“Market bifurcation” has been a factor in the food and beverage industry as long as I’ve been covering it, and I didn’t start yesterday. Briefly, it describes the tendency of consumers to cluster at either end of the quality-value continuum; either costlier items with higher quality, or items whose primary appeal is their low price. Think of an inverted bell curve.
The pandemic has disrupted this dynamic, as it has so many others. But it has left us with another, which I’m calling “automation bifurcation.” This describes the tendency of good fortune to come to companies at either end of another continuum: automation vs. manual labor. To understand this, we need to look at how sales have been going during the pandemic.
As most people know by now, center-store items, whose sales had been languishing in favor of fresher food, experienced a resurgence. There were several reasons: Shelf-stable items were ideal for stocking pantries during the first stages of panic buying; consumers were cooking, or at least preparing, more meals at home, and needed pantry staples to do it; many center-store products, like cookies or boxed macaroni and cheese, are perceived as comfort foods; many of them are familiar brands from large, well-known companies, and familiarity is another source of comfort during a crisis.
This situation has increased the fortunes of many of the companies in our Top 100, like Kellogg, General Mills, Kraft Heinz, Hostess Brands and Bimbo Bakeries. But it has also handed them some production problems. Several of them have had trouble meeting demand for their newly popular old staples, to the point where they’re cutting back on newer, less established SKUs or using more contract manufacturing. Even so, many have been plagued by out-of-stocks, especially during the pandemic’s early stages in March and April.
Now, one of the ongoing dynamics in the food industry is how Big Food has been gradually but steadily losing market share to smaller companies that are nimbler and faster to respond to consumer shifts. That’s why some of the biggest names in food, like General Mills, Tyson and Nestlé, have established funds to start up and, in some cases, buy up such companies.
