Adapting to change
Additional retail trends that will affect food and beverage companies include consumers continuing to purchase non-perishable items on-line, polarization of the market with value and premium offerings pushing out “middle market, homogenized products,” and decreased demand for processed foods, Vitaro said.
Food companies are rapidly attempting to adapt to the change.
“We’ve been focused on e-commerce, but we are doubling down a bit more than we had in the past with the dedicated team, a reinvestment of additional resources and really partnering closely with our customers,” Michele Buck, president and CEO of The Hershey Co., Hershey, Pa., said in a July 26 conference call with securities analysts to discuss the company’s financial results. “One of the biggest changes I’ve seen in the marketplace is a lot of our brick-and-mortar partners are now really dialing up their efforts on omnichannel. Those click-and-collect and multiple forms of home delivery and then, of course, there are the pure plays out there.
A challenge The Hershey Co. may face in the future is the possibility of diminished impulse buying in the event consumers shop brick-and-mortar retail less.
“The way that we think about the business is, we need to win with growing customers,” Buck said. “Our goal is always to outperform the marketplace and to gain market share so that if there is softness, we get even more of our growth from market share gains. And we’re heavily focused on that because it’s our profit engine.
Later she added, “What we now want to do is expand our portfolio so that we can participate in even more snack occasions and ensure that we have the right portfolio and channel development to maximize those opportunities.”
Indra Nooyi, chairman and CEO of PepsiCo, Inc., Purchase, New York, said in a July 13 conference call that consumers are rapidly evolving as new retail formats emerge and food and beverage companies must as well.
“We choose to take the optimistic approach because this period offers a once-in-a-lifetime opportunity to strengthen our business and capture new avenues of growth.”
PepsiCo is investing in making changes to its snacks and beverage businesses to capitalize on the growth of e-commerce.
Many of PepsiCo’s products are impulse-buy oriented at brick and mortar, but Nooyi sees potential in those products achieving growth online.
“I think the whole e-commerce area is going to be impulse as you see it in a brick-and-mortar store, which then translates to e-commerce, and it becomes part of a replenishment cycle,” she said. “We’ve seen so many virtual reality tools right now. You can actually simulate grocery stores or whatever version of a grocery store you want online. And you can easily navigate the aisles, and just with a click, shop for whatever you want. So, I think in an interesting way, there’s infinite possibilities to create impulse all through technology online.”