Big Food Is Back – But for How Long Without Innovation?
Whether empty shelves at food retail, COVID-19-driven shutdowns in facilities, worker (and animal) welfare or shuttered restaurants, we are likely — both as consumers and as food and beverage industry professionals — to find disruption due to “life during the pandemic” to be extreme. One bright spot in the pandemic has been the comeback of Big Food, demonstrating a near 180-degree turn within food culture and economics where prior to just a few short months ago small, emerging brands were garnering a majority of attention and growth. The Hartman Group’s CEO, Laurie Demeritt, and VP of Strategic Insights, Tamara Barnett, recently discussed this topic on our podcast series The Insatiable Appetite in an episode titled “Should Food and Beverage Product Innovation Hit the Pause Button During the COVID-19 Crisis?", highlights of which follow here.
The rise of sales for Big Food has driven a key line of thinking that marketeers and business leaders are considering today, which is whether this resurgence will be sustained once things “normalize” (— and meanwhile, “maybe we should table the idea of innovating”). The decision to simply meet heightened demand for a wide range of legacy brands and established categories is understandable: first of all, we have to acknowledge there's been immense disruption for food and beverage manufacturers in terms of day-to-day operations, especially on the front lines of harvesting, distribution and production. To keep up with a host of issues, many food and beverage manufacturers have simply been in triage mode to ensure that they can maximize the productivity of their lines, and that means reducing, if not holding back, certain SKUs and doing everything they can to limit out of stocks. Obviously, in this environment, active innovation and new product launches are inevitably going to be affected.
That said, we believe that the essential question is how companies in this moment strike the right balance between brass tacks essential operations on one hand and innovation on the other while recognizing that the latter is still an essential part of the long-term health of packaged goods firms. And so while the answer's going to be different for every food and beverage company, our bottom line is that innovation must continue during this time, particularly among packaged foods firms, and that it would be a huge mistake to totally shift all focus away from innovation.
We think this is true because it’s quite possible that the renaissance that many large brands have enjoyed in the past couple of months is going to inevitably dissipate: the extent to which these brands can enjoy a strong post-COVID-19 performance is actually going to be driven by their ability to innovate during this time and continue to build on the relationships that they've reignited with consumers.
Focusing on innovation ensures that companies can maintain a long-term vision for the future and that a portfolio of products is resilient over time. Paying attention to innovation also helps establish that the bounce that many of the big brands have experienced doesn't just dissipate once consumer behavior, supply chains and access to products “normalize.” Having a long-term vision also helps ensure that a portfolio of products (as a whole) is engaging with the attributes, the benefits and the occasions that consumers value and that are driving growth long term.
Related to attributes and benefits of products, one interesting outgrowth of the pandemic is the increasing literacy and awareness that mainstream consumers have been gaining around the life cycle of food and the food system. Additionally, we’re seeing increased interest in products that are associated with premium attributes, such as organic and those that enable culinary discovery, and even more interest in progressive health and wellness benefits (notably: food as medicine with linkages to immunity) as well as issues that link to sustainability.
In terms of scenarios for innovation, there's no cookie-cutter solution: CPG manufacturers have unique challenges that grocery retailers do not. One important question to ask is: what are the long-term cultural shifts that are driving demand and is your portfolio correctly aligned and right-sized against these shifts? At The Hartman Group, when we think about innovation, we are always grounded in an understanding of the deep, long-term shifts in both culture and in consumer behavior in order to ensure that the innovation engages with but isn't driven by more fearful trends — or for that matter, a specific crisis.
Also, we believe that executives and marketeers need to think about what the future of food might look like long term post-COVID-19 and potentially post-recession as well. We recognize that innovation cannot exist in a bubble and that long-term shifts in consumer behavior are being impacted, reprioritized and further nuanced by COVID-19. Thinking through what the food and beverage world is going to look like post-COVID-19 is an essential first step to thinking through how innovation may need to respond to these new realities.
When it comes to future scenarios and strategies for growth, there are a number of levers that organizations can pull, including renovation, build or buy, with new product launches or product acquisitions getting the lion’s share of attention. In terms of areas to innovate within, companies and their big brands are really going to need to engage with consumers in areas that extend beyond the current moment where we see significant consumer attention on pricing and elements of nostalgia.
At its heart, innovation remains an essential component of ongoing success in the food industry. Innovations help companies maintain a long-term, strategic vision for their portfolios and allow brands that have experienced a sales boost during the pandemic to continue to grow as consumers adapt to a new normal. As consumers increasingly connect their own wellness to the well-being of the planet, they will seek out not only innovative products linking to wellness and culinary discovery but also innovation that takes into account sustainability-related factors like social justice, worker and animal welfare and soil health. With distribution avenues for small, emerging brands currently suppressed (e.g., cancellations of trade shows, access to capital derailed and retail distribution challenged), large brands should acknowledge the importance of and opportunities of maintaining research, development and innovation as key strategic pillars even during the disruptions that COVID-19 has imposed. .