Dive Brief:
- As larger companies like Mondelez International, General Mills, and Kraft Heinz Co. announce layoffs at greater Chicago area facilities, smaller startups are seeing expansion in the region.
- In the Chicago area between 2000 and 2010, the number of food manufacturers with five or fewer employees increased by 35%, while the number of food manufacturers with 250 employees or more dropped 17%.
- Many of these smaller companies have positioned themselves to benefit from the current consumer health trend and related niche markets, such as organic, non-GMO, and gluten-free. Some also use local ingredients or otherwise have a simpler, cleaner label with fewer artificial additives.
Dive Insight:
The rise of the underlings and fall of the food giants in Chicago is indicative of what's going on throughout the U.S. food industry. According to investment bank Jeffries, major brands saw a loss in market share in 42 of 54 categories over the past five years, caused by gains in new products from smaller brands.
This is also part of the reason why more major food manufacturers have been hungry to acquire smaller companies. Larger companies hope to benefit financially from these transactions, but can also learn something from smaller brands as to how they are achieving growth even as overall processed foods consumption falls.
Smaller food manufacturers and startups have to decide for themselves how they want to operate moving into the future, such as whether they want to remain small and localized or try to expand like Skinny Pop and its parent company Amplify Snack Brands, which recently launched an IPO.