Hiring a public relations agency at the right time is crucial to the success of your brand, especially in this “Amazon Era”. A dedicated PR agency not only helps create brand awareness before and after a product launch, but also offers a plethora of services important to your overall ROI, including securing A-list press coverage, brand exposure, consumer activations, creative campaign ideation, social media management, influencer marketing, brand partnerships, and crisis communications, among other services.
Word of mouth is a powerful tool, however strategic media relations outreach and a measurable public relations program — whether you are a startup or an established brand launching a new product — will help determine the right messaging and strategic approach to ensure you reach your target consumer.
When to hire a PR Agency?
There is a common misconception that brands should engage a PR agency after they launch their product or service or once they are available for distribution, ie, at Amazon or other e-commerce platforms. Hiring a PR firm is like bringing on an experienced partner to help you throughout the “on boarding” process, from start to finish, whether it’s a rebranding, important company development or a product launch. Additionally, it often takes months to get a good PR hit (yes you get PR before 3 months),—but consider the time it takes to select the right media targets, the time it takes to send them samples, the time it takes to follow up, and the timing of their editorial calendar. Additionally long lead magazines like Everyday with Rachel Ray, Vogue, etc. work on “long lead” times which can be 3-6 months. Most long lead publications, as of the day of this writing, are already working on their November and December holiday issues.
Your PR agency will not only promote the launch of your brand or product, but will work with you from the beginning to develop creative strategies and ideas that will attract the media, retailers and distributors and your target consumer audience. They work in partnership with you to create key messages, support with website copy and content development, and conduct focus groups to learn what your consumers are looking for and how they will respond to your product launch. They often help in creating ideas that generate attention from distributors and retailers and make your brand stand out. No one wants to be considered “just another brand” by buyers.
Involving a PR company during your start up stages strengthens your brand’s credibility, builds momentum, and stimulates consumer demand. Consumer trust can also be destroyed when a company promises one thing but delivers another. Look at many poor Amazon reviews and you will see a lot of companies unintentionally over promise and under deliver. Therefore, messaging should be managed carefully. When it comes to a product launch, the consumer will already have perceptions of the brand’s product based on word-of-mouth, social media messaging, media articles, product reviews, and marketing efforts. By having all of these key tactics in place, you have a better opportunity to launch your produce or service successfully.
How does PR support Amazon reach & sales?
What role does PR play in Amazon sales and distribution? Product availability and Amazon distribution are promoted through public relation efforts via press releases, social media messaging and secured media coverage. When media outlets include a brand or product in a round up or feature article as a result of the PR agency’s outreach, they include the Amazon link where readers can purchase the products, resulting in sales and website traffic.
Another way PR can support Amazon sales is through influencer marketing. Influencer marketing has become one of the most sought -after channels to reach consumers organically. Whether we like it or not, content creators and influencers are here to stay and their power and influence in consumers’ behavior and choices will continue to grow.
Like many businesses, Amazon engages with influencers to promote its products through affiliated links. Through the Amazon Influencer Program, influencers receive a portion of the sales of a specific product they promote in their social media or blog when people click through the affiliated link. Although there are no additional fees for brands and Amazon covers the commission for each unit the influencer sells through their shop, there is no guarantee influencers will promote your product unless you are working directly with the influencers.
Here is where your PR agency comes in to support through an influencer partnership and campaign. Your PR agency partner can manage the influencer campaign on behalf of your brand by carefully vetting influencers, providing recommendations, drafting the messaging, providing key branding assets and overseeing deliverables and results.
For a brand trying to increase their sales on Amazon, leveraging influencers is a great way to raise brand awareness, grow exposure on the platform, and generate sales as influencers have the credibility and an audience who is looking for their recommendations.
Want to learn more?
Cascadia has partnered with CIIC (www.ciicnews.com) to provide consulting or project-based PR services to brands looking to successfully compete in the food & beverage industry. Contact Paola Cuevas at email@example.com to learn more about their food & beverage experience and how they can help you get your product in the news and “off the shelves” in no time.
Cascadia Managing Brands offers its clients outsourced sales, brand management, Amazon setup and sales, traditional retail sales, marketing, new product development, operations, production and logistics.
Cascadia Managing Brands helps brands reach critical mass faster, cheaper, better, and smarter. From business plan development to the actual execution of the plan, from strict consulting advice to managing your sales or sales team, marketing and operational plan; Cascadia Managing Brands is the outsourced resource for large and small beverage companies alike.
Cascadia Managing Brands has over 75 plus years of food and beverage experience including Evian, Zico, Hint, C2O Coconut Water, Nantucket Nectars, Fresh Samantha (Odwalla), Naked Juice and many more.
This is the third installment of So You Want to Launch A Brand? Why You Should Start Now and we will discuss some tactical aspects of a brand launching including basic Point of Sales Material (POS), Presentation, and Insurance. The next installment will cover Distribution strategy and Execution as well as a recap of the three part timeline.
Let’s start with Point of Sale and Presentation.
Point of Sale Material and Presentation
Now that your name has been chosen, your logo and label has been developed and the FDA attorney has approved your label, it is time to start working on developing your point of sale material and distributor or key account presentation. Point of sales should be seen as a “silent salesperson” informing the consumer about your product when you can’t be there to do so.
There are a few very basic, standard point of sale needs today:
Product Sell Sheet with UPC Codes and specifications. Understand that consumers will never see this sell sheet. Your customer here is your distributor or key account. Your distributor and key accounts have a lot of criteria for buying a new product, but, at the end of the day, they both want to know how much money they can make from selling your product! Make sure your headline and graphics grab attention (must key into your USP) and tells them they can make money by selling your product. More often than not, brands develop their sell sheets with a focus on the consumer. Consumers will never see this item.
PowerPoint Presentation. Every brand needs a 10-12 page presentation showing their USP, features, benefits, bridge (the bridge links features and benefits together and explains what this means to the buyer), planned marketing activity including social media and events, trade show participation, and any category or brand data you can find. You can usually find a lot of this beverage for free or very little using a google search or at Bevnet.com, Beverage Industry or Zenith International. If necessary, and if you budget allows, you can purchase data at Beverage Marketing Corporation, IRI, Nielsen, SPINS and others.
Cold Box sticker. If you are looking for distribution in refrigerators you should have a stick that you can put on the glass door of the refrigerator promoting your product.
It takes the average consumer 3-5 seconds to make a buying decision. Your point of sale material is a silent sales person when you are not in the store.
7Channel strip. A channel strip is a piece of laminated plastic that fits into the channel of the retailer’s shelf and promotes your brand.
Wobbler. Wobblers is also a piece of plastic that goes into the retailers’ shelf but wobbles as people walk by and the breeze makes them move.
Display Unit. If you are looking for non-refrigerated distribution, you should consider having a limited amount of display units that you can give retailers to display your product.
One thing to note is that not all stores allow point of sale material to be placed in their stores.
All things being equal, it should take about 2 weeks to design these items and about 2 more weeks for a printer to print these items. The PowerPoint presentation might take a little more time to create and make look great.
Now that your product is being developed and hopefully ready to produce commercially soon, you need to purchase Liability Insurance. Large supermarket and natural supermarket chains will require you to have between $2 million and $5 million of product liability insurance. Otherwise they won’t buy from you. An insurance broker will give you a questionnaire to fill out and your rates will depend, in part, on your answers. You need to know how to fill out the form properly. Let’s assume this process takes 3 weeks from start to finish.
Cascadia Managing Brands is a strategy, brand management and sales execution firm that helps startups succeed. In this bi-weekly series Bill Sipper, Managing Partner, shares his insights on:
This is the second installment of So You Want to Launch A Brands? Why You Should Start Now and we will discuss Branding, Positioning, Logo and Label Development as well as Intellectual Property and FDA Label Compliance.
Brand Positioning and Logo and Label Development
While you are waiting for your shelf life test results, if you haven’t already started, let’s focus on Positioning/Branding/Label/Logo Development. This is a very critical step in the process if not the most critical step.
To start, you need to determine what your Unique Selling Proposition will be. The food and beverage graveyard is cluttered with great tasting food and beverages that don’t sell because there is no Consumer Need. What makes your product different? What makes your product special? Why should a consumer purchase your product?
Sometimes this information is crystal clear to entrepreneurs and sometimes it takes a while. Please understand the world does not need another regular energy drink in the same size can and with the same ingredients of the Energy Drink market leaders.
There are a few ways you can handle product positioning. The first way is to do it yourself. Develop some reasons why you are unique and discuss it with friends and family. Sometimes this works. One of the risks involved in this scenario is that your friends and family might not tell you the truth because they don’t want to hurt your feelings. Another potential problem is your friends and family might not be the same as the consumer demographic you are targeting. However, it can be done and it has been done this way.
Another way to approach branding and positioning and your Unique Selling Position is to hire a professional like Cascadia (in fact Cascadia can do most of these steps for you) or you can hire other professionals like Arena Partners or Modernized Mobile, for example, or another reputable agency who will work within your budget. I have seen very good, small branding firms charge a few thousand dollars and done a great job and I have seen larger ones charge between $50,000 and $100,000. In this case, larger agencies do not always equal better work content and unique positions.
Listen to this. I am going to tell you a secret that will save you potentially millions of dollars. If you do not have a Unique Selling Proposition don’t start a food or beverage company. You will just be setting yourself up for failure.
The branding and positioning process should take about 30 days if you and your branding firm turn around content and feedback quickly.
Assuming you have your Unique Selling Proposition as well as your brand positioning, all of your marketing efforts will flow more smoothly.
Once you have the USP, it is time to design your logo. Logo development is a very iterative process. It can be done within 2 weeks to 4 weeks, again, if you and your designer turn around feedback and work product quickly. However, you need to be careful how you coach your designer and what you tell them. If you tell them you want squiggly lines that is what you will get, but it might not be good for the brand. The better approach would be to tell them you want some sort of abstract art in the logo. Don’t tell them you want the logo in red, for example. Let the designer do their job and give you various options to consider. Wanting what you want just for the sake of having it can create problems in this phase. After all, you don’t want a logo that you love but consumers hate. Remove your ego from the process.
Most branding and positioning firms can also create your logo and label.
Now that you have your logo it is time to start working on your label. Keep in mind during the development of your label you want to create something that will get the consumers attention AND is in compliance with FDA regulations.
First, your agency or designer need to create your label. After that, you should send it to an FDA attorney for review. Just because other people are saying certain things on their labels doesn’t make it correct or legal. An FDA attorney will also usually give you advice about the best ways to avoid class action lawsuits which are rampant in the industry, especially in California.
The label design and FDA label review (oh by the way, your website copy, point of sale material, sell sheets, and social media content should also be reviewed by the attorney but I won’t include that in the timeline) take about another 6 weeks or so, unless you need to live photography or custom illustration for the label. That will add more time to the process.
Intellectual Property and FDA Compliance
We work with several excellent FDA attorneys. Here are a few: Justin Prochnow, Rachel Gartner, and Rakesh Amin. These firms can also handle your trademarks and patents if necessary. Be prepared for a lot of comments to your label review. Very rarely have I seen a good review without a lot of comments.
We had a client who owned an AMAZING Trademark for a name. In fact, this client could most likely have made a lot of money from a much larger company who was infringing on their logo. Unfortunately, while day-dreaming one day, I searched their trademark (to this day I still don’t know why) only to find they never renewed it and it expired. They lost all the leverage they had on the larger company and, in fact, had to get the larger company to explicitly allow the Company’s trademark in a very specific channel. Not optimal at all. But I digress.
Cascadia Managing Brands is a strategy, brand management and sales execution firm that helps startups succeed. In this bi-weekly series Bill Sipper, Managing Partner, shares his insights on:
As published in Beverage Business Insights May 11, 2020.
There’s little question that online sales’ continuing inroads in the bev biz have become accelerated as conventional shopping has become more tortuous during the coronavirus pandemic. Data shared on Monster Bev earnings call last week showed that rival Celsius may be still modest at retail but it owns 10% category share on Amazon. BellRing Brands’ ceo said ecomm has jumped to 10% share of sales and may stay that way even post-pandemic. Those are eye-popping stats. Should your early-stage brand make the leap? Does the chaos of the current crisis make this a good time or a bad time do so? Bill Sipper, partner at Cascadia Managing Brands in Ramsey, NJ (CascadiaFoodBev.com), offers a primer here on what factors should go into your decision-making and how to plot your strategy.
“Our vision is to be the earth’s most consumer-centric company; to build a place where people can come to find and discover anything they want to buy online.” That’s Amazon’s mission statement. From a consumer perspective, they have achieved their goal. But what is missing from that mission statement? You, the vendor.
As much as Amazon cares about making consumers happy is as little as they are concerned about their vendors. Amazon can be daunting for even the most experienced food and beverage executive. (It certainly was a learning curve for those of us at Cascadia Managing Brands.) It is even more difficult for an early-stage entrepreneur with limited understanding of their digital space. And as I noted, Amazon doesn’t necessarily work hard to make it easy and intuitive for you. Having been steeped in these issues for our clients in recent years, I’m offering a few guidelines for navigating this challenging but potential rewarding channel.
A word first about timing. Much has been said about Amazon focusing on “essential items” during this pandemic. Yes, food and beverages typically are considered essential, but your early-stage brand may not be so essential at a time many consumers are more focused on staple items. Does this imply you should put off a launch until things settle down? Not necessarily, because of the time frame involved. It will usually take 8 weeks or more to get items listed on the platform. Amazon people are very meticulous and want information the way they want it. For example, quite often Amazon will ask you to prove that you are the brand owner and require specific, and somewhat odd, documentation to support that. It is not uncommon to receive approval to steps in your account only to have them unapproved the following day, as the company requests additional information. So the sooner one starts this process the faster the products will find a berth on the great ship Amazon.
If you decide the time is right to proceed, you first need to determine which Amazon platform is right for your brand. Amazon is not one unitary service. Rather, it offers 3 options, each with its pros and cons: Amazon Vendor Central, Amazon Seller Central Fulfillment by Merchant, and Amazon Seller Central Fulfillment by Vendor. Which platform do you choose? It all depends on your brand’s needs and your operational strength. You need to think this through because success on Amazon starts by choosing the optimal platform.
Product type and packaging are important here. Take ASC Fulfillment by Merchant, in which the order is placed on Amazon but the product is shipped by you, the seller. This is a much better platform for pills and powders, refrigerated products and glass packages (9 out of 10 times Amazon will not ship glass directly). Then there is ASC Fulfillment by Amazon, where you deliver your product to the Amazon distribution centers on consignment and it is shipped to the buyer by Amazon. This most often is better for shelf-stable and RTD food and bevs. Each of these platforms offers different options and opportunities. For example, Vendor Central allows you to participate in Amazon Pantry, Amazon Fresh and Prime Now, while the other platforms do not. ASC FBA automatically gets you a Prime designation while ASC FBM Prime offers that possibility but not a guarantee. This may all sound like gobbledygook to you now, but these are essential, crucial distinctions.
Your digital shelf on Amazon is completely different than your retail shelf. Although you will find some level of uniformity, realistically there is much more flexibility in digital. For example, in traditional brick & mortar you would most probably want to offer each one of your sku’s, sometimes individually, sometimes in multipacks, and sometimes in cases. However, you are limited to the room a retailer allows you on the shelf. The digital shelf is much different. You can offer any pack you want, whether a 3-pack, 4-pack, 6-pack or 12-pack. Variety packs and packs that meet a consumer subscription cadence are the gold standard on Amazon. So this is a key part of your strategizing for this platform. You need to settle on the right size and the right pack count with the right order cadence, and of course make this all work with your supply chain.
Price is also important – but maybe not as important as you might assume. When Amazon shoppers are polled on what’s most important to them, the top three responses tend to be: (1) free shipping, (2) most likely to have the product I want, and (3) better prices. According to Consumer Research Report by Salsify, 2019 69% of consumer will abandon a product page for lack of information or details, a significantly greater driver than price.
Therefore, the content on your digital page (again, think of it as a shelf) is critical, from the type and number of photos, to the titles, to the bullet points. All these things affect your search ranking. Reviews also help in the search rankings and consumers like to see what other people are saying. Focus on getting quality reviews, not quantity.
Last but not least is promotion and advertising. You don’t have an Amazon business without marketing inside Amazon and out. But don’t spend one penny until your content is right. Amazon offers programs ranging from pay-per-click (PPC) to brand sponsorship, product sponsorship and brand store. These need to be combined with search engine optimization and key words on your pages. Yes, it’s a complex matrix, but again, you won’t have a successful Amazon business without thinking these issues through.
I should note that one of the downsides of Amazon is the lack of overall data you will receive about your consumer. Yes, Amazon captures a great deal of data about its shoppers and their purchasing habits, but it doesn’t share much of it. For vendors using Seller Central, the only consumer data you will be able to see is age, household income, education, gender and marital status. Amazon owns the relationship with the consumer. Vendors would receive a lot more consumer data if they sold their products on their own website. But consider this simple bit of arithmetic: Amazon receives 200 million unique views per month, while the average food and beverage startup’s website will receive no more than 50-100 visitors. So do the math. More often than not, even with a lack of consumer data, the sheer consumer volume on the Amazon platform will offer greater sales. Brands would have to spend a considerable amount of money to secure enough views of their website to come close to Amazon’s sales potential. It is a tradeoff that needs to be considered.
If you have a very large brand and if you have a lot of capital to invest in Google search terms and pay-per-click ads, and you have a large database of social media followers, you might opt to sell your product from both your website and Amazon. That could yield incremental sales and capture your consumers’ data directly. However, if you don’t have a large amount of capital (although you still need some to support your Amazon marketing), then it is best to focus on selling your product on Amazon. If you happen to generate sales from your website, that is great. But I would not invest a lot of time there. It is worth noting in this context that Amazon is the #1 search engine for retail products. More than 70% of online consumers begin their product searches with Amazon, versus just 11% with Google. Think about that.
If you’ve read this far, you understand that Amazon can be very difficult to set up if you don’t know what you are doing. It is not as easy as just throwing some photos and words on a page. Today, many brands launch exclusively on Amazon because the barrier to entry and costs are relatively low compared to the requirements of operating in the bricks-&-mortar world, from recruiting distributors to paying slotting fees to running in-store demos. Amazon sold $8.2 billion of grocery items in the US last year (compared to Walmart’s online business of just $2.4 billion). It can be a great place both for large brands and small ones. But only if you have a plan.
I started writing an article showing the steps and timeline for creating a new food and beverage brand. I wrote more than I expected so I decided to post the article in bite size pieces here on a bi-weekly basis.
The pandemic, amongst other things, has caused many entrepreneurs to pause and re-think their strategy. Many entrepreneurs who have great new food and beverage ideas are waiting to see what happens. I can say, that is a very bad strategy for entrepreneurs because while they wait, others will be moving forward and will be the first to gain shelf space when the country goes back to our new normal.
Let’s look at a typical timeline for a new food or beverage item. For arguments sake, let say you already have an idea in your head. What do you do next?
Research and Development
Let’s start with research and development. You might be able to create your product in your kitchen today but it will be much difficult once you move to the production phase. For a very basic example, let’s say you are using Heinz ketchup as an ingredient. If you were to order Heinz ketchup in a 50-gallon drum, the minimum size you can usually order for a production run, it would be very expensive. Depending on how much you use, Heinz Ketchup may make your product too expensive to sell or too expensive to make a profit. Heinz ketchup has a certain taste profile. When you move into production you will most probably need to buy a less expensive but high-quality ketchup. Where do you go for that? How do you sample the different types of ketchup being sold in bulk? Will the manufactures send you free samples if you are a startup?
This all leads up to you probably should hire a person or company, like Parkside Beverage, Beyond Brands, or Metabrand amongst other reputable firms. Get your recipe or formula done right the first time. In the grand scheme of things their fees are not a lot of money and you need to get it right the first time. Re-formulating takes time and money.
I have been on the floor of production facilities with clients who created their own recipes and were trying to adjust the formula on a fly. It was a disaster. I remember one time being on the production line when someone’s formula would not work because the ingredients were too thick and they were clogging the filters. That costs a lot of money. The client had to pay for the entire day of production even though he/she was never actually able to produce their product. My advice, stick with the professionals and they will save you a lot of money in the long run.
Now let’s look at the timing and timeline. Formulation companies aren’t waiting for new entrepreneurs to contact them. Even during these Covid 19 times, reputable formulation companies are still busy. They point is you can’t just pick up the phone and expect them to get started immediately. It might take two weeks until they can accept your business. It might take them time to order special ingredients.
Once they create the first batch of samples for you, and I am sure this will not be the last batch of samples, and you consider the time it takes for them to mail you the samples, and the time it takes for you to review the samples and send comments back to the formulator, and they eventually finalize the formula, consider 4 more weeks go by.
Now you have your formula. Great start. Do you want it to be GMO free? Organic? Kosher? These processes take time and someone has to fill out all the paperwork and get all the information for the certifier. My last go around with a GMO-Free certifier took 6 months because they are backed up. However, let’s say it takes 3 months. However, assume you can work on other parts of your product during that time period.
Let’s consider the next step being Shelf Testing. Before you produce your product, you want to know what happens to your product after being exposed to different levels of heat, cold, light, etc. Are any bacteria growing? What about yeast, pH, mold, salmonella, E. Coli, listeria, staph, aureus etc.? How long will your product be on the shelf before the color or taste or aroma begin to change? And this isn’t just a “nice to have”. Retailers and Distributors may request to see the shelf life test results.
According to RL Food Testing Lab, Product Safety Testing will take different times depending on the type of item you are testing.
Here are a few examples:
Beef Jerky 9 months – 1 year
BBQ Sauces 4 months – 6 months
Pasteurized Dairy Products: 3 weeks
Raw Juices 5 days
Cakes, Cookies & Other Bakery Goods WITH preservatives 30 days
Salsa 3 months – 4 months
But now, you need to test for shelf life. How long will your product last before going bad or before losing taste, aroma or even color?
The rule of thumb regarding shelf life testing, depending on the product, is that a product needs 1 week of testing for every month of shelf life you are looking for. But, that timeline may be a little bit over cautious. For the sake of this article, let’s say it takes you 90-120 days until you get your test results.
Cascadia Managing Brands is a strategy, brand management and sales execution firm that helps startups succeed. In this bi-weekly series Bill Sipper, Managing partner, shares his insights on:
When was the last time you were able to
purchase a soft drink in a reusable glass bottle?
When was the last time you even saw a soft
drink in a glass packaging?
Today, single-use plastic packaging is still
omnipresent, despite our increasing environmental awareness. According to a
World Wide Fund for Nature study, an average person consumes 1,769 tiny
plastic particles and fibers every week just from drinking water. That accumulates to
around a half-pound of plastic every year!
And we aren’t the only ones feeling the
impact of plastic. We might be the last link experiencing the results in the
huge chain that makes up our environment. Unfortunately, the beverage industry
plays a significant role in plastic pollution of the Earth. Let’s have a closer
look at how plastic impacts our environment and whether we could turn the bleak
trend around by going back to glass bottles.
In the ‘60s, plastic waste was observed in
the oceans for the first time, which ended the reputation of plastic materials
as entirely positive and great to use. Even though plastic helped our
industrial advancement, especially in the years after World War II, we did not
have enough foresight to predict its environmental impact.
And it is dire, mostly because that plastic,
made from synthetic materials not found in nature, can take forever to
decompose on its own. Most plastic bottles take at least 450 years to biodegrade, and
only if they weren’t made with Polyethylene
Today, plastic pollution is a huge problem —
it has contaminated our oceans most of all. Toxins from plastic find their way
into plankton, which is the base food of most marine ocean species. It travels
through the entire food chain, ending up on our own tables.
But our air and land are also polluted. When
plastic is burned to dispose of it, toxins are released into the air. While it
waits for its turn to be disposed of in landfills, we end up needing more and
more space for storing garbage.
According to Science (website), about 8 million metric tons are
thrown into the ocean each and every year. This is the equivalent weight of
approximately 25,000 Empire State buildings (website). Even with current recycling and
conservation efforts, the amount of plastic in the oceans will increase 10
times by 2020 (website) and by 2050 there will be more
plastic in the oceans by weight than fish (website). Recently, a dead whale in the
Philippines contained more than 88 pounds of plastic in its stomach (website). Has anyone asked what happens to
that plastic when we eat the fish that live in our oceans?
The global annual production of plastic exceeded 350 million tons in 2013. By 2015,
the world had produced 7.8 billion tons of plastic. Back in the day, single-use
plastic seemed like a great idea — but we are overproducing it, drowning in it,
and making the entire planet sick in the process. And it is time to re-think
single use plastic beverages. Recycling
has failed to fix the ultimate problem.
According to Greenpeace (website) and the Breakfree
from Plastics Movement (website) the top four
plastic polluters in the WORLD are, from highest to lowest, Coca Cola, PepsiCo,
Nestle and Dannone.
conversation is not simply about the birds and the bees or “fishees” in the
ocean. This conversation is about the
world in which human beings live and the net effect plastic has on human
beings, current and future generations. It is impossible to argue that plastic
is good for mankind. It is convenient
and it is less expensive, but that does not make it acceptable. Food and
Beverage companies need to take responsibility for the damage they are doing to
promote their bottom line.
Use of Plastic in the
The beverage industry is one of the major players in the plastic
packaging market — especially the companies that produce soft drinks, like
Coca-Cola and PepsiCo. According to Greenpeace, Coca-Cola Company alone
produced more than 100 billion plastic
bottles in 2016. And if we compare this statistic to the data stating that over
90% of plastic isn’t
recycled, it becomes easier to put the beverage industry plastic pollution into
In the earlier years, these big names in the
industry committed to plastic, believing (or simply stating) that they would
increase their efforts to reclaim and recycling it. However, with a lack of
deposit systems and financial incentives to recycle, the system ended up being
wasteful. Around 70% of bottles are never reclaimed, which leads to a low
recycling rate. According to Euromonitor data, less than 7% of recycled bottles
were turned into new bottles.
Beverage giants like Pepsi are aiming to start using biodegradable
plastic. However, according to some experts, this will take a long time to
accomplish, because the packaging must still be able to preserve the contents.
What’s more, even biodegradable plastic can release damaging
gases into the air, such as methane.
the Use of Plastic
Slowly but surely, the public opinion grows
harsher towards plastic, especially single-use plastic that is most responsible
for pollution. More and more initiatives against it are cropping up, and we
might soon ensure that the industry as a whole takes a turn to a different
One of the most notable ones is the New
Plastics Economy Global Commitment, which was launched in 2018 by Ellen MacArthur
Foundation (EMF) and UN Environment. It has 250 corporate signatories,
including Danone, PepsiCo, and Coca-Cola Co.
All of the signatories committed to a few
decisive actions to complete by 2025:
to take action to eliminate unnecessary or problematic
to move away from single-use models towards reuse models
where that’s possible;
to use recyclable content in all their plastic packaging;
to make 100% of their plastic packaging reusable,
compostable or recyclable.
While these efforts to make plastic packaging
recyclable and to improve our recycling systems are a step in the right
direction, perhaps we need to look away from synthetic substitutes and slightly
different alternatives. There are much more sustainable packaging solutions,
one of which the beverage industry has used in the past. Of course, that would
be glass packaging.
Use of Returnable or
Recyclable Glass Bottles
In 2012, we saw the last ever returnable
glass Coca-Cola bottle pass away into beverage history. Soft drinks and glass
bottles used to be great friends in the early days of the industry, as the
glass bottles were able to endure the pressure of carbonation.
However, the practice of returning glass
bottles had nothing to do with sustainability or environment preservation back
in the day. The reasons why consumers were incentivized to return glass bottles
to the manufacturer with a bottle refund fee were the price and difficulty of
the manufacturing process. The bottles were therefore considered company
property, and consumers would return them to be refilled and reused.
Eventually, the glass bottle was overshadowed
by the plastic model, as it was much easier and less expensive to transport
plastic safely. Plastic bottles were considered to be more lightweight,
resistant to breakage, and therefore superior in every way when compared to
glass bottles. The environmental impact wasn’t considered or analyzed.
Benefits of Reusing
What beverage companies were unaware of was
that the practice of reusable glass bottles helped keep excessive amounts of
waste from the landfills. But as it turns out, plastic isn’t the superior
packaging material in any aspect other than weight and resistance to breakage.
Glass bottles are more hygienic, and more capable of preserving the contents without a change in flavor, strength,
and aroma — not to mention their aesthetic appeal.
Overall, there are multiple benefits to
returning to the practice of using glass bottles for the packaging of soft
drinks. Perhaps the biggest obstacle to returning reusable glass bottles as the
industry standard is the way things are done nowadays.
Since there is no standard glass packaging, every bottle looks
different. That makes reusing more difficult, as we have to sort our glass
bottles meticulously to determine which ones we can recycle, and which ones we
can return and where. The process for the consumer isn’t straightforward — but
could it become more so?
Industry Start Using Glass Bottles Again?
If we take a look back, we could find the
time where most liquids were packaged into glass bottles to be refilled and
reused, and learn from it. Before World War II, that used to be the industry
standard. However, all glass bottles were identical and therefore, easily
That would make the process easier to
re-implement today. Beverage companies tend to avoid reusable glass bottles
because the difference in design requires extra efforts in sorting. What’s
more, collecting and transporting reusable glass bottles requires more storage
facilities and labor. For most beverage companies, that would mean involving
the retailers into the collection and shipment, which overly complicates the
process, especially when compared to single-use plastic.
However, it would still be possible to reintroduce reusable glass
bottles as the industry standard. It might take some time, but the results are
worth it: 93% less energy consumed by a refillable bottle that can be reused 25
times, as opposed to one-way glass bottles. Of course, when compared to plastic
it becomes even more evident how much better reusable glass bottles are: the
use of energy in MJ and the CO2 equivalent of its Global Warming Potential is the lowest of all container materials.
Bottles and the Glass Bottle Market
Reusable glass bottles will be the clear
favorite if we wish to implement more sustainable practices. However, it would
require preparation, as we would have to standardize our glass containers to
make the process easier.
Today, companies that make refillable glass
containers have packages of different sizes and shapes, even colors. This might
be a contributing factor in the low return rates of refillable glass bottles
(that also contributed to the eventual decrease in their use).
But what if bottles were standardized, and
returned locally for sanitization and refilling? Then we could implement the
reuse of glass bottles on a bigger scale, and ensure that one bottle does get
returned 25 to 30 times to maximize sustainability.
The glass bottles and containers market is
also growing, and showing potential for more progress thanks to European
consumers. It’s predicted to reach $76 million in value
by 2024. Most of it was glass for recycling and not refilling — European average recycling
rate is an estimated 54%,
as opposed to the reuse rate of 7%.
Aluminum Cans are Another Possible Solution
According to Chasinggreen.com, aluminum is 100%
recyclable and can be recycled almost indefinitely without loss of quality or durability. They
can be recycled, repurposed, and back in the store in as little as two months
and the average recycling rate of aluminum cans 68%, the highest rate of
recycling of any resource. The use of recycled aluminum in manufacturing
utilizes 95% less energy than creating aluminum from raw materials.
However, there is also a negative side of
aluminum cans. The aluminum industry was responsible for 140 million tons of CO2
production in 2005 alone and it is a non-renewable resource. It also takes 2-4
tons of bauxite to produce just one ton of aluminum through smelting and
refining. Aluminum production spends over $2.3 billion annually for energy.
Most of that energy is used to create aluminum: over 1 quadrillion Btu of
electricity a year and some research suggests that BPA, a chemical lining found
in some aluminum cans, may pose health risks.
What Consumers Think
One of the most critical pieces of the puzzle
will be the consumer, requiring a change in behavior to move from pollution to
sustainability. The good news is that consumers are becoming more
environmentally aware and putting more stock into sustainable products and
According to a report by Pro Carton, 75% of European
consumers have stated that the environmental impact of the packaging of a
product affects their purchasing decisions. What’s more, they are also
influenced by the media coverage of pollution, especially when it comes to
The majority of consumers tend to prefer more
environmentally-friendly options while shopping, especially if it doesn’t cost
them much extra to help preserve the planet. However, that doesn’t mean they
aren’t prepared to pay more: 77% of Pro Carton survey responders said they were
prepared to do so. In addition to that, 58% of them would support increased
taxes on non-sustainable packaging in order to incentivize brands to think
harder about their environmental impact.
All of these statistics are very encouraging
and clearly show that we’re ready to start making crucial changes. Even the
major players thinking only about profit can benefit from meeting consumer
demand for sustainability.
It’s Time for Glass
Can the beverage industry’s use of
pollution-inducing plastic packaging end? It certainly can. While there are
some disagreements on which materials should
replace plastic, the message is still loud and clear — beverage companies and
entrepreneurs have to change their ways.
Glass packaging, especially reusable glass
bottles, could be the answer to the environmental crisis we now face. With a
low carbon footprint and multiple other benefits regarding the quality of
packaging, glass would be a great choice. And if we made an effort to make
reusing glass bottles more accessible and more standardized, market research
shows that consumers would rise to the occasion and help make it the new
Reducing plastic pollution should be one of
the main priorities of the beverage industry. To accomplish this task, now
might be the time to start using glass again.
It’s our responsibility as beverage industry leaders,
entrepreneurs, and consumers to demand and facilitate change. Today, every link
of the beverage industry chain might be ready to commit to making this change a
Getting rid of the beverage industry’s share
of plastic pollution by implementing more sustainable options, glass bottles or
even re-usable glass bottles, might be of utmost importance for the future of this
blue planet. If we don’t turn away from plastic now and start repairing the
damage we’ve made, it might be too late in a few decades or even a few years.
It is time to admit the conversion to plastic
from glass has failed and these companies continue to fail mankind in favor of
profits. Human beings are almost equally complicity by purchasing these
products. It is time for the Big Four to eliminate plastic products and force
competitors to convert as well. It is
time to end plastic for profit over convenience.
In the food and beverage industry, even the giants can have a hard time developing and launching new products. However, their troubles are usually entirely different from that of a food and beverage entrepreneur. These huge companies have all the advantages of troves of data, experienced marketing departments, and plenty of resources to make the new product succeed. But they still fail.
In fact, according to multiple sources, approximately 80% of new products developed by large food and beverage companies end up failing. This is a staggering statistic that perfectly showcases the scope of the problem. But why does this happen so often, and is there a solution that can turn this trend around? Let’s have a closer look at why large food and beverage companies fail at product development:
Big Companies and Innovation Struggles
As technology began to advance, most innovation in the food and beverage sector was tied to finding ways to prolong a product’s shelf life or get it to consumers faster. But today the market’s needs and appetites have grown way beyond this, especially as the consumers’ attitude towards food and nutrients changes.
Consumers are becoming more aware that what they eat and drink has a significant impact on their health, so they are seeking out the best possible options. That’s why large companies that don’t have a lineup of healthy, good-for-you products are finding themselves in a problem when developing new products. And unfortunately, the vast majority of big food and beverage companies falls into this group, as the trailblazers of new healthier trends are usually smaller businesses and food entrepreneurs.
To Reformulate or to Relaunch?
According to IRI, of 10,000 new products that are launched every year, as much as 90% fails to achieve sales goals. In fact, many of them aren’t even around two or three years down the road, which makes launching entirely new products a risky undertaking for most companies. In most cases, they decide to reformulate or relaunch their existing products to make them more appealing to the changing public opinion on how our food and beverages should be.
If we take a look at Consumer Good Forum statistics, we can see that 66% of their members have reported having reformulated some of their products in 2016. Some of the most common changes implemented in product reformulation are reducing the amount of sugar and sodium, adding vitamins, or using healthier alternatives to certain staples (such as switching to whole grains).
Declining Sales and New Product Launch Fails
The main reason for relaunching existing products is declining sales. Between 2012 and 2015, the U.S. retail sales of the top 25 food and beverage giants have gone down from 66% to 63%, according to the study Is Big Food In Trouble by The Hartman Group and A.T. Kearney.
However, the need for change hasn’t prevented new product development and launch fails. A few reasons stand out. There were cases of companies making the wrong conclusions on what the market needed, developing products that didn’t fit with their brand image, and choosing the wrong trends to chase.
Wrong Conclusions on Market Wants and Needs
Despite having a wealth of data at their disposal regarding products, taste tests, and market research, sometimes companies just fail to ask themselves whether someone will be willing to buy the product and at what price.
For example, let’s have a look at Coca-Cola’s C2, their attempt from 2004 to gain the favor of a target market that’s been avoiding their products. C2 was meant to be a middle ground between classic Coke and Diet Coke. The idea was to capture the interest of 20- to 40-year-old men, who were mindful of their calorie intake while avoiding Diet Coke because of its general appeal to women.
However, C2 only had half the calories and carbs of a classic Coke — it wasn’t a complete no-calorie version like Diet Coke. As such, its qualities weren’t distinctive enough to allow it to stand out in the market, even if it did (in theory) need a similar option. The target consumers simply didn’t find it appealing enough.
Just because a Company spends a lot of money on or does a lot of consumer research doesn’t mean they are correct. If that were true, Coke and Pepsi, and other conglomerates like them, would never fail. But that is not the case.
Research needs to be combined with gut instinct to be successful. If you look at the most successful, “new”, innovative and disruptive brands, none of them used expensive and extensive consumer research in the beginning:
Amazon Bai Boom Chicka Pop Deep River Snacks Dirty Lemon Dirty Potato Chips Fiji GT Kombucha Kettle Chips Keurig Liquid Death Mama Chia Monster Naked Juice Netflix Perky Jerky Pirate’s Booty Red Bull Smart Water Sophie’s Kitchen Starbucks Vita Coco Vitamin Water Voss Whole Foods Zico
The Product Doesn’t Fit with the Brand
Big companies also face difficulties trying to expand their lines or launch new ones with products that stand out from what they were known to do. When many companies first reformulate their existing lines and launch new products that are more in line with the new brand image, there are sometimes cases where the consumers aren’t prepared for the change.
More often than not, these fails come from a brand branching out into the food and beverage industry — such as Colgate’s frozen lasagna or Cosmopolitan’s yogurt. However, that isn’t to say that food and beverage giants are immune to developing products that just don’t fit with the brand image, whether that’s in a big or a small way.
Trying to Capitalize on a Trend
Finally, one of the biggest and most frequent causes of new product development fails is chasing the wrong trends or fads. When a company is too early or too late to the current consumer preferences party, it inevitably brings low interest and even lower sales. Trends like low-carb diets have proven fleeting, which is something Coca-Cola has felt with their C2 release as well.
However, some notable innovations are still prevalent in the food and beverage industry. Alternatives to dairy, Greek yogurt, free-from foods, plant-based protein suitable for a vegan diet, etc. have mostly been brought on by smaller companies or entrepreneurs. It’s therefore essential for food and beverage giants to correctly interpret their market data, and accurately predict the coming market trends that are here to stay.
Key TakeawaysBig food and beverage companies and smaller businesses alike need to watch for industry insights and anticipate market trends. Staying true to your brand is more important than ever, as that prevents consumer confusion or disappointment. However, it’s even more crucial to adapt to the changes in the industry and the growing market demand for healthier food and drink options.
In only 24 years, Amazon.com Inc. has evolved from a little online bookstore to the most extensive digital retailer in the world. Generating $177.9 billion in net sales from its over 300 million users in 2017, it is a giant in many markets, including retail and groceries.
As the company remains true to its four guiding principles – customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking – its sell-through position strengthened with inroads in new categories. Among other things, it has led Amazon to acquire Whole Foods Market as its subsidiary.
In 2018, the growth trend continues. Despite demanding more dollars for marketing from vendors, Amazon has met planned sales expectations for the second quarter for many categories (14 out of 25), exceeding plans in 9 categories in the changing natural food industry.
Orders from Whole Foods mainly surpassed its planned expectations due to deep discounts for Amazon Prime members, while higher marketing fees discouraged vendors from investing in promotion for their products. As a result, more vendors have opened Seller Central accounts, which allowed them to manage costs better and simplify product launch, and increased direct shipment from Prime Now.
Those are only two critical areas to watch. But if you want to learn more about other changes in 2018, there are other trends to look out for in retail and grocery as the year draws to an end at Amazon.
A Growing Amazon Prime Membership
In May 2018, the cost of Amazon Prime membership rose to $119. And while some vendors viewed it negatively, most don’t expect any significant impact on service use. It comes down to the advanced features included in the membership to its users, including Amazon’s marketing tools and expanded offering on Amazon.com platform. A natural food vendor even said:
“Amazon keeps offering more and more benefits [for Prime members], so I don’t think [the higher annual fee] will have any impact. Prime members value that service so much.”
And payment fees and commissions to Amazon were also raised in most vendor contracts. Because of the 10% increase in rates, all vendor contracts from 2017 are invalid, and sellers need to sign a new 2018 contract.
But it’s important to remember the terms in the new contract are negotiable. And while vendors do encounter additional fees, like fulfillment fees, inventory fees for storage, out-of-stock penalties, and accrual fees, it’s important to accept Amazon’s demands and negotiate a 2018 contract.
Amazon Competition Is Low
Amazon’s main competitors are Walmart.com and The Kroger Co., closely followed by Walmart’s Jet.com, Walmart brick-and-mortar stores, Target Corp. and Thrive Market Inc. However, most vendors agree that no e-commerce platform or store chain can compete with the retail giant when it comes to grocery retail.
However, Kroger and Target are making breakthroughs in grocery assortments and improving the shopping experience for their consumers. It seems to be generating interest among some vendors, as Kroger, for example, is placing standard category managers in charge of specific category managers and buyers. But it is yet to generate the amount of attention required to disrupt Amazon’s large-scale operation.
Amazon Prime Is Helping Whole Foods
Amazon’s Prime benefits (10% discount on all items and steep “Prime Member Deals”) helped increase sales during the second quarter in 2018 at Whole Foods Markets. The Amazon subsidiary saw an initial redemption rate between 60%-70% in June, but the figure is likely to reach 80% by year-end.
Prime Deals and promotion also aided vendors in their efforts. Many natural and organic vendors stated their Whole Food orders exceeded expectations, with almost all of them meeting their planned goals.
Despite this, vendors will bear the cost of those mandatory 10% discounts, which may result in several sellers reducing budgets allocated for promotion. However, for most of them, the price will be worth the effort if Amazon can deliver the right sales volume with Prime discounts. And according to the amount of sales Amazon made – it can.
Grocery Sales on Amazon.com and Fresh
In 2018, Amazon has made a lot of efforts to increase its foothold into groceries. It has led natural and organic food vendors to a very successful quarter with their sale of non-perishables on Amazon.com, than of perishable items sold on AmazonFresh. Also, over 65% of vendors exceeded planned order figures, which led some of them to improve their use of Amazon Marketing Services (AMS).
More and more vendors are turning to e-commerce SEO and search terms with AMS for marketing, than, for example, offering customer incentive programs such as coupons. On the other hand, vendor spending on ads has also increased but not significantly. Still, the combined efforts of both marketing tactics resulted in a higher revenue stream than in previous years.
In contrast, vendors who used AmazonFresh did not meet expectations. Their sales quotas fell below plan. They attribute this to significant reorganizations within the company, as AmazonFresh and Prime Now are hiring more staff in Seattle and distribution networks get realigned to handle perishable goods.
New Expansion Plans
Another critical factor influencing all of these changes is Amazon’s plan for rapid expansion. In short order, AmazonFresh is planned to move from the current eight-hour delivery format to a new two-hour delivery, which will make it stand out even more from the competition.
A new app is also set to be launched shortly, as Amazon wants to consolidate all of its grocery platforms in one place. But, until now, there is yet to be an integration of all purchases into one system, as Amazon.com, AmazonFresh, Prime Now, and Amazon Go remain separate from Whole Foods.
Finally, Amazon is moving towards direct shipments to reduce the reliance on United Natural Foods Inc. The plan is to allow room for rapid expansion of Prime Now with a hub-and-spoke system that will revamp warehouses and transportation logistics for perishables.
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In June 2018, United Natural Foods (UNFI) and Supervalu decided to uproot North America’s wholesale distribution by combining their efforts to create a premier wholesale distributor. UNFI is the largest distributor of natural organic products in the United States and Canada, while Supervalu is the largest publicly traded wholesaler in the U.S.
Their joint enterprise indicates a rapidly changing infrastructure landscape in which consolidation among stakeholders in the supply chain is fast-becoming the new norm. And this has become a prime example of how manufacturers, suppliers, distributors, and retailers are pushing for change in Canada and the United States.
Based on this recent industry development, here are the most significant benefits of creating a premier food wholesaler in North America.
Adding Value to Customers and Stakeholders
Transforming into North America’s top wholesale food distributor is beneficial for all parties involved in the supply chain, including consumers and shareholders.
First off, it allows distributors to create a diversified consumer base. As they merge to form a common front, it automatically expands the consumer base to open up new opportunities to different stakeholders and increase distribution across all fronts. Delivering an extensive and comprehensive product offer to UNFI’s existing natural and organic products has allowed Supervalu to create a genuinely “better for you” offer.
As high-value products like organic meat and products become available to a broader audience, it enables cross-selling opportunities for different stakeholders on a much larger scale. A much more significant market across the United States and Canada gives wholesalers a much broader geographical location to work with and increase their market reach. The much more extensive scale has not only enabled growth but has improved their efficiency and effectiveness across the board.
The increase in capacity relies heavily on leveraging scalable systems. Focusing attention on streamlining larger operations has enabled different stakeholders to optimize their processes. Combined with the increased use of technology to achieve this goal has equipped all involved parties to meet customer expectations and reduce future expenses at the same time.
And in the case of UNFI and Supervalu, it also delivers significant synergy, which by the third year can create a run rate cost opportunity of more than $175 million.
Advanced Build-Out-The-Store Growth Strategy
With UNFI and Supervalu heading the enterprise, many smaller brands have joined the food super-wholesaler. Both giants contributed in equal measure in securing brands which create the supply chain. UNFI brought Blue Marble Brands, Woodstock Farms, Tumaro’s, Rising Moon, and Field Day to the fold, while Supervalu contributed with Essential Everyday, Culinary Circle, Market Centre, and Wild Harvest, among others.
Handing each brand a seat at the table has enabled them to have a united market presence, and create an advanced build-out-the-store growth model. The strategy is relatively simple and relies on increasing the product range to bring in attractive products to the store, and build a comprehensive and diversified product portfolio.
With each brand specializing in a specific food group, everyone is specializing in premier products. It expands the offer to the consumer, who is treated to a variety of quality, natural, organic, free-range, and specialty food items.
Combining the two wholesalers into one has also merged their capabilities. It works because both UNFI and Supervalu share certain features. However, their most significant advantage is in the different and unique abilities, which essentially compliment one another.
UNFI’s revenue contribution is divided among Independent Natural Retailers (26%), Supermarkets (30%), Supernatural Retailers (33%), and other revenue (11%) such as e-commerce retailers and foodservice customers.
Supervalu’s revenue contribution is divided among Independent Regional Supermarkets (61%), Unified Groceries (29%), SVU FL (5%; regional chains, multi-stores, and single stores), and other (5%) which includes military and corporate revenue.
The combined revenue of UNFI and Supervalu is therefore divided among Independent Regional Supermarkets (48%), Unified Groceries (17%), Supernatural Retailers (14%), Independent Natural Retailers (11%), other revenue (8%), and revenue from SVU FL (3%).
It diversifies the consumer base for both wholesale retailers, as well as their revenue streams. In doing so, both UNFI and Supervalu can adapt to the fast growth of retailers and supply their demand for products.
A Compelling Opportunity
The opportunity for the premier food wholesaler will be to unlock the potential value across the business using synergy. Synergetic cooperation between the two organizations will improve the business process and inside operations, but also create a unified presence when dealing with outside services.
A combined effort has a more significant effect than individually either UNFI or Supervalu would have ever been able to achieve, and will benefit multiple aspects of the premier food wholesaler:
Revenue – a diversified revenue stream from cross-selling, offering high-growth products in stores and expanding the private label offering (net sales expected to reach over $21 billion);
Capital expenditure – increasing optimization of the supply chain and more effective capacities in distribution centers minimizes costs and expenditure (strong cash flow can reduce leverage and improve the credit profile);
Systems and technology – combining IT systems and cyberinfrastructure of both companies will enhance automation and use of technology to streamline the business process;
Operations – joint operations, increased capacity and a united strategy all increase efficiency inside the business model and stood to benefit everyone across the supply chain;
Expanding Gross Margin – aligning strategies and methods of inbound logistics and adopting a professional service unit to monitor the process will help with larger capacity.
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Specialty foods are unique and highly valuable food items. Typically, this type of food is produced from small amounts of high-quality ingredients, which is the reason behind their above-average price tag, but also their overall quality and health benefits.
In 2018, The Specialty Food Association released a two-year study titled The State of the Specialty Food Industry. Author and researcher, Denise Purcell discovered significant changes in the food industry, with a focus on specialty foods. The study highlights the impact specialty foods have on sales and consumer decisions. Here is a brief overview of her findings and the current state of the specialty food industry.
Reasons Behind the Rise of Specialty Foods
Specialty foods might seem like a trend, but its roots span much deeper. Thanks to FDA regulations on labels and nutrition guidelines, more people are aware of the health risks involved with food and beverages. Ingredient labels help people to understand what they eat and drink, and watch out for ingredients like sugar, artificial flavoring, or chemical food dies, to improve health.
Consumer demand for higher quality food is another major contributor to the rise of specialty foods. It is affecting everyone in the supply chain. Food manufacturers are taking more care when sourcing raw food, while distributors and suppliers, like UNFI and Whole Foods, are changing the landscape of the natural food industry.
All of these changes are contributing to much higher demand and supply of specialized food, and choice remains the main reason behind The State of the Specialty Food Industry study.
The Rise of the Specialty Food Industry
As of this year, 65% of consumers purchase specialty food. Specialty food dominates sales revenue as well, with a peak income of $140.3 billion in both retail (78.4%) and foodservice (21.6%), an 11% increase from 2015.
Sales from specialty food and beverage have a share total of 15.8%, with plant-based foods dominating the first four spots. Due to the increased interest in organic produce, their input is expected to rise over the next five years.
When it comes to consumer retail purchase, mainstream channels hold an 82% share of total retail sales. However, the biggest winners are both the physical and online versions of the food service. Their sales have doubled in size over the two year period from 2015 and outgrew regular retail options.
On the other hand, retail makers are increasing their offer of specialty foods, which is raising their sales input, but it is growing at a much slower pace. Major chain supplies have only seen significant growth potential in the convenience, drug and vending channels.
When it comes to consumers and who is purchasing specialty foods, demographics reveal that the most significant number of consumers belong to the iGeneration (18-23).
Other Millenials are also significant consumers because generally, these groups have the highest awareness of what they consume. They also make the decision to buy specialty foods based on many different non-traditional factors, like benefits to health, environmental impact, and even trendiness.
Top Ten Selling Specialty Food Groups in Retail
In 2017, the top-selling retail products reached a combined total of almost $29 billion out of around $1.4 trillion of total food spending. It included fresh, refrigerated, frozen, plant-based, and health-focused food, which also had the most notable growth in retail sales.
What’s interesting, on the other hand, is the growth rate of specialty foods which peaked at a combined 12.9%. That’s 11.5% more when compared to all other food, which only achieved a 1.4% growth.
Seven groups in the top ten are chilled or frozen foods, which indicates the demand for other specialty foods will have to increase to create a genuinely diversified offer on the market. Here is a brief overview of the top ten specialty food groups and their performance on the market in 2017:
Cheese and Plant-Based Cheese – cheese achieved the highest sales total, reaching little over four billion in sales. But it’s growth was relatively insignificant with an average of just 6.6% from 2015, which indicates a stable demand for cheese.
Frozen or Refrigerated Meat, Poultry and Seafood – frozen meat in all its forms reached $3.8 billion in sales over the period. What’s most interesting is that it had the lowest change over the two year period between 2015 and 2017, with an average growth of just 3.3%.
Chips, Pretzels, and Snacks – this group is characterized by a top three spot when it comes to sales in 2017 with $3.8 billion (little less than the previous group). However, it had a below-average growth rate for the observed period with 11.8%.
Non-RTD Coffee and Hot Cocoa – owing to the love of coffee in the United States, it is not surprising that this specialty food group earned $3.3 billion in retail sales. Still, the traditionally loyal consumer base also means it had a low growth rate of only 5.4% over a two-year period.
Bread and Baked Goods – bread is a staple food group and earned an expected $3 billion in retail. What’s surprising though is the above-average growth of 18.1% from 2015 to 2017, meaning demand and consumption has risen significantly.
Chocolate and Other Confectionery – chocolate and confectionaries brought in a combined sum of $2.3 billion in sales last year. And according to the data collected from the previous two years, they exhibited a slightly below average growth of 10.8%.
Yogurt and Kefir – healthier dairy-based products like yogurt and kefir massed a total sum of $2.2 billion in retail sales last year. However, the market growth was excellent in the previous two years, and the specialized food group saw an increase of 20.6%, which is the third best value among the top ten groups.
Frozen Deserts – the frozen deserts group has a strong eight position in retail sales, earning a total sum of 2.2 million. More importantly, frozen deserts achieved the highest growth rate out of all the groups in the top 10 with 41.6% between 2015-2017.
Refrigerated Entrees – ready-to-eat refrigerated entrees gained a combined amount of $2.1 billion from retail sales, which was enough to secure them ninth place. But the good news for suppliers and distributors is that this group of specialty foods takes second place when it comes to exponential market growth with 27.2% change from 2015.
Frozen Lunch or Dinner Entrees – frozen lunches and dinner entrees performed similarly to refrigerated dinner entrees taking $2.1 billion from sales, which is a 13.1% of growth during a two-year period. But if you combined the two similar last entrees, they would top the list with $4.2 billion in revenue and 40.3% change.
The Bottom Line
Observing the changes in the specialty food market Denise Purcell remarked on future growth: “We see the future growth of the [specialty] category being driven more by foodservice, convenience, and vending. We’ve seen a lot of growth in drug (CVS, Walgreens, etc.) as well. You’ve got all these different players now that want to carry some of these products.”
If you want to know more about the general state of the food and beverage industry, stay up to date with the latest news. Use the most recent information as an opportunity to improve your offer, and boost your bottom line.