How to Save the Future of Packaged Foods

Hartman Group white paper urges execs to break away from legacy behaviors

BELLEVUE, Wash. -- From 2012 to 2013, more than half of the top 14 branded food and beverage companies grew their U.S. retail revenue slower than 1% inflation, according to data from Euromonitor. While some are quick to blame the economy or uninspired marketing, leaders at The Hartman Group say it’s something else. It’s the food.

“Legacy brands need to take a page from upmarket, entrepreneurial food businesses and start shaping their products to consumers' needs, which are radically different than they were when many of these brands were growing fast,” Harvey Hartman, founder and chairman, and James Richardson, Ph.D., senior vice president, Hartman Strategy, wrote in a recent white paper published by the research firm.

The sluggish growth has troubling implications for food and beverage products, Hartman and Richardson continue:

  • Demand is tapping out for many legacy branded food products, as these businesses can no longer count on population growth as a basic guarantor of top-line growth.
  • Innovation from many legacy brands continues to produce short-lived top-line hits, not sustained and/or large accretions.
  • Innovation successes (i.e., large first-year hits) are not necessarily making up for volume losses elsewhere.
  • Brand portfolios are becoming segregated into decliners, flatliners and a small group of power brands, creating turf struggles over marketing/innovation investments.

They pointed to the IRI Summit, held earlier this year, where speakers and attendees focused on solutions that rely on the GDP picking up, distribution fixes and digital marketing, despite the “relentless double-digit growth of disruptive upmarket food retailers that sell highly differentiated foods curated to a contemporary set of quality criteria.”

“The biggest long-term challenge facing the U.S. food industry is that taste preferences are changing,” the paper continues. “This is most apparent among highly urbane and educated consumers, where the arbitrary boundaries of ‘too sweet’ and ‘too fatty’ are altering in ways inimical to the core food science paradigm of the U.S. food and beverage industry.”

Multiculturalism and the well-traveled upper-middle class create a large consumer group intentionally seeking complex flavors from around the world. Meanwhile, more educated and health-conscious consumers are readjusting the way they eat—which happens to be in the opposite direction of many legacy food brands.

The white paper goes on to offer a handful of steps for how senior executives should respond, including a focus on restructuring to allow for upmarket innovation and investment, letting go of legacy brand bias, major supply-chain overhauls, and an investment in consumer demand analytics outside of your base consumer.

“The key is to develop a talent for studying the edges of the consumer base, the consumers who are most dissatisfied with your current products. These non-customers have underserved needs your organization will not see by studying legacy brand heavy users. Deep, niche ethnography and nuanced analysis of the less measured channels are key components that are systematically underutilized.”

Click here to download the entire white paper, “A Recipe for Growth in Packaged Foods,” from The Hartman Group.