A Wake-up Call for ‘Big Food’


September 16, 2016

Grocery DecisionYesterday afternoon, I snacked on chipotle-lime beef jerky while sipping a stevia-sweetened sparkling beverage. Last night, I cooked dinner for four with a meal kit delivered to my house. This morning, I skipped the cereal sitting dormant in my pantry and grabbed a high-protein nutrition bar from a local company for breakfast as I scrambled out the door. Like me, large swaths of consumers have fundamentally changed their food consumption habits, and small- and medium-sized manufacturers have taken advantage of those shifts to the detriment of established “big food” manufacturers.

As reported in A.T. Kearney’s “Is Big Food in Trouble?” report, the top 25 food manufacturers in the United States have ceded 300 basis points of market share to small- and medium-sized competitors since 2012—and have had anemic annual growth of 1.8%. Changes in consumers’ core values—amplified by social media, celebrity chefs, and a myriad of food experts—are rewarding small- and medium-size companies with annual growth rates of 11–15%.

Consumers are more passionate about the food they eat and their appetites are creating dynamic shifts in the grocery aisle. Below are key trends we identified in the study.

  • A focus on dieting has shifted to a focus on healthy, real food to maintain health
  • Dramatic increase in functional foods that support heart health, digestive health, and higher energy levels
  • Consumers are embracing free-from segments (non-genetically modified (non-GMO), organic, and gluten-free)
  • Fresh food departments are growing at the expense of center store and processed foods
  • Locally-sourced foods with a direct-to-consumer model are becoming more attractive
  • Consumers are demanding transparency in food sourcing, production, and labeling

The good news: We project $70 billion of growth is available in the United States market in the coming years, but large food manufacturers need to give consumers real reasons to remain loyal. This includes providing innovative products that meet consumers’ current and emerging needs, delivered when and where they shop and with transparency and authenticity in sourcing, production, and marketing.

Here are three strategies for large food manufactures to win back consumers:

  • Strategy 1: Take advantage of cost take-out and divestiture to enable investments in growth activities.
  • Strategy 2: Use controlled acquisitions of smaller, established players and external venture capital development to add trending categories to your portfolio.
  • Strategy 3: Create venture funds to invest, seed, and grow nascent brands, products, and technologies that could position your company to take advantage of consumer trends with a lower entry cost.

Food and beverage manufacturers that are able to find the right mix of these strategies, given their specific situations, will successfully return to a growth trajectory.

Randy Burt

Randy Burt
Partner | CPG, Food, Retail | Strategy, Merchandising & Supply Chain
A.T. Kearney
randy.burt@atkearney.com



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