The recent attempt by Kraft Heinz to acquire Unilever and the less-than-stellar earnings reports of the largest packaged foods players highlight the continuing upheaval in the food and beverage industry. The cause of the turmoil? Hartman Group CEO Laurie Demeritt offers this assessment: “Consumers are saying, ‘I’m changing and looking for things that are healthier, and Big Food companies aren’t offering those options for me, so I’m looking elsewhere for them.’”
The food and beverage industry is under more pressure than ever before to generate organic, volume-based topline growth. Some analysts say the total market is essentially now a zero-sum game. But this belies the enormous turbulence and reshuffling of market shares below the sector’s surface as emerging brands take share from established brands by focusing on new and different eating experiences.
Commenting recently on the issues facing Big Food, Demeritt said, "Who we are, what we do, how we shop and what we value are morphing. Acknowledging these macrodynamic shifts is essential to understanding eating culture and eating occasions today."
A host of reasons beyond the often-observed public desire for cleaner, fresher foods and beverages is at play in restructuring the industry game board; consequently, new tools and methods of analyzing the changing market are needed. In this special edition of Hartbeat on Big Food, we’ve compiled a collection of articles, reports and videos that offers our latest thinking on how Big Food can navigate the turbulent waters of today’s food culture.
Highlights from The Hartman Group’s participation at the 2016 GMA Leadership Forum: Big Food is not getting its fair share. It’s not showing the revenue growth that it should, given its current valuations. Conversely, consumers are changing, and they don’t see Big Food companies changing with them. In order to regain some of the market momentum that smaller, more progressive food and beverage brands have taken from established brands, there is an array of options open to companies.
The food and beverage industry’s growth rate is slowing. Portfolio rebalancing is an absolute must for most publicly traded companies to survive. As we discussed two years ago, there are two primary sources of growth that portfolio rebalancing should tap into in modern food culture: younger growth categories and premium brands. Let’s take a look at
how premium acquisitions have or have not affected the portfolio health of the top firms.
In this issue we share: a) a new way to find pockets of growth for today’s leading food
companies, b) what it will take to pursue these new pockets of growth and c) key strategic implications for the larger enterprise as a whole. Many legacy brands face a much bigger problem than the age of their brand or its “relevancy.” They are competing for share of declining categories in food culture.
Temporary commodity price deflation could distract packaged food and beverage companies from their long-term unit-volume challenges throughout their portfolio. They will revel in enhanced margins even with flat price points. Things will seem fine again. But when we look at per capita volume trends in packaged food, the story remains bleak.
As legacy-brand market shares continue to struggle or decline, we’re finding urgency in investing earlier in the product life cycle to set enterprises up for long-term, organic growth. And we’re finding greater urgency in contemporizing specific kinds of legacy brands with premium cues that keep them relevant in modern food culture.
We have all heard of billion dollar food brands because they heavily drive quarterly earnings’ results. But have you ever heard of a billion dollar line extension in packaged food? Our analysts recently scoured our archives for an example we could verify and came up with…virtually none. We found that the beverage world alone seems reliably capable of spinning off billion dollar extensions of its base brands, such as Diet Coke.
With the recent acquisitions of KeVita and Bai beverages by major CPG players, it is clear to us now more than ever before that modern portfolio strategy has more or less accepted the necessity of bringing younger, premium brands into the portfolio as a long-term growth strategy. But when in the life cycle should this be done?
How do you separate trends from fads in product innovation?
In this video, The Hartman Group CEO Laurie Demeritt discusses the attributes upon which the premium food and beverage marketplace is built and its growth potential in the coming years.
Packaged food and beverage consumption has slowed in recent years, and long-entrenched major national CPG brands face steep competition from younger emerging-brand entrepreneurs.
As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.