NEW YORK – A major shift in consumer spending power is underway, but many large food and beverage companies haven't fully absorbed the implications for their business, according to a new Rabobank report “Dude, Where’s My Consumer.”
Millennials will take up the money mantle as the baby boomer demographic shrinks, which means food and beverage companies will need to understand how consumer tastes have evolved. Nick Fereday, senior global consumer analyst for Rabobank, said companies can still capitalize on shifting consumer tastes.
“We propose five key recommendations based around acquisition strategies (i.e., buy, not build) and in-house innovation (i.e., build, not buy),” Fereday said.
First, companies need to create a business culture that welcomes new ideas, brands and risk-taking.
Companies who have “lost their R&D mojo” should continue to acquire innovation through acquisitions, Rabobank said, but sooner rather than later to avoid paying too much.
Rabobank also advises maintaining the culture and integrity of their new acquisitions. “The big players have learned the hard way not to mess around with their shiny new purchases,” the report stated.
Innovations should be bold and disruptive; reformulations are no longer enough to deliver products that resonate with consumers. “Going forward, no more ‘innovation-lite’: Product reformulations just won't cut it,” Rabobank said in its report.
Finally, not every brand is in trouble or in need of a radical makeover. “There are lessons to be learned from iconic brands that remain irreverently relevant and laugh in the face of today's health and wellness trends: from Jack Daniel’s, Lunchables, and Oreos, to Twinkies, Domino’s Pizza, and Popeye’s.”
“These strategies are not mutually exclusive, and many companies are actively pursuing both ‘buy, not build’ and ‘build, not buy’ — depending on the need they're trying to fill, how much time they think they have, their appetite for risk, and the strengths and weaknesses of the company itself,” Stephen Rannekleiv, spirits and wine analyst for Rabobank, said. “We don't believe one strategy is preferable over the other. There are multiple drivers behind changing consumer preferences, and it would be naive to assume there is a single solution.”