Big Food…Big Problems
This week, the CEO of Campbell’s announced that she is stepping down. The storied firm of 149 years also announced a review of its portfolio, including soup, and its future as a stand-alone company. The challenges at Campbell’s are also being seen in other Big Food firms, like Kraft, Mondelez, PepsiCo, Coca Cola, and it raises questions about the future of mega food firms and their brands.
- Food Brands Are Under Attack: In a digital world, does a customer have a high preference for the brand of tomato sauce that he or she buys? I argue that the brands begin to matter less and less as we move into a digital realm. The evidence is compelling. Amazon is launching many of its own food and beverage brands. It even has a brand for dog food, Wag. Value is the king at Amazon and lower prices win the day, not overpriced brands! It is hard to fit that narrative with a fancy brand and large marketing budget.
- Customer Preferences Have Shifted: More and more, people show their preference for prepared food, food ordered by Uber Eats, or a local delivery service. Families are smaller. Millennials have kids later in life and boomers are living along. The economics of cooking are unattractive for those groups. It removes the customer even farther from the raw ingredients in their meals.
- Big Food Has Not Built Meaningful Big Data: In virtually everything that we do today, we leave a digital signal. When I search for a plane ticket, it tells Kayak or United about my interest and, in fact, my identity. My searching trends can be tracked and even compared against other flight options and against other customers. Every transaction on Amazon or eBay creates and uses data, all at a very detailed level with AI and analytics. However, when I buy an iced tea beverage, the manufacture will never know me or that I looked at green tea, too. The manufacturer just sees more units sold at Costco or Whole Foods. It gives very little detail and even the ordering signal can be lost in inventory and marketing campaign decisions. Most food firms are trying clever ways to have us go to their app or website. However, there is no natural reason for me to register my coke purchase. The future of Amazon pantry does offer the customer data that is missing for Big Food firms, but I suspect Amazon is not planning to share everything about the customer and, of course, the price control has been shifted from the food firm to Amazon (which also runs a great grocery store).
- Customers Want Deals: Food brands are expensive. The brand is a message to assign value to a product that is more or less a food commodity. When you think that 50% of American households live on less than $62,000 per year (gross), you realize that deals are important to many people. It explains why firms like Aldi are seeing a surge in discount and value products and why Walmart is the grocery powerhouse in most parts of the US. If you are wealthy enough to not look at the price of what you eat, you indeed are wealthy. However, for the rest of America, make room for deals. This is increasingly difficult for Big Food, because their products use energy, metal, oil in plastics, and large amounts of labor – all parts of the economy that are seeing rapid price increases.
- Variety is the Spice of Life: Big Food is boring. They use flashy colors to make it look exciting. The products are dependable and reliable, and yes there is value in that. However, with the rise of the #foodie culture, people want to experiment and are looking for innovative solutions to their meals needs. You have to give some kudos to Coca Cola for launching the many new flavors of Diet Coke. Now, imagine having to do this every year, and surprising your client with new ingredients. It will be lots of work. Get started.
Some advice for Big Food:
- Think About the Customer First: Start with the need and service that you provide the customer. Bring value to the customer. Lower prices. Take work out of food preparation with great new products. Walmart said Save Money. Live Better. So, do that for people.
- Innovate: Bring new flavors and food norms to the market. Almost certainly, the food answers of the 1970s will not be sufficient. Try. Invent. Do it all the time. When you stop, it will be your demise.
- Less Bad Stuff: Try it. America wants less bad stuff. Make it a task to simplify the ingredient list. HFCS, added sugar, salt, trans fats, and preservatives. Take it out. Nobody wants it anyhow. You will have a better product and a better story to tell. Paul Newman did it with Newman’s Own, and it has been a wild success.
- Consider Premium Brands: Of course, Big Food wants Big Margins. I think the reality of our polarized society and growing income inequality is that more than half of the population will want value and some small part of society will desire premium, high-quality products. If you want to serve the upper crust, get a top product that can command their interest. The opportunity exists to charge these people higher prices and earn higher margins. We see sales of mass-marketed beer trending downwards; yet more expensive and premium craft beers sales are growing. Here’s the twist, premium brands don’t have Big Food names on them (by customer preference!). Sorry, Campbell’s, but Well Yes! Soup by Campbell’s still says Campbell’s. It is really time to pull out Alfred Sloan’s branding playbook from GM and craft a house of brands. What if you just called it Well Yes!, instead? Lose the hubris. Anheuser Busch realized that Goose Island is just fine and there is no need to call it Goose Island by Anheuser Busch (sorry, 312 fans, the Chicago original sold out to the man from St. Louis and their Belgian owners in 2011 and does a good job of keeping that fact pretty low key). Premium brands have a story, authenticity, and appeal beyond price. Doritos cannot have mass appeal and claim premium status simultaneously. It explains why GM kept Cadillac separate from Chevrolet.
- Get Savvy with Digital: Retail is not coming back anytime soon. Get ready for competing in Amazon’s Pantry. The future will be shopping for food products with Amazon and Alexa. When someone asks for Macaroni and Cheese, will it be Kraft blue box that gets sent in the mail? Maybe. Maybe not. Will it be based on reviews, price, value, availability, or even ingredients or just what the person bought last time? The stakes are much higher when your customer does not look for your product in the store but orders it digitally.
In a time long ago (well not so long along, actually), Professor Walker liked shopping at Publix, Wegmans, and Ukrops. Today he likes Costco and Whole Foods, but likes Amazon Pantry even more.
Professor Walker provides keynote talks, seminars presentations, executive training programs, and executive briefings.
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About Russell Walker, Ph.D.
Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. His most recent book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.
Professor Walker has developed and taught executive programs on Enterprise Risk, Operational Risk, Corporate Governance, Analytics and Big Data, and Global Leadership. He founded and teaches the Analytical Consulting Lab, Risk Lab, Global Lab, and Digital Lab, all very popular experiential learning classes at the Kellogg School of Management, which bring Kellogg MBA students together with corporate opportunities focused on data and strategy. He also teaches courses in risk management, analytics, and on strategies in globalization. He was awarded the Kellogg Impact award by Kellogg MBA students for excellence and impact in teaching.
He serves on the Scientific and Technical Council for the Menus of Change, an initiative led by the Harvard School of Public Health and the Culinary Institute of America, to develop healthier and more environmentally friendly food choices. He is a former member of the board of the Education and Technology Committee to the Morton Arboretum. He was a board member of the Virginia Hispanic Chamber of Commerce, where he developed support programs for Hispanic entrepreneurs and worked with US senators on US Latino matters.
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By Russell Walker, Ph.D.
Russell Walker helps companies develop strategies to manage risk and harness value through analytics and big data. He has done novel research in data monetization and digital disruption and advises leading firms on these topics.
As Director of Experiential Learning in Analytics and Associate Teaching Professor of Marketing and International Business at the Foster School of Business, at the University of Washington, Dr. Walker is an academic thought-leader on analytics. Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. Previous to moving to Seattle and the Foster School, Dr. Walker was Clinical Professor at the Kellogg School of Management of Northwestern University, where he founded and taught many popular courses in analytics and risk management.
His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage.
Dr. Walker consults with firms on the topics of Big Data and Analytics, Data Monetization, Risk Management, and Business Strategy.
Russell Walker can be reached at:
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