The food and drink sectors are facing a number of challenges due to changing consumer habits and preferences, regulations and environmental concerns, consolidation and the increasing influence of new emergent brands.
Adrian Swinburne, 42 Technology’s head of consumer sector, explores the A to Z of some (but by no means all) of the issues facing these sectors, and highlights some of the behaviours and responses that may be required.
The markets are changing faster than ever and there is a need to respond quickly and adapt – often a challenge for large corporations with deeply embedded systems and cultures. But you must retain the ability for agile, but well considered, behaviours.
Your brands are key to your success but need to evolve and avoid becoming stale and out-dated. Sustainable and credible brand evolution and brand extension need to take centre stage in your NPD roadmaps.
Brand owners and retailers are not who they were last year, and it is guaranteed that next year they will be different again. How does this continued flux influence strategy? And how do you respond to increasing retail purchasing power?
New entrants and niche entrepreneurial offerings are arriving faster than ever, and even though only 20% of these are likely to gain true market success, they represent a genuine threat to the established brands. Complacency is not an option.
Whatever changes you may need to make to respond to your customers, consumers, market trends, competitors, regulations or social responsibility, ultimately everything needs to reflect in your earnings and delivering shareholder value. That’s not always a comfortable balance.
Recipe changes on strong and long-established products, including salt and sugar reduction, inevitably bring challenges to product formulations and manufacturing processes, as well as carrying the risks of consumer alienation when changes are made too abruptly. Recent history shows both good and bad examples of brands making such changes. Are your processes able to support these formulation changes and still deliver quality product?
You may strive for a global footprint with consistency in products, operations and brands – but the reality of regional preferences, cultures and markets often presents barriers. How can you intelligently standardise whilst maintaining tailored offerings?
Global health agendas often lead to, often illegitimate, negative consumer perceptions, or even vilification of your brands through social media, and it only takes a small and vocal community to inflict tangible damage. Does your messaging properly support your brand positioning and are you taking the right steps to mitigate opportunities for such damaging consumer feedback?
… or more generally Data should be driving everything we do. Know you markets, your customers and your operations. Embrace Big Data and IIoT but in an appropriate way that delivers real ROI in acceptable timescales.
This could have a number of meanings, the most obvious of which is addressing the push-back against so-called junk food and its damaging effects on our health. But it could also refer to waste in the supply chain, from the farm gate to the consumers’ household – the reduction of which has both societal and economic benefits.
We could hardly avoid raising lean and continuous improvement in our A-Z, but it is important to recognise that these principles can be applied to all of your business functions and operations, not just your factories and supply chain.
Much of your success depends on customer loyalty – loyalty to your products and to your brands. But this cannot be taken for granted and diligent attention to your customers’ opinions and purchasing behaviour is essential, especially in these times where social media propagates views with alarming speed.
There is truth in the principle credited to Peter Drucker “If you can’t measure it, you can’t improve it”, and whilst there are arguably some aspects of business success that defy measurement, you must always challenge that viewpoint and strive to establish the true facts rather than simply common belief.
The industry has made significant advances in its use of natural ingredients (or more correctly, reduction of seemingly unnatural additives) but the goalposts seem to keep on moving, and what was considered acceptable yesterday is today meeting with consumer pressure for reformulation, even when such artificial complaints are proved to be invalid perceptions. Trends towards flexitarian eating habits are also driving consumers’ purchasing behaviour and need to be embraced by brand owners.
Huge pressure has been placed on improving operations and driving bottom-line growth, and this places immense pressures on a business, even if the prize is worth the pain. It can also lead to brand stagnation and open the doors to new entrants into the category. A careful balance needs to be struck to ensure agility and passion are not sacrificed in the process of improving operational performance.
It is rare to find a discussion in the drinks industry where Producer Responsibility and specifically plastic is not front of mind. Brand owners have the opportunity to take a lead with issues like rPET use and Deposit Return Schemes, or else face stiff government-imposed regulations.
Your consumers (and certainly your retail customers) are often fickle and can respond quickly to real or perceived quality issues. Robust monitoring and control of your operations is essential – can you trust your quality KPIs?
You may have noticed no mention of Innovation – in the current climate is there still room (or budget) for significant innovation in your portfolios or operations, or does Renovation need to lead the way in avoiding stagnation and erosion of market share, possibly through targeting alternative consumption occasions, or pragmatic approaches to extracting greater value from your existing assets?
This topic is largely covered in the item on plastic and producer responsibility above, but merits emphasis, in particular as society becomes increasingly conscious (and vocal) of the impacts on our planet of some of the practices we have taken for granted for many years.
For the consumer, taste is everything! Whatever other health benefits and desirable attributes your products might deliver, if it doesn’t hit the taste buds then you’ve got a problem.
Uncertainty permeates most aspects of business operations, so accept it, embrace it, and use it to inspire how your business and your products can evolve. Are there additional approaches you should be taking to measure your processes and information gathering to eliminate uncertainty?
Your consumers must be at the heart of everything you do and the impact on them of all of your actions must be properly understood. Customer perception and loyalty can be damaged by seemingly unrelated actions, so take care before you act.
Water scarcity is said to be one of the biggest challenges facing industries, with water set to become more valuable than oil. The food and drink industries are in a position to lead the way in water use reduction (and many already are), whether in their manufacturing operations or addressing water consumption in their raw material supply chains through innovative agricultural initiatives.
Brand owners need to recognise where they might have image problems (often due to invalid perceptions of product quality or health impact) and take actions to promote their brands and products with the right image and messaging to appeal to their target customers.
Robustly challenge why you are doing what you do? Are your actions based on solid data and strategy? Or are you making poorly considered tactical moves in response to loose market trends or unqualified data?
You will no doubt have numerous initiatives underway to strive towards zero waste, zero carbon footprint, zero emissions, etc and we would encourage you to challenge all of your standardised processes to find creative approaches to reducing your impact.
Many of these issues are certainly not unique to Food & Drink, and will likely apply to your work in other industry sectors. You will also almost certainly have your own variations on some of these points, or feel that the most critical topic has been missed or understated. We would love to hear your thoughts and your own industry A-Z.