Sunday, May 16, 2004

Food industry trends It'll have no surprises for readers of this website, but a 2002 report by Cap Gemini Ernst & Young called "State of the Art in Food" details some of the food industry trends we have been documenting. We always take such prognoses with a grain of salt: Trend reports are generally naive concoctions that assume a linear progress based on the recent past and take no account of disruptions. They are also written to give pseudo-objective support for marketing executives to use or misuse at will to support new initiatives: "This report predicts that consumer demand for widgets will grow by 2 million a year…" These made-up "facts" look nice in a Power Point presentation. In one industry I know, the president of the leading market prediction company privately has admitted that because no one wants to pay money to hear bad news, all of the reports are under pressure to be upbeat and as optimistic as possible. After all, nobody remembers the last predictions when the next marketing team comes in or the next campaign is readied. In any case, we can look at some of the CAP Gemini ideas and see if they still make sense two years later. It's based on interviews with over 200 food industry executives. Here are the conclusions: There will be 10 dominant companies with operations in over 100 countries world wide. They in turn will own the dominant global brands that will continue to grow. These dominant food manufacturers will also own some local brands to satisfy the growing demand for local products in opposition to the resented growth of global brands. Manufacturers will increasingly try to go past retailers to market directly to consumers. Meanwhile, retailers will build their own brand consciousness and try to be less under the thumb of manufacturers, through loyalty programs and store brands. Both manufacturers and retailers will wrestle over the supply chain (and the biggest loser will be the middleman). Conventional supermarkets are going to be squeezed on one side by hypermarkets (Wal-Mart, Carrefour) and on the other, by convenience stores. While the purchase of fresh products is predicted to increase, retailers will get further upstream in the selection, packaging, and standardizing of the fresh products they sell. None of these conclusions are surprising, but they do seem still valid and they do summarize a lot of what I've written about the industry on this site, though there's lots more at play that remains unmentioned by the report (take, for example, the compelx issue of brand extension or the more global issues of disruption and innovation.) The trend toward oligopoly is unmistakable and the battle between the manufacturers and retailers is getting more and more furious all the time. While some players rise and fall (Parmalat and Ahold, for example), the patterns are clear. 1:38:07 PM

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