The consumer is changing. The latest diets and trendy new flavors, like Dubai chocolate, are all on the rise. The food and drink trends change almost monthly, and the consumers buy into them.
There is one problem. Brands of food and beverages are struggling to keep up with the times, to maintain their brand’s relevance, or to launch new products quickly enough to meet demand.
What are the most significant challenges faced by F&B brand owners?
There are still challenges posed by the climate change and socioeconomic changes.
Richard Peake is the managing director at Merchant Gourmet. “Volumes continue to grow slowly, and inflation continues to affect production costs. Consumers are now more sensitive to price than ever before,” he says.
Smaller brands have a better chance of success thanks to digital channels, DTC and consumer behavior changes.
Richard Peake is a Merchant Gourmet
It’s not all bad. There are many positives, especially for small brands. The industry is evolving to help them succeed in an increasingly competitive market.
Peake says that FMCG used to be dominated by big players twenty years ago. The supermarkets were gatekeepers and the challenger brands found it much more difficult to break through. The power dynamics have changed. “Digital channels, DTC models and shifting consumer behavior have allowed smaller brands to succeed.”
Prices are a constant battle between private-label and independent brands. (Image: Getty/Noel Hendrickson)
The social media platform has helped smaller brands reach their consumers in a way that was previously impossible.
Peake, from Merchant Gourmet warns that this has challenges. A brand can disappear overnight, or go viral. Take Little Moons for instance. Challenger brands may struggle to cope with this influx of demand.
The revolving doors of fashion are arguably brands’ biggest challenges. The hottest trend one month may not be the hottest trend next month. It is hard to predict, and harder still to accommodate. There are some trends that have proven to be durable.
Peake says that health, wellbeing and sustainability is at the forefront of his agenda.
In essence, brands are expected to be able to handle everything
Richard Peake is a Merchant Gourmet
Consistency is a trend that has its challenges, as more and more brands must cater to everyone.
Peake says that brands are expected to be a mix of all these things – nutritious, easy, transparent, environmentally friendly, and ethical. Balance is the key, and it can be a great opportunity for those brands who get it right.
Both private label and independent brands are affected by this, which means they both have to do more to remain relevant for consumers.
What can brands do to remain relevant and profitable?
Open to Change
Food and beverage companies are constantly fighting to remain relevant. Change in any form is one of their biggest obstacles. Being open to change is also a solution, especially when it comes product formulation.
Merchant Gourmet’s Peake says that brands are being pushed to improve their labels, lessen the use of UPFs and produce products which are both nutritious as well as delicious.
Create a powerful brand identity
To achieve success, it is important to create a brand that the consumer can identify and recognise.
It is enough to consider companies such as Coca-Cola, to understand the importance of maintaining a consistent brand identity. Coca-Cola has maintained strong brands across its portfolio including Coca Cola Sprite Dr Pepper Fanta. As a result, the American multinational is continuing to achieve success, with net revenues of $47.1bn by 2024, and a 3% growth year on year.
It’s crucial to share the brand’s identity with consumers. This is something we see a lot of. Social media is a great way to connect with people.
Peake says that consumers want brands to align with their own values. This could be sustainability, provenance or innovation.
Future-oriented
In a difficult climate, brands must ask themselves what the consumer will be looking for in 10 years. Peake says that this should be a stress test for NPD.
It will be against the impulse of many brand managers to follow the latest trends in an attempt to boost sales. However, it may prove costly.
Peake warns against creating products to meet trends. The most lasting trends were the ones which never went away.
Volume not price is the key to increasing sales
Prioritising the volume of sales over increasing prices should be given priority. It will boost revenue in the long term and prevent customers from switching to lower-cost brands.
Peake says that businesses are too often focused on short-term profits and not brand equity. There needs to be an adjustment in the priorities.
Transparency with clients
Since over a decade the trust in food has declined, but now brands are beginning to change things. Increasing transparency is the most effective way to capitalize on this change. It could be the key to success or failure.
Peake says that if brands do not take the initiative to inform consumers of what is in their foods, regulators will. Some brands will be successful, while others may fall behind.
Big is better
Success will be likely for brands that are ready to change and meet the demands of consumers, especially in relation to sustainability.
Peake says that the industry can double-down on sustainability and innovation, putting the customer at the center of the process, as opposed to just tweaking the existing product.
