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12.01.2005

“HartBeat” is The Hartman Group's FREE online newsletter, providing insight, analysis, information and strategy to give business leaders the knowledge and vision to build sustainable brands.

For more Hartman Group articles on PACKAGED VS. FRESH, click here...

09.01.2005 "Evolving Trends in Fresh"

07.28.2005 "The Paradox of Fresh"

03.24.2005 "Convenient...and Fresh?: Evolving Food Culture in America"

02.10.2005 "Packaged vs. Fresh...and Center Store Migration"

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Packaged Goods: Value-add Or Value-less?

I am concerned about a growing trend we're seeing among all consumers. This trend has yet to reach its fullest expression (and it might not do so for some time), so there may be a chance to act. Nonetheless, we're already seeing demonstrable effects in many CPG categories.

What is that trend?

The growing consumer belief that processed or packaged foods (things found in a box, jar, carton, can or bag) are, by definition, inferior products; products of lesser quality, in legal activist parlance, second-class citizenry. Notice the emphasis on "belief" in the previous sentence. As it stands many are still not prepared to act upon this belief for a host of reasons. Yet even the belief should be enough to signal concern for those in the industry. As we've witnessed recently in the case of smoking, eventually beliefs will be translated into behavior and the results for industry won't be pretty.

Likewise, this is a trend that is not simply addressed by moving products around in a given retail space. We've all been aware of the problems plaguing center store for some time now - not to mention the growing trend towards fresh - but this is something that cuts far deeper.

Packaged Goods
THINKING THE UNTHINKABLE

This provocative white paper lends context and meaning to the evolving food trend in packaged goods. Here we answer the question, "IS VALUE-ADD NOW VALUE-LESS?...AND WHAT CAN YOU DO ABOUT IT"

CONTINUE THE CONVERSATION»
PURCHASE OUR DOWNLOADABLE WHITE PAPER.

What's most troubling about this trend is that its presence can be seen in all sectors and segments of the consuming public. Far beyond obsessed foodies, political activist types, or fanatical health and wellness consumers, we find ordinary, average American consumers espousing these beliefs in routine, everyday interactions - as if this were common knowledge among all right-thinking people.

Consider the following recent interaction with a consumer in the Midwest:

Researcher: So what is 'good' food?

Respondent: You know...the same thing they always tell you, your fresh foods, your whole foods, your real foods - basically anything other than that packaged stuff. Sometimes you gotta settle on canned tomatoes or the macaroni and cheese in a box, but I try whenever possible to serve my family the good stuff. The quality stuff. I think they're worth it, and they can taste the difference."

Of course many consumers still opt for packaged or processed products, but even when choosing these products in the store, at the shelf, we almost always observe a consistent, palpable feeling that the consumer is settling on "the inferior," "the second-rate," "the mediocre." Somehow, packaged goods simply fail to generate the magic that they once did.

To give some insight, I just finished watching a three-hour, in-home interview with a family in Indianapolis. This family could not have been more representative of the average American household: Mom was managing her weight through Weight Watchers; Dad was overweight, yet admitted satisfying his daily craving for fast food during work lunches; and the daughter grazed freely from the kitchen, all the while spinning wonderful tales of the array of fast food offerings available in her school.

During the ensuing pantry audit, when we question consumers regarding the specific products found in their cabinets or refrigerators, our researcher held up a jar of salsa - a brand well known to all:

Researcher: Is this good food?

Respondents: (The husband and wife in chorus) Absolutely not!

Respondent: In fact, we would never buy something like that...it's only there because our daughter picked it up when she was visiting last year.

Researcher: What's wrong with this...does it taste bad?

Respondent: It's not even a matter of taste, just look at the ingredients...It's made from processed stuff and preservatives. Instead we get our salsa made fresh at our neighborhood Meijer....It's got big chunks of tomatoes and onions...the stuff in the jar could never compare.

Researcher (reading from ingredient label): Let's see here, we've got crushed tomatoes, fresh onions, fresh jalapeno peppers, diced tomatoes in tomato juice, distilled vinegar, salt, dehydrated onions and garlic. That's it. That doesn't sound very processed to me.

Respondent: Well, I have to admit, that's much better than I would have thought, but still, I don't want something made in some factory in Texas. I want the salsa from the store down the street. Why settle for second rate if I don't need to?"

And this dialogue continued in a similar manner on numerous other categories including salad dressings ("We make our own, duh"), tomatoes ("If we can't find them in the produce section, we don't have spaghetti") and, surprisingly, cookies ("We either bake 'em from scratch or get them from the bakery").

So here we find what is by all accounts an ordinary family - a family struggling with weight issues, a family that eats significant quantities of fast food, and a family that shops at Meijer - that is convinced a branded salsa in a jar is, by nature, inferior salsa. Ditto for cookies and salad dressings and....

This, I submit, is a serious problem.

And while I recognize the tendency to dismiss these observations as a mere by-product of the current obsession with "all things fresh," I would caution that there is something more fundamental at play here: Namely, the implicit assumption that packaged foods add value by offering consumers convenience, predictability, familiarity or quality assurances is increasingly suspect - in large part because it appears increasingly irrelevant. Put most simply, the idea that you have given the consumer something of value simply because your product comes inside a container is woefully outdated.

Packaged foods came of age in a very, particular time, a post-war culture infatuated with technology and the promise of the future. By offering convenience and time-saving features, packaged foods purported to free new suburban moms from the daily grind of meal preparation, ostensibly to spend more time with their children. Likewise, packaged foods meant that Mom needed to shop for groceries merely once per week. Most importantly, Americans embraced the idea of factory-made foods without question; as if this were merely the next step in a logical course of evolution.

Jump into the present, and we see an entirely different context. Most families feature dual-wage earners with increasingly frenetic schedules, resulting in almost daily grocery trips for last-minute needs (school parties, medicines, household supplies, etc.). Because families find themselves shopping on an almost daily basis, the need for shelf-stable, packaged goods is increasingly less critical.

More importantly, our collective idea toward products - especially food products - has evolved significantly. Despite the admitted promises of safety or convenience, factory-made or mass-produced food is construed negatively, as if a quaint relic from our naive past. As consumers have evolved, we've been trained to recognize imperfections, irregularities or even supply glitches (can you say seasonal?) as positives rather than negatives. And as if that weren't enough, our markets are now teeming with vastly more sophisticated options, many of them prepared freshly on the premises.

Suddenly the value-add in CPG products - "You can trust us," "We'll save you time," "A flavor you know and love" - has begun to lose its luster. To be certain, most consumers still opt for packaged goods on a regular basis, but I have to question the long-term viability of any proposition where the consumer frequently expresses regret - or in extreme cases disdain - from the outset.

What Next?

As I see it there are two important implications here, one more easily dealt with than the other.

On a more immediate level, I believe this insight is of value in its own right. That is, if we in the CPG business reminded ourselves on an ongoing basis that we are not, by definition, adding value when we put things in containers, we'd likely be much more sensitive to consumer needs. Simply being aware of a situation, no matter how dire the circumstances or implications, is undoubtedly a benefit.

As far as longer-term implications, I believe we need to rethink our notion of packaged goods from the ground up. When you examine the benchmarks by which ordinary consumers speak about value in their food products you hear words such as local, quality, seasonal, fresh, authentic, or unique - words that CPG manufacturers have only begun to understand. In fact, in most cases consumers currently suggest it is the retailer more than the manufacturer who appears to be adding value. Think about it, it's the retailer who offers the preferred salsa - the fresh one, "made on premises" in a label-less clear container. Ditto, it is the retailer who offers the cookies that appear to have been baked and bagged on site.

And what better evidence of this proposition than the growth of private label or "store brands"? As suggested in a recent New York Times article, consumers are increasingly deciding that the retail experience itself is a better promise of quality or freshness than the supposed "value-add proposition" underlying many premium brands. If you want proof of this just consider Trader Joe's, a food retailer presently experiencing enviable growth.

While private labels at Trader Joe's comprise over 80% of the available product offerings, consumers are nearly unanimous - and vociferous - in their belief that packaged products at Trader Joe's are higher quality, better-tasting and healthier than their premium brand counterparts. Somehow Trader Joe's has created an aura that suggests that the stuff inside its bags, boxes, cartons or jars might not be so second class after all.

Oh, look...cookies!

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