Quality, Price Perceptions Hurt Food Companies

The American Customer Satisfaction Index LLC has conducted polls for 20 years to measure satisfaction levels in 43 industries, and the numbers for food and beverage companies have never been lower.

True, the scores don’t shift significantly year to year, and both soft drink and beer companies have registered equally low customer satisfaction scores in years past. But both the short- and long-term trend for food and beverage products is down, in part because declining quality perceptions are making shoppers more sensitive to price increases, according to David VanAmburg, managing director of Ann Arbor, Mich.-based ACSI.

Telephone and on-line survey questionnaires were completed by 6,231 individuals in the third quarter to gauge satisfaction levels with manufacturers of non-durable goods. Among companies in 43 industries, soft drink manufactures rank fourth overall, with food manufacturers and breweries above the median. The lowest satisfaction scores go to internet service providers. ACSI sells its brand-owner subscribers insights into how their brands stack up with competitors on specific quality metrics.

Overall scores for food companies declined 2.5 percent in the last year, a change VanAmburg attributes to higher prices. “When you’re seeing higher prices, particularly when income is stagnating and those prices are for products you’re buying every week, it’s in your face when the value received is the same but the price is higher,” he says.

In the course of 20 years, Dole and Anheuser-Busch have registered some of the largest drops in ACSI customer satisfaction scores, plummeting 7.8 percent and 8.3 percent, respectively. Among all categories of nondurable goods, only Nike has registered a larger drop (11%). The Dole of 1994 was a much different company than today’s hollowed-out version, of course, while A-B’s drop can be attributed to circumstances beyond the St. Louis beer giant’s control. In manufacturing, quality is a synonym for consistency, and Budweiser and Bud Light are models of consistency. But “the lure of craft beers” and their ability to deliver more flavor through superior ingredients is crippling mainstream beers, says VanAmburg. “The Bud drinker is thinking it’s not that great anymore.”

The biggest year-to-year satisfaction drops were registered by A-B and Dr Pepper Snapple, down 4.9 and 4.7 percent, respectively. Dr Pepper’s challenge has less to do with quality than product diversity, he suggests. Coca-Cola and Pepsico dominate the soft drink category in part through line extensions and new varieties, like Coke’s green-themed Coke Life that blends stevia and sugar sweeteners for a lower calorie count.

Generally, the biggest long-term hits in satisfaction are affecting second-tier brands and private-label products. People don’t approach those brands with lofty quality expectations. When prices increase—food prices rose 4.5 percent in 2014’s first half, far ahead of the 1.9 percent increase in the Consumer Price Index—those brands are more vulnerable to consumer dissatisfaction. Small, entrepreneurial food companies, on the other hand, have little brand equity and are “upping the ante and coming up with new spins that grab attention,” notes VanAmburg.

“There are folks making bacon flavored vodka,” he points out. “Smaller companies have the ability to create a Wow! factor.”