Beatrice exec calls for unity among key industry segments.
What we've seen happen in our industry is what one academician has termed "structural change." He uses that term to describe things that change and don't revert to their original state. And that's where we're at in the food industry. The name of the game today is efficiency, economies of scale, broad geographic reach, and consolidation. We're seeing these factors playing out in every segment of the food industry, from manufacturer, to distributor, to retail outlet. American Stores' acquisition of Jewel Tea is the latest in a series of consolidation moves in the retail segment. In the distributor segment, one industry observer was laughed at several years ago when he predicted that the number of wholesalers would dwindle in the 1980s to less than 100 from more than 500. No one is laughing anymore, because it's happening.
On the food manufacturers' side of the fence, we've been making plenty of news. Of course, Beatrice has just checked in with our acquisition of Esmark, but we're only the latest to come down a well-traveled road over the past five years. Look at the merger of Nabisco and Standard Brands, which was truly an attempt to develop worldwide synergies in production, distribution, and marketing. Esmark bought Norton Simon a while back, and immediately began to synthesize its Swift processed meats unit with Hunt Wesson--very compelling combination, as we have obviously acknowledged. The mergers come in all shapes and sizes, but the bottom line is the same. We're looking for synergies, efficiencies, and marketing clout.
But consolidation and sheer size aren't the only factors preventing us from ever going "home" again. There's the electronic revolution, driven by the computer. If you ask Jack Twyman, president of Super Foods, he'll tell you that the successful wholesalers are going to "embrace the computer and all it can do for them." Jack would further say that the computer has enabled the wholesaler to forge a true marketing partnership with the manufacturer and the retailer. He and his resourceful competitors can provide data on product movement by category to tell a pretty compelling story to both the suppliers and the distributors of the world.
In the retail store, scanning is becoming the order of the day. Again, this gives each link in the food industry chain vital data to track product movement and consumer trends. Those retailers and wholesalers who don't pay the price--who don't make the vital investment in computer hardware and software--will surely have a more difficult time in the marketplace. Changing Consumers
While we've been changing, the consumer has gone through some changes of her--and his--own. I'd categorize two types of changes as demographic and psychographic. The demographic changes have been well documented: the rise of two-income families, growth of the Hispanic market, the "graying of America," and the breakdown of the traditional nuclear family. Psychographics, which get into people's behavior, is more subtle. Basically, people are more mindful of health and nutrition than ever before. They now feel that what they eat makes a statement about themselves.
How do all these changes relate to the marketing of food products? Speaking for the food manufacturer, we need to develop a true marketing partnership with the distributor and retailer. That means sharing the information they have available on product movement, so that we can fine tune our advertising and promotional programs, and even reevaluate the new products and product line extensions that we have on tap. Looking at the consolidation going on in both the distributing and retailing segments, it's also clear that more and more power is being placed in fewer and fewer hands. So it only makes sense to make our customers and distributors allies in promotional development and execution.
Secondly, the changes in the consumer will require new marketing approaches. It has been said that the brands that are really in trouble are the so-called "big old far ones." These are the brands that have been around for years and have appealed to a mass market. The hot brands nowadays are those which appeal to specific market segments. It is in these so-called market "niches" that food marketers will find the highest volume growth and the highest margins. The stakes and risks are higher in these markets, as we're talking about development of entirely new product categories. And who's to say that categories such as low-alcohol beer and low-nicotine pipe tobacco are going to be successful?
To compete in these types of segments and niches requires a high degree of marketing sophistication, from product development, and creative strategy to media selection for advertising. And, going back to my call for a marketing partnership, it requires a little help from our friends--those of you in the retail and distribution segments.
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|Title Annotation:||Hal Handley|
|Date:||Sep 1, 1984|
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