Driven by desire for a faster, more convenient shopping experience, consumers are pressuring food and beverage brands to double down on digital offerings.
This shift in the industry landscape — and the opportunities and challenges that come with it — was top of mind for several companies that presented strategic initiatives at the Consumer Analyst Group of New York conference (CAGNY) in Boca Raton, Florida, Tuesday.
"The digitization of the whole [shopping] experience is ongoing and permanent and we need to participate in that," Coca-Cola CEO James Quincey told analysts at CAGNY. "It’s about, saying it in the simplest of terms, finding a way to reconstruct the virtual world those imperatives that have existed for so long in the physical world."
With online grocery sales expected to capture 20% of the market, or more than $100 billion by 2025, according to a report from the Food Marketing Institute and Nielsen, food and beverage manufacturers slow to adapt to e-commerce risk losing market share to rivals and upstarts.
General Mills CEO Jeff Harmening said in a panel that the cereal giant expects e-commerce to drive about 5% of sales in 2020, up from 2% today.
"The digitization of the whole [shopping] experience is ongoing and permanent and we need to participate in that."
"We’re up 82% so far in e-commerce in the U.S. in the first half [of the year], and we’re taking our capabilities global," Harmening told the audience. "Even though it’s dynamic and there is a lot of change [in e-commerce] ... that change is opportunity for those who are willing to take it.”
This opportunity includes new ways to engage with consumers and experiment with branding, novelty products and targeted marketing campaigns, Mondelez CEO Dirk Van de Put told conference attendees. He, in particular, cited the success of an Oreo turntable product the company sold last year through Alibaba in China.
"Specialized food experiences are a growth opportunity, but also a logistical challenge [when] trying to produce individual and unique products at scale," he said.
The maker of Oreo, Cadbury and Belvita saw e-commerce drive net revenue by more than 40% last year, and Van de Put said the company is on pace to hit its goal of $1 billion in e-commerce revenues by 2020.
But Van de Put also stressed the importance of omnichannel dominance, and said Mondelez wants to grow its presence in rising offline channels such as convenience, natural and discount retailers in addition to boosting its online reach.
Hain Celestial echoed this strategy during its presentation, citing 273% growth last year on Kroger’s click-and-collect model Kroger Click List, as well as 89% growth through Walmart’s click-and-collect channel.
The better-for-you manufacturer, which owns Celestial Seasonings tea, Greek Gods yogurt and Arrowhead Mills flour, also said e-commerce gives companies greater access to high priority consumers such as millennials and organic buyers — both of which are big online spenders.
"We’re adopting an e-commerce first mentality," said Julie Bowerman, Hain's SVP of digital engagement and e-commerce. "The heavy organic consumer uses digital and online technology disproportionately when they’re making decisions about brands they want to buy … and we’re uniquely positioned to capture this growth."
The natural and organic company said the heavy organic demographic buys about 25% more when shopping online than in-store — a huge opportunity, which CEO Irwin Simon said could lead to more than $100 million in e-commerce sales.
To capitalize on this growth, Bowerman said that the company is developing "dedicated packaging that meets the supply chain needs of online channels" and has built two dedicated fulfillment centers for e-commerce. Bowerman also said Hain plans to open a couple more centers this year to expand distribution across the U.S.
"We’re adopting an e-commerce first mentality. The heavy organic consumer uses digital and online technology disproportionately when they’re making decisions about brands they want to buy … and we’re uniquely positioned to capture this growth."
SVP of digital engagement and e-commerce, Hain Celestial
While there was consensus among presenters that e-commerce is the market of tomorrow, McCormick stressed the challenges that await manufacturers that want to take their company further into the digital frontier.
"[E-commerce] is still small — this is an emerging area. Nobody has figured out food," McCormick & Co. CEO Lawrence Kurzius told Food Dive.
To boost its e-commerce efforts, Kurzius said he has gone outside the company to get additional expertise and hire people with the knowledge they need. "We don’t know everything, and frankly the best knowledge and best practice in e-commerce is not in the CPG industry."
Still, he said that McCormick’s push into digital has been a successful venture so far. The company is working with e-commerce providers to optimize its presence on their devices, as well as provide engaging content such as sourcing details, dimensional photos and online recipes that demonstrate how shoppers can use their spices and other flavor offerings at home.
"We believe this is the future so we continue to invest in it," Kurzius said. "Anybody who says differently has their head in the sand."