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Food Brands Fighting to Find Winning Market-Share Formulas

APICS CEO

Friday July 14, 2017


It used to be that if you looked in any American pantry, you saw some quintessential items, such as Kellogg’s cereal, Campbell’s soup and Kraft Macaroni and Cheese. Now, if you open that door, you likely will see healthier, more natural alternatives and less-expensive store brands. Last week, The Wall Street Journal laid out the challenges being faced by big food brands in “So Long, Hamburger Helper: America’s Venerable Food Brands are Struggling.”

“Anyone searching for macaroni and cheese, a childhood staple, can opt for fancy pasta with organic ingredients or inexpensive store brands such as Kroger Co.’s,” write Annie Gasparro and Saabira Chaudhuri. “Squeezed in the middle are Kraft Heinz Co.’s venerable blue-and-yellow boxes.” 

Smaller, younger companies are grabbing market share from the likes of General Mills and Conagra, which owns Chef Boyardee and Snack Pack, among other food brands. And these larger companies, rushing to catch up, are either consolidating their brands and dropping the ones that are no longer performing or contemplating strategic mergers and acquisitions.

“The plight of the packaged goods companies is a classic business tale,” Gasparro and Chaudhuri write. “An industry creates winning products, carves out strong market positions and enjoys reliable, sustained revenue — only to be too slow to adapt to changes that threaten those cash cows.” 

Although packaged foods aren’t moving fast enough, they are making some changes to reflect consumer preferences. For example, Nestlé cut the amount of sugar in its Nesquik drink mix, General Mills now advertises that the first ingredient in its cereals is whole grains, and Kraft Heinz stopped using nitrates in its Oscar Mayer hot dogs. One product spokeswoman called these “product renovations.” 

“Big food sellers still dominate in America,” Gasparro and Chaudhuri write. A.T. Kearney reports that in 2016 the largest 25 food and beverage companies controlled 63 percent of the $495 billion U.S. food and beverage market. However, that number was 66 percent in 2012. And although the top 25 companies averaged 2 percent annual sales growth from 2012 to 2016, smaller companies averaged 6 percent, according to A.T. Kearney.

Still, national brands rely on huge marketing budgets, and store brands must simply be placed on shelves. According to The Wall Street Journal, consumers started buying more store brands during the recession, and the market share of those brands is rising, especially since they started adding healthy options. In fact, Credit Suisse reports that private-label-product shelf space has expanded 3.5 percent a year since 2012.

Speaking of shelf space, it’s not the necessity it once was. Smaller companies now can get in front of consumers using the internet, whether it’s via their own websites or Amazon.

Staying nimble

Recently, I took my son and some of his friends on vacation. While stocking the kitchen for four teenage boys, I piled up on lunch meat, bread, cheese and some other items I thought were essential. One day, I walked into the kitchen to find the boys had restocked the kitchen with staples they thought were essential, including Kraft Macaroni and Cheese in what The Wall Street Journal calls its “venerable blue-and-yellow boxes.” 

This just goes to show that companies such as Kraft, Conagra and General Mills aren’t going anywhere. However, big-brand decision-makers have discovered that they can’t stay content with what they have. American consumers are searching for healthier options and better prices. How are big food companies going to deliver so that they can stay competitive? Consider the definition of innovation risk from the APICS Dictionary: “The risk of losing customers because another firm creates more innovative products.” 

As supply chain experts, you naturally should heed some of these warnings and examine your processes. What costs are there simply because they always have been before? How can you innovate your supply chain, taking some cues from smaller, more agile companies? Consider earning your APICS Certified Supply Chain Professional designation so that you can help address these questions and other supply chain challenges. Visit apics.org/cscp for more information.
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2 comments

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  1. rijah September 13, 2017, 09:45 AM
    The main takeaway should be that any business cannot shadow a cookie harvester plan. Developing trends and customer ways will evolve, irrespective of industry. The rate of alteration in customer behavior is reliant on many factors, all of which should be recognized before a market investigation process is industrialized and for the digital marketers and also for seo company is it implemented for.
  2. IT Supplier July 19, 2017, 01:09 AM
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