Big Food Has Been Missing Something Big: Shifting Consumer Preferences (Part I)

With increasing pressure to show earnings growth, founders-driven Top 10 companies like Coca Cola and General Mills have been going through changes. Lots of changes. The consolidating, streamlining, and refocusing that they’ve been implementing has surely been a contributing factor in a number of recent executive transitions. But can new leadership build success in this time of marketplace disruption?

We seem to be in the eye of a Category 5 storm of transformation for big food companies. Many CEOs are transitioning as their corporations come out of a decade of consolidation — a decade during which they focused on building their brands in ways that appealed to shareholders and retailers, while also concentrating on building suppliers’ power over buyers. In all this, they missed the signs of the burgeoning consumer interest in food innovation, and therefore missed the mark with consumers.

It seems to me that since firms like 3G Capital entered the picture a few years ago, companies have been re-engineering themselves away from a true strength: selling products that offer a satisfying emotional and visceral appeal to consumers across demographic lines.

The new crop of incoming CEOs has some heavy lifting to do, because in the flurry of building new efficiencies and selective cost-cutting, too little attention has been paid to the innovative side of the business that appeals to consumers. And let’s face it, if consumers aren’t interested in products, those products aren’t worth much.

Just look at some of these big homegrown food companies. I call them “homegrown” here not only because they’ve been around a long time, but because their cultures have tended to nurture internal succession, yielding many decades-long and storied careers. They’re also companies with a history of founders with strong values — values that launched them into success but may have been left behind.

Irene Rosenfeld, a 30+-year veteran at Kraft, was appointed CEO there in 2006, only to step down as CEO of Mondelez — which was formed from former Kraft brands when it merged with Heinz — this year. John Bryant retired in September after just six years as CEO at Kellogg. Denise Morrison, CEO since 2011 at Campbell’s Soup, resigned from President Trump’s Manufacturing Jobs Initiative this past August — but is the writing on the wall for her at Campbell’s as well?

These executives — all extraordinary leaders — reached the pinnacle of their careers and their departures are not a sign of failure. But with pressure from Wall Street to show earnings growth combined with the extra pressure of the recent changes to the legislative environment, if you’re a serving CEO in a CPG company today and you got there the “old school” way, you probably want out. Old school just doesn’t cut it anymore.

Our current retail reality has caused many executives to rethink what they’re doing. They’ve been living out these last few years under the era of 3G — which laid down the edict that it’s not good enough just to be big and powerful, you have to be super efficient too. Simultaneously, the legislative environment has changed with the impact of product labeling, and the agricultural supply chain is reacting to the stress of climate change. These factors all play a role as big food companies fixate on internal financial decisions.

Companies under the 3G spell take their collective eye off the consumer, who has been focusing on food as a source of health and wellness. Consumers have also become fascinated with learning about where food comes from and how it’s made. And food itself is becoming nationally important. Remember Michelle Obama’s drive to end childhood obesity? That effort created a celebrity out of White House chef Sam Kass — who was named senior advisor for nutrition policy. Kass became well known for reasons outside of his work in the kitchen — he joined the First Lady in promoting food as a source of strength, health and longevity, and thatresonated with consumers.

Taking advantage of the big companies’ inattention, small emerging brands — innovative, fleet of foot, and totally focused on what consumers want — have crept onto the scene. They began making big inroads with small steps, impacting the market that big brands used to dominate through sheer scale and hefty advertising.

Specialty foods — let’s not call it “small food” — is now $127 billion of the $890 billion total food market. That’s more than 14% — and it’s likely to grow to 20% in relatively short order.

In many ways, the changing of the guard of CEOs at top CPG companies is the proverbial shot across the bow —the starter pistol in Big Food’s race toward reinvention or extinction. In future articles, we’ll look more specifically at old school versus new school leadership and management styles, and how some Big Food companies are responding to the need for innovation. What is specialty foods’ place in this mix? We’ll also look at that and changing consumer patterns, as well as some of the things manufacturers should be focusing on to succeed in these wild times.