Phil Kafarakis is president of the Specialty Food Association, an umbrella organization representing more than 4,000 innovative, entrepreneurial member companies in the food and beverage industry.
Can we talk about ketchup? When I was growing up, the iconic condiment gracing the table of practically every American household was Heinz Ketchup. If that bottle wasn’t on your table, you were considered outside the established norms of society. Heinz was a magnificent brand and a market leader. The company used traditional category management to dominate in shelf space and market share. Heinz was the king of ketchups, reigned supreme for decades, and seemed invincible.
It seems impossible that anyone could have cut into the power of the Heinz brand, and the shelf space that Heinz considers rightfully belongs to it. What happened? Recently, you may have come across a ketchup brand called Sir Kensington’s. The brand has been growing from an almost imperceptible appearance on health food and supermarket shelves to a crescendo presence that’s hard to miss.
Two students from Brown University, Scott Norton and Mark Ramadan, envisioned a new kind of ketchup, one with none of the ingredients on the “bad-for-you” list. Their mascot, Sir Kensington, was based on a historical 19th century character who wrote a treatise on gastronomy while studying at Oxford. He was a frequent figure in the English court, called in for his expertise in special sauces.
So Ramadan and Norton decided to develop a ketchup that was all organic, no sugar added and health-conscious. They did an extensive social media marketing campaign, striving to understand the consumer dynamic, working the supply chain through Whole Foods. And very gradually, they took significant share from Heinz.
In the food and beverage industry, this brand is just one small example of what has been happening very fast. It’s the beginning of a transformation through which specialty food entrepreneurs are winning the day by offering the kind of products that the newly health-conscious consumer is craving.
Even five years ago, Heinz seemed to be doing fine, even if they were under pressure because of licensed commodity costs and production efficiencies. Then, in a wave of venture capital empowerment starting in 2004 with the emergence of 3G Capital and zero-based budgeting, the CPG world of measuring shareholder value and net worth changed forever. After the global beer business was slurped down by 3G affiliate InBev’s acquisition of Anheuser-Busch in 2008, Heinz began experiencing a different kind of pressure when, in 2015, 3G came in and began telling the great leader that they needed to be more conscious of their bottom line, improve their margins and offer better returns to their shareholders.
This created a perfect storm with industry-wide repercussions. While financial activists put pressure on big brands to perform for shareholders, the big brands lost sight of consumers, putting their full focus on financial engineering. Simultaneously, as consumer values were changing, retailers tried to connect to consumers, changing their retail models as a result.
Suddenly the big food brands found themselves looking in the rearview mirror, realizing they had to get back to what the consumer wants. And on the way, they realized they also needed to leverage technology. With the focus having been on short-term gains, long-term investments in innovation had taken a back seat in many major CPG brands, leading to the current state of affairs — namely, relatively dry pipelines that do not appeal to today’s consumer.
It’s worth noting that I closed out the Big Food chapter of my career while on the front lines of the 3G effect. The company where I worked avoided them and ultimately benefited from the disruption they caused. But speaking from that perspective, and now working with small, strong entrepreneurial brands through the Specialty Food Association, I can say that Big Food brands have been getting their breakfast and lunch eaten — partly as a result of the smart use of guerrilla marketing tactics by the small start-ups, but also by these small companies gaining a superior understanding of what the market craves.
It’s hard to imagine, but there was a time when nobody knew what a Kind Bar was, or how it came to power in a category dominated for decades by Mondelez brands. Nor would anyone have dreamed that consumers would be spending $5 or more for a few ounces of kale chips until entrepreneurial companies stepped in and offered such a product to health-conscious consumers. Suddenly, Frito Lay was watching its back as these new challengers entered the scene.
Right now, consumer trust in big brands and process manufacturing is very low. Consumers are very suspicious of multi-ingredient foods. Traditional “push” methods of attracting customers, such as discounting and trying to buy loyalty, haven’t worked for the mainstay big brands. Why? Because the marketing approach of the smaller startups and the building of communities that are loyal to their brand — usually because of the brand’s values — has shifted the focus to the consumer. They use every tactic known in social media today. The Good Foods brand is a great example of excellent guerrilla marketing. They’re building communities in really smart ways across a host of social platforms. And these tactics make the most of consumer suspicion of foods that contains unnatural, unpronounceable, or too many ingredients.
Take the case of the parent who has a child with an allergy. There is a new small brand out there that has made it their business to answer directly to this parent (and child). This brand satisfies the parent’s need to address the child’s allergy, all the while building community and simultaneously leveraging technology.
In fact, social media platforms have allowed these small brands to become very personal and direct with their customers, illustrating how technology can help disrupt the status quo. Despite its well-documented data privacy problems, Facebook has been an extraordinary vehicle for small businesses.
And through multiple tactical components of a social media strategy, these brands start to bring that consumer along, to educate as much as the brand has taken cues from the consumer to begin with. The consumer will then start to look for this new product, the small brand sends them product, and voilà! Suddenly the consumer is doing product testing in their home, free of charge.
As consumers gain experience with everything online, the platform to engage directly with a brand’s core consumer has become very easy. It’s essential for a brand to do that first. They need to go deep inside their brand and distribution — versus going wide — in order to succeed at “pull” marketing that ends in consumption. One regional chain with 10 stores and its consumer base in a small brand’s backyard is sufficient to build out the brand’s model. Then the small startup can go back to their supply chain — whether grocery or convenience store, restaurant, etc.—and point out that they have this consumer who’s following them, who’s listening to them, who understands their new product. Suddenly, the startup is not just selling the product. They're delivering it all the way through to the end user — rather than the product going into the distributor’s warehouse and six months later, staying on the shelves there, unsold.
In undertaking a social media campaign on Instagram, Snapchat or Hulu, having all supply chain partners understand that “pull” component, and how it’s going to move the inventory all the way to the consumer’s table, is what spells success. Distributors don't want a product sitting in their warehouse, they want it turned over. The more a brand is focused on that, the better off all the stakeholders are.
What this boils down to is that there are some smart, entrepreneurial people in the food industry who are in tune with consumers’ ethos and values. They’re bringing their brands to market, and completely turning around the big brands’ model — and their lock on grocery shelf space — in bringing their brands to the marketplace. It’s an exciting time in the industry, and much of it has been made possible by guerrilla marketing, of course powered by products that today’s consumers want.