Editor’s note: Laurie Klein is VP of client services at market research firm Forbes Consulting Group, a division of Copernicus Marketing, New York City.
Recently, I had the opportunity to chair a food and beverage conference with presentations from companies such as General Mills, KIND Snacks, Tyson, Twitter and Pinterest covering a diverse range of topics – from changing food values to new consumer, digital media and e-commerce opportunities to effective food innovation strategies. The conference highlighted the increasing desire for brands to more fully understand the emotional connections that consumers have with products and how best to further develop and nurture those ties. Here are the seven biggest trends impacting the ever-evolving food industry today.
1. Mergers and acquisitions
Just a few short years ago, companies were splitting businesses apart to run more profitably or selling off brands that were no longer a fit within their portfolios for long-term growth. While P&G is still in the process of selling off less profitable/slower growing brands, others believe that there are greater efficiencies by joining forces. The newly formed Kraft Heinz Company and the Hillshire-Tyson merger certainly hope that bigger means better.
Other companies are betting on a growth path that is fueled by the purchase of smaller, growing brands that seem to have tapped into a current consumer trend – for example, Campbell’s decision to buy Bolthouse Farms, Plum Organics and Zico Coconut Water, rather than going to the effort and expense of trying to create an in-market hit of its own. In fact, nearly all major food manufacturers have recently bought smaller organic or all-natural businesses. The typical strategy is to allow these natural/organic brands to continue to run independently (at least for a while), rather than folding them into the big food company structure. Along the way, these smaller brands are re-educating the big food companies about guerilla marketing, nimble tactics and how to win today’s game.
2. Margin squeezing
As a result of the merger mania, many companies are budgeting differently. 3G Capital, the management investment firm that bought Kraft Foods (along with Berkshire Hathaway) and merged it with Heinz, is known for extreme cost-cutting, staff reductions and a zero-based budgeting model. Each line item of the budget is scrutinized and a case is made for every dollar. This often leads to significant budget reductions and no discretionary spending in the plan. In order to continue to be competitive, other food companies have followed suit and made significant reductions to their marketing, research and innovation budgets. Everyone in the industry is tasked with doing more with less.
3. Multiple distribution channels
Several years ago, a food marketer’s distribution channels were quite simple: grocery, drug and convenience stores. Today, the distribution opportunities are endless.
Starbucks is a perfect example of this wildly expanding distribution trend. Just think of all the places where you might be able to find a Starbucks product today: Starbucks’ retail store, inside another retail store (like Target), hotels, K-Cup coffee pods or even packaged instant coffee at a local grocery store.
4. Manufacturing goes all natural
There is a big effort underway to reduce the amount of artificial ingredients, flavors, colors and preservatives in many food and beverage brands today. Diet Pepsi recently reformulated to remove aspartame. Nestle has vowed to remove all artificial flavors and colors in more than 250 types of chocolate sold in America. General Mills has committed to removing artificial flavors and colors from 90 percent of their cereals by the end of 2016, including Trix and Reese’s Puffs. In a stealth move, Kraft Mac & Cheese reformulated to remove artificial dyes, flavors and preservatives without making a public announcement until after 50 million boxes were sold, proving that the product had no discernible difference in taste. With the new formula changes, Kraft Mac & Cheese is likely to win back other consumers who are looking for less processed, more natural food solutions.
5. Millennials change the game
I spoke extensively last year at the Food Marketing Summit about the impact that Millennials are having on the food industry. These influencers are behind the big push for less processed and more organic/all natural food products. Millennials are often criticized for being less loyal to brands than previous generations, but they live in a world with more brand choice. Why not choose the product that is on sale this week? That said, Millennials are willing to pay a premium for quality, as is seen with, Chobani, which is not the least expensive yogurt but it offers unique flavors and a brand that stands for good values.
Don’t expect Millennials to stay loyal to the same brands as their parents if it doesn’t fit their lifestyle. For example, cereal manufacturers have had to work hard to re-invent themselves as Millennials aren’t likely to sit at the breakfast table in the morning with a bowl of cereal and milk. Millennials want products that they can consume on the run. They want things that are high in protein. The brands that win with Millennials are those that recognize their unique needs and adapt accordingly.
6. Marketing has gone digital
Gone are the days of traditional media planning across three key mediums: TV, print and radio. There’s been an explosion of media options that are growing by the day. While TV remains the dominant medium at 37.7 percent of all expected media spending in 2016, digital media expenditures are expected to climb to 27.7 percent by the end of this year (Carat Ad Spend Report – March 2016). The boom of digital media is expected to surpass the growth of all other types of media.
Digital allows marketers to catch consumers in the moment wherever they are, whether they are streaming, shopping online or in store and are connected to a retail coupon via geofencing. The digital age of marketing is here to stay.
7. MR and consumer emotion
For many years, marketers have spent time and energy trying to understand the rational connections that consumers have with their products. Do they like the flavor, color, product and texture? Is it unique? Is it relevant? Does it fill an existing need? While all these answers are important to understand, this is only part of the equation. Numerous research studies and scientific experiments have validated that every decision we make is based on rational and emotional factors. However, most research can only measure the rational factors that lead to purchase. Many companies are now exploring neuroscience market research techniques to be able to assess the consumer’s emotional connections that can lead to brand choice.
Understanding the emotional connections that consumers have with brands is a growing trend and an important tool for food and beverage marketers. Some brands are fighting it out by using expanded distribution networks, reducing margins, finding more effective ways to reach Millennials or using zero-based budgeting. The most efficient way to rise above the noise is by continuing to establish a meaningful and motivating emotional connection with your consumer, and delivering a powerful sensory emotional experience every time the consumer uses your product. Research conducted by the Advertising Research Foundation concluded that, “emotion is the measure most predictive of whether an advertisement will increase a brand’s sales.” Likewise, in a 2013 article, Psychology Today stated, “Positive emotions toward a brand have far greater influence on consumer loyalty than judgments of a brand’s attributes.” By evaluating both the rational and emotional factors that drive brand choice, you can create a more accurate picture of all of the elements that lead consumers to choose your brand.