As market share wanes, Big Food needs to pay attention
- Major food and beverage manufacturers are quickly losing market share to private label brands and startups, according to a commentary from supply chain expert Lora Cecere in Forbes. The 25 largest manufacturers now have a 63% share of the industry — 3% less than in 2012. In the same amount of time, shelf space for private label brands is up 3.5%.
- The biggest problems come from lack of trust for large companies, as well as use of traditional tactics in a market that is transforming. Big Food companies responded to market slowdowns during the recession by launching new products, translating to market confusion. Different manufacturer departments weren't communicating well internally, nor were they paying attention to retail point of sale data.
- For Big Food to adapt to the shifting markets, it needs to better leverage data, perform testing, listen to social media to determine bigger trends and realign teams through shared metrics.
Throughout history, Big Food has dominated with its products, selection and prices. It makes sense that it's the slowest sector to adapt to major shifts. After all, major companies have weathered economic storms in the past and come out ahead.
However, the movement toward additional scrutiny on the consumer end is more than an economic storm. It started during the 2000s recession when consumers paid more attention to where they were spending their food budgets. But with democratization of information and communication, consumers also started spending more time researching products and talking about them. They wanted more than something new and different. What they demanded was the type of product they could trust, and Big Food generally wasn't open about its ingredients, processes and practices.
Nowadays, food companies agree that transparency isn't an option, it's a requirement. New studies show almost all consumers — between 98% and 99% — find transparency important, and seven out of 10 say their purchases are influenced by how transparent the products are.
Big Food still is responding to slow sales with new product launches, but they're paying more attention to consumers and trends — including providing more transparency. Announcing its new items earlier this week, General Mills played up the simple ingredients for versions of brand favorites. Other companies have done the same, highlighting the clean labels and health benefits of their products.
And Big Food also is now paying attention to when products aren't selling. Pinnacle Foods recently discontinued 16 Aunt Jemima frozen products that had been in its portfolio. In a statement from CEO Mark Clouse, he explained they were not generating high returns the company wanted, nor were they providing Pinnacle with a strategic foothold in that category. Snyder’s-Lance said it may divest some of its non-core brands, noting that approximately 50% of the snack company’s 2,000 SKUs contribute only about 5% of total branded gross sales.
There is likely much more room for large manufacturers to improve their internal communications and responses. They also don't want to lose additional market share. But by listening to consumers and different facets of a large company, and paying attention to data, they at least have a better shot at maintaining their current position.
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