Are you vegetarian? Gluten-free? Do you follow the keto diet? Paleo? Are you lactose intolerant? Allergic to soy? Chances are you or someone you know falls into one of these categories.
Take veganism, for example. Today, there are nearly 10 million vegans in the U.S. — a figure up 3000% over the past 20 years. It’s not a secret that peoples’ eating habits are changing in a major way, whether by choice or for health reasons.
As people become more rigid and defined in their eating habits, they’re paying more attention to the foods they’re buying. That goes beyond checking the nutrition label. Now, they’re looking at ingredients, allergens, preparation methods and even country of origin. It’s all major food manufacturers can do to keep up with increasing customer demand (and preference).
We’ve reached a point where mega-brands have begun diversifying at breakneck speed. No, I’m not talking about the likes of PepsiCo’s 1965 acquisition of Frito-Lay, which was revolutionary at the time. Today’s approach to diversification needs to be more nuanced—like PepsiCo’s acquisition of SodaStream in 2018.
Brand diversification in the modern era isn’t about branching out from core product lines or adding endless variations, a la Oreo. Instead, it’s about understanding consumer eating habits in relation to the bestsellers of an increasingly bygone era.
Take a staple like the much-beloved frozen pizza. In 2019 — a time when Americans were likely buying more frozen pizza than ordering it fresh — major brands surged. Jack’s, for example, grew sales 3.8%, to $270.5 million. Now, compare that to Caulipower, the leading gluten-free cauliflower crust frozen pizza, which saw 429.8% sales growth, to $47.8 million.
While the bottom-line sales figures may look disparate by comparison, big brands are paying close attention to the powerful momentum behind emerging diet-conscious products.
Ultimately, food and beverage brands have two options when it comes to diversification: roll out new lines or bring new brands under the umbrella. For most, the latter option is the path of least resistance. And, thankfully, there’s a growing pipeline of up-and-coming brands and products to gobble up.
PepsiCo’s acquisition of SodaStream showed how easy it is for mega brands to capitalize on consumer trends by simply poaching them as upstarts. Consider Mondelez International’s acquisition of Enjoy Life Snacks in 2015 — the company’s foray into allergen-free foods. Go back even further and you’ll find an early adapter in General Mills, which acquired Larabar in 2008 to capitalize on rising demand for “real” foods.
Looking ahead, it seems only a matter of time before current trending brands and products become offshoots of established brands. Impossible Foods, Alpha Foods, Puris and dozens of other venture-backed and bootstrapped startups are blazing new inroads with shoppers. They’re doing it through innovative manufacturing, new ingredients, thoughtful formulations and a mind for the ever-more-discerning consumer.
Big-time food producers are happy to let smaller brands take the lead and set the standard. While they’re bound to pay a premium for acquisitions in the future, it’s often much more affordable than spinning off a new production process in-house. Moreover, with the cost of normalizing new trends baked into acquisition, the eventual diversification pays for itself.
We’re entering a new era as it pertains to food and beverage manufacturing, one where consumers set the tone for what makes it to the shelves. Thankfully, brand diversification isn’t just a hedge; it’s a broad play to an ever-broadening range of consumer preferences. Welcome to the age of something for everyone, no matter how they choose to eat.