A Seismic Shift in How People Eat
IT’S easy to make fun of people in big cities for their obsession with gluten, or chia seeds, or cleanses.
But
urbanites are not the only ones turning away from the products created
by big food companies. Eating habits are changing across the country and
food companies are struggling to keep up.
General Mills will drop all artificial colors and flavors from its cereals. Perdue, Tyson and Foster Farm have begun to limit the use of antibiotics in their chicken. Kraft declared it was dropping artificial dyes from its macaroni and cheese. Hershey’s will begin to move away
from ingredients such as the emulsifier polyglycerol polyricinoleate to
“simple and easy-to-understand ingredients” like “fresh milk from local
farms, roasted California almonds, cocoa beans and sugar.”
Those
announcements reflect a new reality: Consumers are walking away from
America’s most iconic food brands. Big food manufacturers are reacting
by cleaning up their ingredient labels, acquiring healthier brands and
coming out with a prodigious array of new products. Last year, General
Mills purchased
the organic pasta maker Annie’s Homegrown for $820 million — a price
that was over four times the company’s revenues, likening it to
valuations more often seen in Silicon Valley. The company also introduced
more than 200 new products, ranging from Cheerios Protein to Betty
Crocker gluten-free cookie mix, to capitalize on the latest consumer
fads.
Sign Up for the Opinion Today Newsletter
Every weekday, get thought-provoking commentary
from Op-Ed columnists, The Times editorial board and contributing
writers from around the world.
Food
companies are moving in the right direction, but it won’t be enough to
save them. If they are to survive changes in eating habits, they need a
fundamental shift in their approach.
The
food movement over the past couple of decades has substantially altered
consumer behavior and reshaped the competitive landscape. Chains like
Sweetgreen, a salad purveyor, are grabbing market share from traditional
fast food companies. Brands such as Amy’s Kitchen, with its organic
products, and Kind bars are taking some of the space on shelves once
consumed by Nestlé’s Lean Cuisine and Mars.
For the large established food companies, this is having disastrous consequences. Per capita soda sales are down 25 percent since 1998, mostly replaced by water. Orange juice, a drink once seen as an important part of a healthy breakfast, has seen per capita consumption drop 45 percent
in the same period. It is now more correctly considered a serious
carrier of free sugar, stripped of its natural fibers. Sales of packaged
cereals, also heavily sugar-laden, are down over 25 percent since 2000,
with yogurt and granola taking their place. Frozen dinner sales are
down nearly 12 percent from 2007 to 2013. Sales per outlet at McDonald’s
have been on a downward spiral for nearly three years, with no end in
sight.
To
survive, the food industry will need more than its current bag of
tricks. There is a consumer shift at play that calls into question the
reason packaged foods exist. There was a time when consumers used to
walk through every aisle of the grocery store, but today much of their
time is being spent in the perimeter of the store with its vast
collection of fresh products — raw produce, meats, bakery items and
fresh prepared foods. Sales of fresh prepared foods have grown nearly 30 percent since 2009,
while sales of center-of-store packaged goods have started to fall.
Sales of raw fruits and vegetables are also growing — among children and
young adults, per capita consumption of vegetables is up 10 percent over the past five years.
The
outlook for the center of the store is so glum that industry insiders
have begun to refer to that space as the morgue. For consumers today,
packaged goods conjure up the image of foods stripped of their nutrition
and loaded with sugar. Also, decades of deceptive marketing,
corporate-sponsored research and government lobbying have left large
food companies with brands that are fast becoming liabilities. According
to one recent survey,
42 percent of millennial consumers, ages 20 to 37, don’t trust large
food companies, compared with 18 percent of non-millennial consumers who
feel that way.
Food
companies can’t merely tinker. Nor will acquisition-driven strategies
prove sufficient, because most acquisitions are too small to shift
fortunes quickly. Acquired brands such as Annie’s Homegrown, Happy Baby
and Honest Tea account for 1 percent or less of their buyers’ revenues.
Moreover, these brands, along with their missions and culture, tend to
get quickly lost in the sales and marketing machine of big food
companies. It is easy for them to get orphaned.
For
legacy food companies to have any hope of survival, they will have to
make bold changes in their core product offerings. Companies will have
to drastically cut sugar; process less; go local and organic; use more
fruits, vegetables and other whole foods; and develop fresh offerings.
General Mills needs to do more than just drop the artificial ingredients
from Trix. It needs to drop the sugar substantially, move to 100
percent whole grains, and increase ingredient diversity by expanding to
other grains besides corn.
Instead of throwing good money after bad for its lagging frozen products, Nestlé, which is investing in a new $50 million frozen research and development facility, should introduce a range of healthy, fresh prepared meals for deli counters across the country.
McDonalds
needs to do more than use antibiotic-free chicken. The back of the
house for its 36,000 restaurants currently looks like a mini-factory
serving fried frozen patties and french fries. It needs to look more
like a kitchen serving freshly prepared meals with locally sourced
vegetables and grains — and it still needs to taste great and be
affordable.
These
changes would require a complete overhaul of their supply chains, major
organizational restructuring and billions of dollars of investment, but
these corporations have the resources. It may be their last chance.
No comments:
Post a Comment