The rules of the game used to be pretty simple for large food companies: Make massive quantities of tasty and inexpensive (if not particularly nutritious) food products, create memorable brands around them, and use their market clout to get them within arms’ reach of the everyday consumer. For my mother’s generation, the germ-free, safe, and convenient access to packaged and processed food was a boon.
And then the backlash began.
A growing chorus of critics began to link the practices of agribusiness and mass-produced food to any number of evils. Obesity, under-nutrition, hypertension, diabetes risk, and a host of other problems were linked to easy access to cheap eats. At the same time, consumers started to look for organic and natural ingredients and smaller-batch, locally produced foods. Cue Chobani yogurts and Annie’s snacks. In food deserts, healthy choices are hard to come by and expensive, while those same areas are often swamped by cheap high-calorie choices.
The large food manufacturers were not caught entirely by surprise by these trends—but changing their fundamental business models to ride through the inflection point has proved challenging. For many, acquisitions were part of the answer—making acquisitions of disruptive companies that had sprung up to capitalize on the trends. The goal is to expand their reach in organic, convenience, snacking, and trendy new flavors. While acquisitions should certainly be part of these companies’ growth strategies, they shouldn’t forget about home-grown innovation.
The flurry of acquisitions aside, packaged goods food CEOs are a breed at risk. Some 15 of the largest have been shown the door since 2016. What could these companies do? Innovate. Specifically, stop it with the nostalgia-as-business-strategy approach. Put your best minds on discovering the next generation of better-for-you-and-the-environment food. Reconsider convenience—Millennials might not open cans of tuna, but they could well buy fresh tuna salad. Use your incredible manufacturing prowess to go from huge volumes of standard stuff to greater variety of niche-oriented products. Digital can really help here. And stop using earplugs when listening to critics—they may be telling you something vitally important.
While Big Food is facing some big problems, successfully surviving the revolution in the ingredients business is possible. Just look at Danone, Unilever, and even Pepsi.