A new report published by A.T. Kearney and The Hartman Group, entitled Is Big Food in Trouble?, finds key trends in the food business are slowing the growth of the largest food and beverage companies. It claims that the top 25 food manufacturers in the United States have ceded 300 basis points to small and medium-size competitors since 2012 and have grown revenue at just 1.8 percent compared with 11 to 15 percent increases for smaller companies.
Changes in consumers’ core values – amplified by social media, celebrity chefs, and a myriad of food experts – are rewarding small and medium-size companies with above-average growth and slowing the growth of the top 25 food and beverage companies.
Randy Burt, A.T. Kearney partner and co-author of the paper, commented: “Large established food manufacturers need to give consumers real reasons to remain loyal. This includes providing innovative products that meet consumers’ current and emerging needs, delivered when and where they shop and with transparency and authenticity in sourcing, production, and marketing.”
Consumers are more passionate about the food they eat, and their appetites are creating dynamic shifts in the grocery aisle, including:
- A focus on diet foods has shifted to a focus on “real food” as a way to maintain health
- More foods are being launched that go beyond basic nutrition to support heart health, digestive health and higher energy levels
- Consumers are embracing free-from segments (non-genetically modified, organic, and gluten free)
- Fresh food departments are growing at the expense of center store and processed foods
- Locally sourced foods with a direct-to-consumer model are becoming more attractive
- Consumers are demanding transparency in food sourcing, production and labeling
Laurie Demeritt, chief executive officer of The Hartman Group and co-author of the paper, remarked: “Consumers – led by Millennials and Gen Xers – will continue to press companies and retailers for more information and accountability about how ingredients are sourced and processed, how real their food products are, and how responsive they are to consumers’ desire for choice and customization.”
Based on industry projections, major food companies can tap into a $70 billion opportunity in overall F&B market growth over the next three years. The study provides “big food” marketers with three strategies for recapturing profitable growth, as follows:
- Take advantage of cost take-out and divestiture to enable investments in growth activities
- Use controlled acquisitions of smaller, established players and external venture capital development to add trending categories to a portfolio
- Create venture funds to invest, seed and grow nascent brands, products and technologies that could position companies to take advantage of consumer trends with a lower entry cost
Dave Donnan, A.T. Kearney partner and co-author of the paper, stated: “Larger F&B manufacturers need to evaluate focused acquisition strategies as well as investments in new growth category venture funds. Corporate innovation models will require an open innovation platform incorporating smaller entrepreneurial companies.”
For a complete copy of the report, visit: www.atkearney.com.
About A.T. Kearney and The Hartman Group
A.T. Kearney, which has been advising clients since 1926, is a Chicago-headquartered partner-owned global management consulting firm with offices in more than 40 countries.
For over 25 years, The Hartman Group has specialized in identifying demand-side trends in the food industry and developing strategies to exploit them. The market research company’s expertise ranges from discerning how the smallest nuances of product design affect a product’s ability to grow to devising portfolio programs that maximize sustainable, demand-led expansion.
