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Massive Big Food study holds lessons for restaurant industry today

American Big Food is losing market share like someone just pulled the plug from its collective bathtub, according to a newly published study on the state of Big Food.

August 17, 2016 by S.A. Whitehead — Food Editor, Net World Media Group

Shhh! Do you hear that collective sigh? That's the sound of American Big Food companies losing market share and customer loyalty like someone just pulled the plug from their collective bathtub. This is major finding of a research study released today by A.T. Kearney into the state of Big Food, which the company said is in serious trouble at the moment.

Why is this important to restaurateurs?According to the people behind the research, the story of Big Food, is also the story of food service. It boils down to the fact that iconic names that have long dominated the business are under threat from smaller brands that are steadily increasing their customer base and bleeding business from the major fast food brands. 

Much of this shift is due to the major chains' deeply rooted reputation for doling out highly processed food with dubious nutritional value.

The big QSRs are moving to address this problem, a la McDonald's incorporation of more healthful, sustainable offerings into its everyday menu, a change that was announced last month. But it might not be enough, according to the researchers.

"The focus of this study was on branded food manufacturers selling primarily to retail, however, the same trends are being seen in the restaurant industry," Dave Donnan, partner and global leader of the food and beverage practice at  A.T. Kearney, wrote in an email to QSRWeb. "These trends have accelerated over the last five years. … [They] are not just with the younger generations. Boomers are trying to live longer so they are more focused on healthy eating, and millennials were raised with a stronger focus on nutrition and health and that is reflected in their purchase habits."

Causes of slumping sales 

Donnan said that the research indicates three basic factors driving the current shift in Big Food and its service chains. Those include:

• an overall move to so-called "free-from" foods that do not contain antibiotics, hormones or genetically modified ingredients;
• increasing focus on health and wellness driving fresh and less-processed food purchases; and
• increasing consumer preference for smaller, innovative companies that source from sustainable food suppliers.

In the Big Food and Beverage industry, all this is manifesting itself in a huge loss of market share. The research indicates that the nation's food and beverage retail sales now attributable to the top 25 US food manufacturers has fallen from 66 percent in 2012 to 63 percent in 2015. 

The study shows that this has occurred while the overall market has grown nearly 3.5 percent. This growth, according to the study, has gone to small and medium-size companies that have been the driving force behind $14 billion in added revenue. That compares with $16 billion in growth for all of the Big Food companies combined, according to the study.

Donna said that in the realm of Big Food, there's a massive shift taking place to re-source products to comply with the changing demands of consumers today. And make no mistake, consumers are driving this trend.

The research found that today's purchasing public is almost reveling the power it wields over all segments of the food industry. In the report summarizing its research, A.T. Kearney calls out the results of a 2015 study by the Hartman Group.

Hartman's research showed that consumers — especially those in the millennial and Gen X demographics — believe the best way to control what happens in society at large is by voting with their dollars.

"For the first time, consumers believe their purchasing decisions have a much greater impact on society than their voting decisions or their  involvement in their local community," the A.T. Kearney report observed.

Three ways to respond

The study's authors advise Big Food to pursue three aims in readjusting to today's market. This research-driven advice might also be useful to large food service chains, as well.

The study said that the food and beverage market overall has a "$70 billion opportunity" for growth over the next three years. The researchers advise three tactics for major industry players to pursue in order to claim a share of this business, including:

• enabling investment growth through cost reduction and divesture;
• acquiring smaller, established players in trending categories, along with outside venture capital development; and
• dreating venture funds to buy and grow emerging brands, products and technology in line with consumer trends.

The report also urges companies to develop "innovation cultures" that are more amenable to the type of risk-taking needed to try new ideas and concepts.

The research also strongly suggests that winning in the business of food in the U.S. these days means truly being transparent about where food comes from and how it's produced and prepared. Sounds familiar, doesn't it? 

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.