In the food & beverage industry you have two masters to satisfy; consumers who use your products and customers who buy them from you. Success will only come to you when you win with both. You need your customers to put your products on their shelves and you need consumers to put them in their shopping carts.
As we move into a new year at SKUFood, we wanted to share some insights to help you stay focused. There are so many shiny objects or hot new trends you can lose sight of what is really important to your business.
We have separated these 2020 focus areas into three distinct reports for you:
Remember to keep the definition of your consumer in mind and that any shelf is not the right shelf. Put your resources and efforts into your consumers and the retailers where you will find them.
In 2019 we experienced a significant shift in buying patterns to explore meat alternatives. Beyond Meat and many others were capturing shelf space in many stores. I was really surprised by the amount of products available early in 2019 that were targeted at consumers seeking alternative sources of protein from our traditional beef, poultry, pork, seafood and dairy. Some will survive and many will not but the fact is consumers demanded choice and industry responded.
As we move into 2020 consumers will be looking for protein in their diet. Some will have traditional, some will have a mix of traditional and plant based and others will focus only on the plant based. The shift in 2020 will be to protein, and away from thinking about ‘alternative sources’. Consumers will identify what they want and just put it on their list. The opportunity for producers and processors is to identify your consumer and keep putting products in front of them that they want. Whether you can shift them from one category to another will depend on your product and your budget.
We know technology continues to evolve at an incredible pace. Every year I say ‘consumers are more informed than ever before’ and it is true. They go to stores with so much knowledge and if they have not had time to look at their phone before they go, they stop in the aisle to do it. This is not new but it is just increasing all the time. I found some different numbers when researching this but the reality is Canadians spend approximately 3 hours per day on their smart phone.
Producers, processors and your products need to be easy to find. Consumers (the people who put your products in their shopping carts) want to know about your business, your product, where it is available and how to use it.
How do you show up on your customer’s e-commerce sites?
How do you show up on the world wide web?
Are you easy to find on social media and are your posts up to date and helpful?
Remember transparency. You don’t control it all so monitor what others are saying abut you.
What is your competition doing and is it working?
Do you lower your cost and take the volume or not?
The environment, the planet, packaging, food waste all received a lot of press and focus in 2019. The next generation of consumers wants to know and they will change their purchase patterns as a result. This is a challenging issue because it is expensive to change and similar to technology, the options are evolving all the time. It is difficult to know when to spend the money and initiate change.
The first thing you need to do is go back to your consumer and customer. Figure out where they are on a scale of 1 to 10 with regards to this issue. If they are more concerned or informed than 5/10 then you need to act. In your business you do need to be exploring options that respond to their concerns and questions. Perhaps you already are and you just need to tell the story.
Your customers will be asking and they expect change as much as consumers. Remember all of the major food retailers in Canada (except Costco) made the commitment to reduce food waste by 50% by 2025. That is only 5 years away now and 2020 seems much closer than 2019. Establish a baseline and determine what is possible and what is realistic within your organization.
Packaging is one attribute of sustainability where consumers and customers will see your efforts. We know single use packaging is under attack and right or wrong, consumers and politicians see it as a problem. It reduces food waste, reduces cost of goods and your equipment is already in place to pack in it. Keep a close eye on where it is going and options you have. The first choice might not the best one but you have to keep doing the research and perhaps even share your findings with consumers.
Health & wellness
The biggest opportunities for new products continue to be in categories where you can deliver health and wellness to consumers. Segments of the market continue to be willing to pay more and even change shopping habits to find the products they want.
As we discussed earlier, consumers are more informed than ever. Health and wellness is another example. They have more access to information and more volumes of information about food. This can include but is not limited to what they should consume, how they should consume it or even when they should consume it. Eating programs (formerly called diets) do not just tell people what to eat any more. Nutrition is complicated.
Retailers want people to eat well but they also want to make money on the products they sell and drive traffic to their stores and online shopping. There are consumers who attach more value to products that are associated with certain health benefits. They are good shoppers to have so as long as they attach value to these items there will be demand and more shelf space available.
Selling direct to consumers
We see big brands in apparel and consumer goods opening their own stores and e-commerce sites. They are avoiding retailers and selling direct to consumers. The economic model is different when you are selling a pair of Lululemon leggings for $125 than it is for a food product that sells for $12.50. That being said, we do see more food and beverage businesses selling direct to consumers. This model is not new, but with online shopping gaining more traction all the time; the potential market is now very different.
This can compliment your sales to retailers.
If you choose to go down this path remember retailers will look to see what you are doing and pressure you to offer the same value to consumers in their stores. You also need to devote the resources to a very different sales process. Managing hundreds or thousands of customers is very different than a hand full of retailers. There is a reason they need to charge the margins they do.
If you are selling direct remember to learn from these shoppers. You have a direct relationship with them that is very valuable. Learn more about why they buy and build trust with them.
Shipping continues to be one of the biggest challenges in this market. We just do not have the density of population in other places, which reduces volume and drives cost per unit up. This is where the subscription model is more effective. When you know you have 12 months worth of business you can offer a better rate of shipping. I did not receive any food subscriptions this year for Christmas but I will be getting a new pair of socks every month!
Perhaps you are thinking what about online shopping or discount stores? Stay tuned for our customer report, which will be released within the next week. If you have any questions or would like to talk about any of these opportunities give me a call at 1 (902) 489-2900 or send me an email at Peter@skufood.com and I will get back to you.