Strong demand for ‘local’ will continue in 2022
We saw increased demand for ‘local’ products in 2020 and 2021. This will continue in 2022 but the reasons for the trend continuing are changing. The opportunity is increasing as opposed to decreasing so this is the year to grow this from a nice to have into a part of the category offering.
Between now and the end of 2021, we will share 10 SKUFood insights to help you make the most of 2022. We try to help you see the entire value chain and prepare your business to respond to changing customers and consumers. Each week we will share a different theme and some ideas and opportunities for you to consider.
Demand for ‘local’ products will continue through 2022
Food and beverage producers and processors that want to be successful need to satisfy two masters: consumers and customers. Consumers are the end users who ultimately buy your product and take it home to their family and friends to consume or use. Customers are the retailers and distributors that issue purchase orders and pay you.
When you can provide a solution to both, you have a much greater chance of success. We often see products that might be a win with consumers but the margin available to the retailer or the fact it is one more product in a crowded category, reduce the chances of success. We also see products where the retailer is excited because there is more margin to make but the product quality is disappointing to consumers.
In 2022 consumers and customers will be looking for more ‘local’. If your products fit into this segment of the market, you have a big opportunity. Taking advantage of the opportunity requires you to become more than just ‘local’.
Consumers want ‘local’
We know consumers like ‘local’ and they have liked it more since the start of the pandemic. There are a number of reasons driving this desire for products produced closer to home.
Consumers are more interested in food than they were 2 years ago. They might have heard people talk about food security, but it was when they saw empty shelves in grocery stores that they felt the impact. They do want to know more and have the confidence that we have a strong and viable food industry. Right now there is a segment of the market that are probably willing to pay more for ‘local’.
As ‘local’ products do get more distribution points and grow volume the prices will need to come down. Producers and processors need to look for opportunities to reduce costs and become more competitive in the category. This is not to say the items need to be the lowest but they need to be competitive.
Consumers are also looking for unique products. Travel is slowly coming back but there are many more events close to home. People are looking for interesting food ideas and items to share with groups closer to home. Millennials are shopping more in grocery stores and they prefer to make food an occasion. They like a lot of the work to be done for them but also add a personal touch to make it their own.
‘Local’ feels good and people will continue to look for opportunities to feel better in 2022. For many the last 2 years have been a roller coaster and consumers want ideas and food items to help them feel good about what they are doing.
Customers want ‘local’
The first, but not only, reason your customers want more ‘local’ is because consumers want it. Good retailers are responsive to consumer demand. They hear them and figure out how to make it happen. We have to give credit to Sobeys for their action and execution on the ‘local’ program. They have provided opportunities in every region to get to the shelf and sell in mainstream grocery stores.
Your customers also want ‘local’ because the service level is better. Large consumer packaged goods (CPG) companies are struggling to produce and deliver product. Labour, ingredients and other input shortages are all impacting their ability to put product on the shelf.
We hear about large CPG companies reducing their number of SKUS to ensure they can produce more of a lower number of products. They are giving up shelf space they fought for just to keep a presence.
Some Canadian retailers see this as an opportunity to differentiate their offering from the larger U.S. based competition. Sobeys definitely use the ‘local’ program as a point of differentiation compared to Walmart or Costco. Walmart do have more focus than they used to but many vendors are leery of working with them. It might be more perception than reality, but it is out there.
What producers and processors need to do
As we move into 2022 ‘local’ producers and processors need to continue to tell their story. You might be tired of it but consumers and customers are not. Evolve the story to focus on your product benefits. You have their attention, now share what they need to hear. You are more than ‘local’.
Act more like a CPG company. Measure metrics like service level to ensure you are delivering and operating better than some others. You should also take the opportunity to develop relationships with the customers. Grow your presence from the ‘local’ section to the category management team. They will have different expectations, but they also open doors to a lot of volume.
Keep focus on your quality and your costs. As your sales grow remember to maintain the processes that deliver the quality you are known for.
This can be a challenge as businesses scale up. You will get more pressure about your selling price. Retailers assume (perhaps not a fair assumption but it is what they do) that when your volume goes up, your costs per unit go down.
Now is the time
We do not see many opportunities where consumers and customers are aligned. This is one and 2022 is the time to make the most of it.
You might have noticed I put ‘local’ in quotes. That is because consumers and customers have their own definition of local so make sure you understand what that is and where you fit.
If you have any questions or require help with your ‘local’ product strategy, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
As we approach a new calendar year, we will continue to share insights to help you position your business for increased success in 2022.
“Consumers and customers are aligned in their desire for more ‘local’ products in the stores”
Peter Chapman
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
Who is promoting your products?
Partnering with people to promote your products can be beneficial to your brand image and even bring new consumers to your target market. This announcement is a real change for Tim Hortons. Partnering with Justin Bieber will resonate with a very different crowd. My kids were aware of this but I would be willing to bet they could not tell me any other Tim Hortons partner.
We can’t all afford to partner with Justin Bieber but you can find different people to promote your products that will appeal to different demographics. On a smaller scale it is possible to get interest from new consumers. If you try the Tim Biebs let me know what you think!
Sobeys new ‘flexstore’ concept
Merchandising and fixtures can have a significant impact on producers and processors. You always want to stay aware of changes your customers are making. This can provide opportunities or in some cases, have a negative impact.
The new Sobeys store is very different from current models. If you sell to Sobeys you should understand what they are doing in your area of the store. Ask the people you know at Sobeys how the changes are going and what is likely to be rolled out into other markets.
US Export capacity
It has been a privilege to work with the team at Aliment to support businesses from Atlantic Canada build capacity to export to USA. We have 4 webinars planned that are packed with great information from people who know how to do this. The team is from across North America who will be delivering the sessions and I know I am looking forward to learning a lot.
Food & Beverage Atlantic US export capacity
Virtual Presentations November 17
When is Peter speaking?
Food & Beverage Atlantic
Selling in Quebec when you aren’t local -November 16
Agriculture and Agri-Food Canada and Learnsphere
Turning pitches into purchase orders in export markets - November 19 & 26
Foodpreneur Advantage
Creating your best pitch for national retailers -November 23
Newfoundland and Labrador Federation of Agriculture
Getting more NL products in the shopping cart -November 27
Gander NL
