Is Big Food in Trouble?, a recent report from A.T. Kearney and The Hartman Group, found that large food companies are losing ground to small and medium-sized competitors. Here’s a summary of their findings and their advice for the future.
Large food companies are losing ground
Between 2012 and 2015, the overall food and beverage market grew by 3.4%. During that time, the top 25 food and beverage firms saw their share of U.S. retail sales fall from 66% to 63%.
- The compound annual growth rate (CAGR) for the top 25 U.S. food manufacturers was just 1.8%.
- In comparison, the CAGR for small and medium-sized companies was 11% to 15%.
Changes in consumer demand are driving these trends
Consumer demand is contributing to the growing success of small and medium-sized firms in several ways.
- Health-conscious consumers are shifting away from diet foods and toward “real” foods.
- Functional foods are becoming more popular.
- Consumers are purchasing more private label lines.
- There is also increasing demand for:
- Free-from categories like organic, non-GMO, and gluten-free
- Fresh food options and formats
- Locally-sourced foods
- Transparency in all aspects of food production and labeling
- Novel, foreign ingredients
Big food companies can adapt and succeed
The report suggests that the food and beverage market will grow by $70 billion over the next three years. The authors say large companies can tap into that growth by:
- Rebuilding loyalty and winning back consumers
- Evaluating portfolios
- Creating strategies to reduce costs and allow for investment in growth activities
- Expanding into trending categories
- Participating in join ventures for potential acquisitions.
A.T. Kearney and The Hartman Group also encourage large companies to foster a culture of innovation and embrace financial forward-thinking.
For more details, download the full report here.