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

In the first part of this series on the transformations rocking the food industry, I discussed how Big Food companies have shifted their focus to shareholder value, thus dropping the ball on the consumer’s changing preferences. In this article we’ll look more closely at complex consumer dynamics and how brands have been maneuvering to reach the consumer.

As I have said, the incoming batch of Big Food CEOs need to learn to compete for today’s consumers with their clear preferences for specialty, local, creative and non-mass-produced products. This is a profound change from the highly processed or designed foods that got Big Food so big in the first place.

This isn’t to say that consumer packaged goods are dead—far from it. Our 2017 Specialty Food Association industry data shows that center store specialty items in the “new” artisan categories — shelf-stable specialty foods — are growing moderately. Specific categories of packaged foods such as water, wellness bars and nut butters have grown at remarkable rates — 20% or more year-over-year. So how does this point to the new imperative for Big Food CEOs when traditional shelf-stable products are flat or down?

Before we talk about how Kraft Macaroni and Cheese, a brand Goliath in CPG history, has been replaced by specialty imported Italian pasta-and-four-cheeses selling for a much higher price, we need to look at who the new consumer is, what they’re looking for and why. While it would be easy to point a finger at millennials and claim they’re responsible—indeed, millennials buy specialty foods wherever they shop—this shift can’t be traced back to any one consumer segment or generation. It’s a convergence of the cohorts. Mom isn’t the gatekeeper on food decisions anymore. And brand advertisers should have expanded their targeting… so why do they keep targeting mom?

In fact, the move toward smaller, more specialized and localized food has been a reality for baby boomers, too —the group that championed frozen dinners in the past. But taking another step back, these boomers grew up at a time when mom made dinner from scratch every night. So they know quality fresh ingredients, even if they didn’t search them out when their own kids were small, opting instead for convenience.

Perhaps that’s because they also saw mom start by making meatloaf for everyone, but when one kid turned vegetarian, she made meatloaf and pasta. Then a third kid was on a diet and now she had to make three different things. Then mom started working full-time and suddenly making dinner became an even more complicated chore.

Without the time after work to cook varied meals from scratch, mom started swinging by the grocery store on her way home for prepackaged dishes and meals. Remember the home meal replacement phenomenon that took place more than a decade ago? Retailers enabled that when they changed out to include deli sections with prepared meals and take-out items. Today’s retailers went further and developed sit-down restaurants inside grocery stores. Heard the new term grocerant? (Yet another story for another day.)

The family dinner splintered—boomers, millennials and Generation Zers all going in different directions, each with different eating habits and needs—with no one sitting down together for a meal.

This change in the dining dynamic led to specialized industry responses: in fact, many of the specialty food companies that have become household names started with a parent wanting to give their child a better quality product, or meet a special nutritional need. Think Annie’s, Amy’s Soup, YumEarth, Ella’s Kitchen, Earth’s Best … the list is practically endless.

The American food consumer also became essentially individualistic as well as highly mobile. That is a challenge for the traditional food industry. It has gotten to the point where a single brand works to communicate with each consumer segment in a different way and often in a different medium — old-school TV and magazines have been left behind.

The very principles of reaching consumers has changed, and now constant novelty and speed-to-market are de rigueur. How can you develop and grow a brand that way? Entrepreneurial agility and the ability to take risks, learn fast and maintain a steady flow of innovative product releases is becoming the norm … and so is continual change. This is all being asked of Big Food companies that, like huge ocean liners, weren’t designed to change course very rapidly.

Leadership shakeups are happening in Big Food companies because the consumer is changing so quickly and old school practices of running a business and reaching consumers have not kept up. The thinking seems to be that maybe a “new guy” can set the ship back on course.

Returning to our example — seeing the old standby blue box of $1.99 mac & cheese get pushed aside by specialty imported Italian pasta with a special blend of four imported cheeses for $6.99 — it’s clear that consumers are responding to specialty offers. The ideas are out there. Although trying to lead the consuming public is like herding proverbial cats, big companies keep trying … and are now being given a run for their money by small entrepreneurs.

The pressure on Big Food is only going to continue. The specialty food movement — addressing consumers’ deep desire to eat healthily and know where the product is coming from, while simultaneously being engaged in the experience and even connecting with a social cause — is already turning the food business upside down.

New Big Food CEOs are going to have to figure out how to become part of a new agile community without damaging their huge brands. Dean Metropoulos, head of private equity firm C. Dean Metropoulos & Co., may have the right idea by buying up orphaned heritage brands like Twinkie and Pabst Blue Ribbon. One thing is for sure: as a CEO, you’d better figure out how to say ‘macaroni and cheese’ in Italian.

Next time we’ll look at how multi-brand conglomerates are trying to reinvent themselves in light of this fragmented and changing consumer landscape. Hint: there are two directions they can go.