Smucker and Mondelez aren't up to competition with Amazon's brands, analyst says
- J.M. Smucker and Mondelez are in the worst position to compete against Amazon in the online retail space, according to a note from Bernstein reported by CNBC. McCormick and Hershey took the top two spots when it came to competing against the e-commerce giant.
- While online shopping for U.S. packaged foods accounts for only 1% of sales, Bernstein estimated that the figure will increase to 5% or 6% in the next few years.
- "While we expect private label shelf space to normalize over time as Amazon separates winners from losers, we continue to believe that Amazon's private label could pose a meaningful threat to branded food manufacturers, especially as its 365 Everyday Value Brand is already highly credible with consumers," Alexia Howard, a Bernstein analyst, wrote in the note.
As the retail landscape changes for consumer packaged goods, companies need to have a strong presence both on-and-offline. The problem is legacy companies that have traditionally relied on the brick-and-mortar model are entering the e-commerce space with different measures of success.
According to Bernstein, Smucker's low ranking is because of competitors' relative success marketing products online. Mondelez, which was ranked second worst, doesn't do enough to get its cookie brands, including Oreo and Chips Ahoy, discovered online. To keep up online, Smucker and Mondelez might need to reevaluate their strategies and prioritize e-commerce.
The ranking is surprising. Mondelez has actually been an aggressive competitor in global e-commerce for years, inking a deal in 2016 to operate a storefront on China's Alibaba Tmall platform. According to an October report from Bernstein that was reported on by Food Navigator, the snack giant saw its e-commerce business in China grow 90% in the first half of last year, and is the only Western company to succeed in the market.
Some companies are effectively challenging Amazon brands. Thanks to heavy investment in digital strategies and online performance, Hershey and McCormick took the top spots against the online retail giant. Hershey has made e-commerce a priority over the last year and McCormick has devoted more of its resources to its e-commerce efforts. Seasonings and chocolate are also profitable food categories that have helped with online sales, Bernstein noted. And at the same time, both retailers do have partnerships with Amazon, which can be a good way to get a foot into the online space.
Although Amazon is the epitome of e-tailers, CPG companies who are looking to catch up through partnerships with the online retailer should be wary. The Seattle-based company has recently come under scrutiny for its skewed ranking system for its private label products at the expense of other brands. Still, for many companies who were not born out of technology, Amazon's exclusive deals present an opportunity to quickly jump into the booming e-commerce space as more consumers turn to online shopping for food and grocery items.
Even if a partnership with Amazon isn't the answer, companies will be forced to adapt as a larger segment of the population begins to buy its food and groceries online. For brands like Mondelez and Smucker, Bernstein's research is a call to action that likely won't be ignored. If the companies do not feel their strong suit is online sales, perhaps a collaboration with other online retailers, like Peapod, might be a temporary solution. Mondelez could also apply some of its sales tactics and lessons learned in China to its home turf. While U.S. consumers and shopping patterns are very different than in China, there are bound to be some strategies that could be effective.
Alternatively, brands could take a page out of Amazon’s book and begin hawking their own private label options exclusively online. This could give dedicated consumers of the brand a reason to begin searching for products on the web, and potentially spreading the word.