Words By Yana Milcheva
It’s 9AM, you are late for a lecture and are rushing through the supermarket aisles in search of a cereal bar or a sandwich that you can eat on the go. Our hectic schedules have made us accustomed to accessing a wide array of foods on-demand and at a low price. However, the trend towards convenience over quality and, sometimes, taste, has had a negative effect on small business and their position on the market. Is it possible for independent manufacturers to compete with the economies of scale and scope of the food industry giants, without compromising on the quality of their products and keeping an integral brand image?
Worldwide, there are 10 companies which control almost every large food and beverage brand:
With billions of revenue generated each year and thousands of employees, these corporations have established a monopoly on the market, influencing both the environment and people’s diets. This trend is directly related to consumers’ preference for cheap and convenient food that caters to their busy lifestyles.
Meeting the modern customer’s demands can be challenging for new businesses, fighting for shelf space alongside dozens of brands, some of which at a much lower price due to their large-scale production. While having a good product is important, it certainly is not enough to make a successful business. In fact, the reason why 9 out of 10 food and drink businesses fail is because they struggle to establish a reliable supply chain and a distribution framework.
Despite the challenges in terms of production and distribution costs, small food brands are gaining popularity. Provided the technological advancements and the ubiquity of social media, the barriers for entry into the industry have lowered and independent manufacturers are now presented with more accessible advertising opportunities. Research by Goldman Sachs and Conde Nast reveals that, despite big corporations driving 80% of the industry sales, smaller food companies have gained share in 62% of the top 50 packaged food categories.
Independent food companies have become especially popular amongst the Millennial consumers, who are much more health-conscious than previous generations. In the UK, the growing demand for vegan alternatives and free-from products has opened up new opportunities for independent businesses with innovative products. That being said, even the companies that have achieved mainstream success experience difficulties in terms of production and distribution costs. Meridian Foods, for instance, has had to increase its products’ prices due to external factors such as surges in the cost of peanuts and an unstable economy, initiated by political factors such as Brexit.
At the same time, big food corporations have shifted their focus towards rebranding their businesses to appeal to the health-conscious consumers: “We understand that increasing numbers of consumers are seeking authentic, genuine food experiences” – says Denise Morrison, CEO of Campbell Soup Co – “and we know that they are skeptical of the ability of large, long-established food companies to deliver them”. While it is commendable that big corporations are jumping on board of the health trend, this makes it even more challenging for independent companies to find their niche on the market.
Provided the constantly-changing consumer habits and diet trends, it is hard to tell who will prevail in the battle for customers’ loyalty. Despite the challenges they face in terms of production and distribution, small businesses have the chance to succeed against the big corporations by targeting a niche customer group, that doesn’t mind spending more money on food with clear origins and a short production cycle.