreneurs in the world. By 2010, Tetra Pak boasted annual revenues of 8.95 billion euros (about $12.5 billion). Tetra Pak produces 145 billion packages a year—twenty for every man, woman, and child in the world. And as noted above, Rausing’s original Tetra Pak design enjoys a spot in the permanent collection of the Museum of Modern Art, alongside such other icons of twentieth-century design as Frank Lloyd Wright’s Fallingwater and the Eames chair.
YET THERE’S ONE market where demand for Rausing’s brainchild has lagged—and it happens to be the richest, most important consumer market on the planet. When it came to the United States, the magnetism of Tetra Pak, and its demand-creating potential, were almost completely lost in translation.
For six solid decades, Americans resisted buying most foods or beverages in aseptic packaging, with one exception: single-serve juice boxes for kids, known as Tetra Brik cartons—the kind with a little straw for insertion into a tiny foil-lined opening in the top—which became enormously popular in the United States in the 1980s. Tetra Pak’s other carton types, from the gable-topped Tetra Rex to the Tetra Wedge, struggled to attract demand from U.S. consumers.
Why? What makes Tetra Pak magnetic to Europeans, while Americans shy away?
The cultural and social factors behind these divergent attitudes make a fascinating study. Chief among them is the early U.S. adoption of refrigerators, which became fixtures in millions of American homes beginning in the 1930s. By contrast, as late as the 1960s, technology historian David Landes could write about how demand for home appliances in France was depressed by homemakers “who contend that the taste of refrigerated food is necessarily altered for the worse.” By 1970, 99 percent of U.S. households had refrigerators; in Western Europe, the rate was just 72 percent.
The physical structure of American kitchens, dominated by giant refrigerators, shaped our behavioral infrastructure—deeply ingrained habits surrounding the purc
hase, storage, and use of food that profoundly affect demand. Unlike European town and city dwellers, who often shop for food daily, visiting several small local shops and markets to pick up fish or meat, vegetables, cheese, bread, and wine (as well as the latest neighborhood news), Americans are accustomed to making a big once-a-week shopping trip to a giant supermarket—and storing the bagsful of foods they bring home in their huge refrigerators and freezers. As a result, Americans have been raised for generations to mistrust perishable foods not stored at low temperatures.
It’s a principle we’ve seen at work before: Different types of customers define magnetism differently. One of the big challenges faced by companies like Tetra Pak that serve a wide array of customers is finding cost-effective ways to provide all those customers with products they’ll consider magnetic.
Under the circumstances, with Americans burdened by a vague sense of unease regarding the safety of foods stored at room temperature, a direct assault on the U.S. market by Tetra Pak would not have worked. To the extent that American shoppers are aware of Tetra Pak cartons at all, they associate them with juice for kids—not a great image if you’d like to sell boxes filled with sophisticated products like hollandaise sauce.
So Tetra Pak’s first forays into the American consumer market have followed an indirect path. Tetra Pak is playing an increasing role in the backstory of more and more companies that serve food to U.S. families, whether at home or in restaurants, getting aseptically packaged foods onto the plates of millions of Americans without their knowing it.
You might call it “unseen demand.”
THE CHALLENGE of building a great backstory company like Tetra Pak is amazingly complex, requiring an understanding of how demand works on at least three distinct levels. At one and the same time, Tetra Pak needs to think about its immediate customers—the food-packaging businesses that buy its goods or services; its customers’ customers—the retailers (like grocery stores) that buy products from the packagers; and its customers’ customers’ customers—the product end users who, ultimately, provide the dollars that drive the whole complicated machine.
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