New Foodies

Consumer packaged goods manufacturers are having a tough time these days keeping up with changing consumer tastes and demands. Beyond the still present impact of the Great Recession and the related drop in overall spending, certain food categories are struggling to maintain sales, with some seeing year-over-year declines of 3 percent to 5 percent or more.

Four food categories that were once on the top of the growth charts have seen ongoing sales declines over the past five to 10 years, and although they continue to be strong performers in overall sales, the trend is not positive. These four categories are carbonated soft drinks, frozen packaged food, pasta and ready-to-eat cereal. 

All four segments are suffering from changes in consumer perception relating to health and nutrition concerns, among other things.

There is a lot of interest today in the so-called millennial generation and its changing tastes, but those changes aren’t restricted to that age group. People from every age group are becoming more interested in what they are eating, and they are making significant changes to their dietary habits as a result of this new interest. 

Healthier Trends

Carbonated soft drinks have been on the decline for a decade, driven by consumer concerns over the sugar – mostly in the form of high-fructose corn syrup – and the explosion of alternatives. Bottled water, teas, coconut water, energy drinks and so on have all taken a bite out of the soft drink pie. More recently, studies showing that sugar substitutes actually contribute to weight gain are impacting the diet soda market. The big companies are looking for alternatives and trying to respond, but the bloom appears to be off the rose for the traditional soft drink. 

Frozen foods, once the growth darling of the industry, are feeling the heat as well. Shoppers are more interested in fresh foods with less processing and packaging. This is bad news not just for manufacturers, but also for retailers as many have devoted as much as 40 percent of their square footage to expensive and energy-hungry frozen food display cases. 

The biggest losers in this category are in the low-calorie segment, with both ConAgra’s Healthy Choice and Nestle’s Lean Cuisine lines leading the charge downward. 

Pasta suffers from a number of maladies: it’s full of gluten, which means it is not hip in a market where one percent of consumers are gluten-intolerant and up to 10 percent are actively avoiding gluten. It is also seen as fattening – a perception that market leader Barilla, which is down 3 percent in sales, is fighting with ads promoting the relatively low calorie count per serving. 

Possibly worst of all is that pasta is seen as, well, boring. Consumers are looking for new tastes to tantalize their palettes, and pasta is the same old thing.

Finally, that staple of the nuclear family morning – ready-to-eat breakfast cereal. The verdict among consumers is that it is too sweet, too expensive, too processed and not fast enough. People are eating more on the go and it is hard to eat a bowl of cereal in the car. Nutrition bars, however, are taking a bite out of those sales as a more healthful option and one that is travel-friendly. To be fair, 90 percent of American homes still buy cereal, but they don’t eat as much as they used to and the curve is heading in the wrong direction. Cereal makers are playing the nostalgia card in an effort to drive demand back up, but short of putting pieces of gold in the box instead of toys, sales aren’t likely to recover soon. 

There may be some impact from the loss of Saturday morning cartoons, as well. What was once a ritual for many children – waking up early and watching cartoons before the rest of the family got out of bed – has gone the way of must-see TV. No more Saturday morning cartoons on broadcast television networks, and no more kid-targeted advertising to drive demand with mom.

Change or Die

Those are the symptoms; the actual cause is changing tastes and concerns about health across the board with consumers. Once “great” products like Kellogg’s Frosted Flakes are remembered fondly by many, but that’s not enough to get them past the concerns about sugar, sodium and the overall processed aspect of packaged cereal. 

The challenge for food manufacturers is clear: Change or die. Consumers overall are changing their habits in an effort to live more healthful lifestyles, save money and eat “real food.” We are becoming something of a foodie culture, but with a twist. Innovation in the form of new taste profiles, less packaging and fresher options are in demand, preferably in a form that can be eaten one-handed while driving to work or the soccer game. 

This is not a fad and the pace of change will only increase over the next few years. Putting things right will take more than clever advertising and a coupon. Packaged goods companies are going to have to break some eggs and change some long-held practices to catch up to consumer demand if they want to bring back growth for the long-term.  

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