Look around - what food companies are telling us
Prime Future 030: Highlighting trends in the animal protein value chain
Tracking trends in different segments of the value chain is such a powerful way to be prepared for what’s coming so that input suppliers, producers & processors aren’t caught flat footed when the ripples from these trends eventually drift upstream.
How Kellogg prepared for the e-commerce surge by boosting its tech and talent (link)
“About two years ago, the 114-year-old company made digital and e-commerce a major part of its growth strategy, building out its platform and making investments in hiring experts in the space. The digital tools Kellogg invested in and additional staffing helped it prepare for the onslaught of online sales during the last few months.”
Takeaway 1: Investing in new sales channels should be seen as a long term play, not a 2020-reactive-to-COVID short term bandaid. We’ve seen this across the meat industry where companies that were already investing in digital & online sales channels were positioned to win big in the pandemic.
“E-commerce in CPG and B2B is still a growing space, which means experienced talent in this niche can be hard to find. Many industries sell directly to the consumer online and there are workers who understand those processes, but it's important to find talent that understands how e-commerce is tracked from different retailers online. That team approach means that Kellogg isn't just bringing in new specialists to focus on this issue, it is also training its other employees to be well-versed in the digital atmosphereand to get them to understand the fundamentals of the e-commerce business as well as they know sales in brick-and-mortar.”
Takeaway 2: Incorporating ecommerce requires a talent strategy that integrates new capabilities with existing market knowledge. The 2 way flow of knowledge is critical.
“Investing in measurement is important to Kellogg because it tracks key performance indicators, which allows the company to be "more strategic and sustainable" in the long term because they can see things like growth compared to the rest of the category, she said.”
Takeaway 3: ecommerce has the potential to be a value driver for the entire business by bringing granular shopper behavior data to product strategy and R&D decisions. We’ve talked about this before, its the real reason packers should go all in on D2C sales channels.
Amazon Fresh’s Hyperlocal Advantage (link)
“The e-commerce giant has been playing in the online grocery space since its initial launch in 2007, but a perfect storm has finally emerged that poses Amazon as a major threat to both traditional grocers and foodservice companies as it inches closer to your doorstep.
With Fresh, Amazon’s formal entry into the grocery retail space could not have been more opportune. While Instacart and Walmart lead the race, its new Fresh expansion poses a serious threat to the now-antiquated promise of same-day delivery.”
Takeaway 1: Consumer expectations are ratcheting up.
“Across the board, Prime members have larger basket sizes and purchase more frequently than non-members, Amazon Chief Financial Officer Brian Olsavsky said during the company's Q2 earnings call. According to research earlier this year by Brick Meets Click, 66% of all U.S. households are Prime members, 24% of whom utilize Prime Now or Fresh services. That remaining 76% of members — roughly 50% of all U.S. households — is a massive opportunity.
While traditional grocers operate off of notoriously thin margins, Amazon is playing an entirely different ballgame. During the call, Olsavsky explained that Amazon has lost money on grocery during the pandemic but was pleased by its progress in the space.
In addition to helping it expand into higher-margin businesses like pharmacy, a brick-and-mortar strategy enables Amazon to unlock multichannel shopping data that can be used to fuel its $14 billion advertising platform. Imagine brands going to a single platform like Amazon to buy advertising space on both offline shelves and online search terms. That is something that only an omnichannel retailer like Amazon can pull off.”
Takeaway 2: The race in business model innovation is on.
Before its purchase of Whole Foods, Amazon fulfilled Fresh deliveries from a small handful of centralized warehouses located far from the end consumer in select markets. Today, it can blanket cities with a mix of dark and consumer-facing grocery stores, creating the ultimate flywheel between online convenience and physical retail experience.
Unlike Instacart, where the same individual picks, packs, and delivers groceries, Amazon Fresh staffs full-time delivery shoppers who hand off pre-packed order totes to Flex contract drivers. Depending on the specific vehicle type, Amazon estimates trunk capacity for each driver, optimizing the number of return trips back to the store for replenishment. Because these stores are at the core of Prime-dense neighborhoods, Amazon can afford to pay Fresh drivers an estimated 68% more than those who pick up standard merchandise from more centralized warehouses,
With Fresh retail stores, shoppers can seamlessly shift from in-store discovery to repeat purchases of those items from the comfort of their homes.
Takeaway 3: Foodservice & retail are converging.
Grab the Prime Future ebook (link)
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Janette Barnard is the author of Prime Future and Managing Principal with Rock Road Consulting, working with animal health, animal nutrition, producers and processors to launch, source, and fund innovation. She leverages her commercial experience with agribusiness (Elanco Animal Health, Cargill, and McDonald’s Global Supply Chain team) and her entrepreneurship & strategy experience with tech startups.