This rather unappetizing statement was tucked into a request for proposals recently sent to ad agencies: "Most of our food supply comes from factory farms, is dependent on GMOs and chemicals, and is not sustainably grown or raised."
The inflammatory language sounds like the typical musings of a fiery activist ready to take on Big Food. But it actually came from the Kashi brand owned by industry giant Kellogg Co. The brand is seeking ideas to "re-establish our identity in the natural foods movement."
Quite simply, big brands are losing one of their most valuable assets: consumer trust. And the fight to regain it will shape the industry for years to come.
The rapidly shifting tastes have forced executives into taking some dramatic steps. They are racing to reformulate iconic products like Kraft's Mac and Cheese, while acquiring smaller brands in hopes of reinventing themselves to appeal to today's finicky consumers. But their search for growth comes amid intense pressure to cut costs as bottom-line focused private equity firms such as 3G Capital lurk.
Some $18 billion in sales have shifted from large to small companies from 2009 to 2014 across all consumer packaged good categories, according to report by Boston Consulting Group and IRI. Credit Suisse recently isolated the changes in market share among food and beverage companies and found that the largest 25 companies saw their control slip from a combined 49.4% share in 2009 to 45.1% share in 2014. Their "dominance of the core U.S. market seems to be slowly eroding," Credit Suisse stated in a report.
Campbell Soup Co. CEO Denise Morrison recently summarized the situation using unusually stark language when she told financial analysts at a February meeting that "we are well aware of the mounting distrust of Big Food." She added that "we understand that increasing numbers of consumers are seeking authentic, genuine food experiences and we know that they are skeptical of the ability of large, long-established food companies to deliver them."
Months later, her confession is still resonating. Just look at the actions of some of the nation's largest retailers, such as Target, which recently committed to overhauling its grocery offerings in favor of less-processed foods. The company controls $15.6 billion in U.S. food and pet supply sales, according to Supermarket News.
The tipping point for Big Food might have come in the middle of 2013 when the shift away from heavily processed foods become more evident, Sanford C. Bernstein analyst Alexia Howard observed in a recent report. She cited several factors: Millennials began forming households after the recession that are led by moms who are "better educated and are less brand loyal than earlier generations."
The rise of social media has also led to a "massive online conversation about what to eat and what to avoid -- and concerns about the additives in many heavily-processed foods are on the rise," Ms. Howard stated. Lastly, advancement in distribution methods are extending the shelf life of fresher, less-processed foods.