Food firms ‘will be left on e-shelf’ if they neglect online retail
Rabobank senior analyst John David Roeg said food companies of all sizes will need different strategies to make products stand out against the competition. Processors can help “online-proof” their goods by ensuring their goods are not filtered out by consumers whose searches include terms such as ‘gluten-free’ and ‘low sodium’.
A Rabobank report, entitled ‘Food Processors Challenged by Online Growth Dynamics’, predicts that the growth of online food retail is a game-changer for processors, similar to the impact of self-service supermarkets in the 20th century.
“In theory, the online grocery market should be a place for everyone to sell everything but this is not always the case,” said Mr Roeg. “Food processors must tackle the complexities of online retailing head-on to avoid being pushed to the back of the e-shelf.
“It’s not enough to change the packaging or formulations. In the face of increased competition and opportunities for commercial advantage, products need to be ‘online-proof’. Even the most popular products — ‘A’-brands — can lose share of screen, so it is equally important for consumers to understand how to navigate the new online retail world.”
Online consumer trends will require new approaches to marketing. Rabobank expects the drive to protect the 24/7 online prominence of their brands will see processors negotiating terms with a retailer for promotions, substitution deals or on-screen advertising.
Mr Roeg said the Rabobank report suggests that long-established brands will also need new sales and marketing strategies as the online share of global food shopping grows, and as new consumer trends emerge.
“From large FMCG [fast-moving consumer goods] to ‘B’-brands and private-label [cheaper] producers, different strategies will be required to make products stand out against the competition,” said Mr Roeg. “In the end, it will be the squeezed middle that find it difficult to break the top-line search results dominated by the most popular or the cheapest products.
“But it is not enough to make it to the top of the screen. In this algorithm-controlled world, retailers can steer customers in a certain ‘ordering direction’ with tailor-made promotions and substitutions based on browsing or buying history, similar customer profiles, and standard shopping patterns.”
The Rabobank analysts suggests three key areas where food producers should adopt strategic changes in order to flourish in the online age.
Firstly, it suggests that mid-market brands in the “squeezed middle” should specialise in niche products such as healthy options. Beyond niches, there are other variables that can lead to filter-beating products such as smart-pricing and packaging variety, suggests Mr Roeg.
Secondly, to protect a 24/7 screen presence for online shoppers, building strong and recognisable brands may lead to new forms of promotional deals between food producers and retailers. And thirdly, Mr Roeg predicts retailers and processors will work together to achieve new supply chain efficiencies so as to keep retail costs low.
