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.