Giving the people what they want, or at least what retail and foodservice customers say the people want, is a guiding principle of industrial food production, but in today’s fragmented market, it’s often easier to say what some people don’t want than what most people want.
That’s the conundrum that established food companies wrestle with on a daily basis. Sorting through the millions of voices on social media to separate the cranks from the trendsetters is more than a marketing challenge when shaping the brand message, as speaker after speaker at the Food Leaders Summit April 27-29 in Chicago made clear. Just as craft brewers have steadily taken sales from major beer companies, thousands of “ankle biters” have steadily chipped away at the share of mainstream food companies, to the tune of $18 billion in recent years, according to Anton Xavier, CEO of Food Essentials, a St Louis firm that collects and analyzes food-label information for industry and consumers.
Some food categories feel those lost sales more acutely than others. Supermarket sales of frozen entrees from Healthy Choice, Smart Ones and Lean Cuisine shrank to $2 billion from $3.5 billion in recent years, according to John Grubb, managing partner of the Boulder, Colo., ad agency Sterling-Rice Group. A sizeable chunk of those lost register rings were claimed by natural and organic processors like Amy’s, Atkins and Evol, he says. The newer kids on the block sometimes pepper their transparency and sustainability messages with hostile attacks on the mainstream. “Bring down the broken food system,” Evol’s website proclaims, “one bite at a time.”
Goliath always is an easy target, but the market’s many Davids also do a masterful job of harnessing “tribal communications” to build trust, acknowledged Charlie Arnot, CEO of the Center for Food Integrity, a research and consulting firm to mainstream food companies, retailers and trade groups. Skepticism of institutions has been building since the 1960s, and major food companies are feeling the brunt of that erosion of trust, Arnot says. Rather than denouncing their critics, he advocates a policy of engagement with the “masses of communicators” who populate social media. His seven-step roadmap for “trust-building transparency” begins with an understanding of the values of critics, particularly millennials, followed by a clear statement of the food company’s guiding principles in terms that reflect those values.
Arnot eschews the traditional PR tactic of “attacking those who attack you,” as exemplified by the self-styled “Science Babe” blogger who is engaging in a point-by-point digital rebuttal to “the Food Babe,” a 35-year-old former management consultant who has launched on-line petition drives that resulted in ingredient changes by Subway, Kraft and other firms.
Changing direction is easier for a speedboat than an ocean liner, as exemplified by Mars Inc.’s pursuit of responsible and sustainable sourcing of cocoa and dozens of other commodities. Donna Westerman, Mars’ vice president-responsible sourcing, spoke with Hugo van der Goes, vice president-strategic accounts and sustainability at Cargill, on the challenges in elevating sustainable cocoa production from a niche to a mainstream commodity.
“It’s going to be a long journey, but consumers in general are comfortable with companies that are developing sustainable supply chains,” Westerman says. Adds van der Goes, “This is something consumers want and are willing to pay a premium for,” though he hopes the price differential will be obliterated by converting the entire cocoa supply chain to sustainable production.
Reinventing the supply chain isn’t simply a goodwill project for candy makers like Mars. While demand for cocoa is increasing, the supply is static to declining because farmers are poorly compensated and exiting the business. Ensuring a living wage and helping them boost production is essential if the next generation is to stay in the business. “Ten years ago, nobody was talking about supplier mapping,” Westerman observes. “Today, sustainability, human rights and supplier mapping are incredibly important to us.”
Leading brands are pummeled when their better-for-you positions are challenged, as was the case with Kashi, the cereal maker acquired by Kellogg Co. 15 years ago. Annual sales reached $650 million before a grocer used social networking to bash Kashi for using a GMO ingredient. Last year, sales had fallen to $400 million, prompting the division to pledge to go GMO-free.
“Free-from” is the whole premise of Enjoy Life Foods, a Schiller Park, Ill., baked goods manufacturer that has layered GMO-free and allergen-free on top of its original gluten-free positioning. Modest growth in its first decade was followed by rates of 40 percent in 2013 and 41 percent in 2014, according to Joel Warady, chief sales & marketing officer. (The firm prefers the term “allergy friendly” because, as Warady explains, “someone is always going to be allergic to something.”)
Too small to afford media advertising in its early years, Enjoy Life continues to rely on alternative communications to promote its cookies, cereals and snack products. Three-quarters of consumers don’t believe media ads, Warady maintains, so the firm focuses on creating platforms for people to share their stories “and hope it is positive.” The company’s followers on social media are modest in number but powerful in impact. He cites the case of an Instagram follower who raved about Enjoy Life’s chocolate cookies and then went “hashtag crazy” in telling her personal celiac-disease story enroute to becoming “a power spokesman.”
Despite its growth, Enjoy Life was only a $45 million firm when Mondelez bought it in February, repeating the industry’s big fish, little fish approach to innovation that began long before Kellogg bought Kashi. Another recent example is Annie’s organic and natural snacks, which was acquired last year by General Mills for $820 million, despite its $200 million sales and a lack of revenue, according to Grubb. “At (Natural Products) Expo West in March, you couldn’t swing your arm without hitting a private equity person” in pursuit of emerging and start-up food companies, he says, noting “a stunning amount of capital” is available to new-age firms.
A grassroots approach to trust-building was outlined by Sue McCloskey, who with her husband Mike owns Fair Oaks Farm, an Indiana dairy with 15,000 milking cows (plus another 800 organic-milk heifers). Located 70 miles south of Chicago, Fair Oaks is part industrial dairy farm, part tourist attraction. Half a million travelers took the off-ramp from I-65 last year to visit the farm and see industrial agriculture in action. “It’s a global story: people want to know where their food comes from,” says McCloskey. “Only 2 percent are yelling; the 98 percent just have a curiosity.”
The McCloskeys are succeeding in humanizing Big Ag and explaining the advantages of mass production. Animal welfare is not simply a feel-good practice, it’s good business: when a veterinarian devoted to cow comfort was hired, the company was able to cost-justify it with quantified production increases. Similarly, an anaerobic digester disposes of solid waste while generating enough methane to power 42 CNG tractors that distribute Fair Oaks milk statewide. “We’re a factory farm,” McCloskey allows, “but we have been able to do more things because of our scale.”
Dairy farming is only part of the McCloskey portfolio, which includes a stake in Select Milk, a New Mexico processing plant that has refined the use of ultrafiltration to produce “designer milk” with increased levels of protein and calcium and no lactose. That led to a 2012 partnership with Coca-Cola Co. in the venture Fairlife LLC. “Who wouldn’t want to be on those red trucks?” McCloskey laughs.
Like many of the start-ups, free-from marketers, and other innovators who spoke, Fairlife’s products come at a premium price. The issue of affordability was raised by an executive from a major ready-to-eat meat processor at the conclusion of a presentation by John Roulac, founder of Nutiva Inc., a fast-growing (60 percent-plus per annum) processor of chia seeds, hemp protein shakes and other supplements. A 15 oz. bottle of Nutiva’s organic virgin coconut oil retails for $12.99, a price point he attributed to a dearth of subsidies for healthy foods vs. the hefty subsidies provided to conventional crops. Roulac suggests people will reprioritize their household budgets and spend upwards of 50 percent of their wages to realize the benefits of healthy, new age products.
That kind of change goes far beyond a different business model, which was the conference’s focus. Barring a sea change in public policy, the best way for mainstream food companies to cope with shifting demands and expectations may be to adopt the trust-building strategies of start-ups, or simply acquire them.