Food brands move to stave off decline, outmaneuver start-ups

Historically large brand name products in the supermarket have commanded more demand and higher costs. Those days, however, may be numbered.

Analysts say that as more upstarts get into the game, major food conglomerates are reacting in ways that suggest their hold on the public is slipping. That means big established food brands are being forced to innovate in new and unusual ways — and must look outside their own company in order to boost growth.

For example, Campbell’s Soup recently announced a $125 million venture capital (VC) fund that the company wants to invest in the “disruption” in food trends. At a recent analyst’s conference, Campbell president and CEO Denise Morrison pointed out that 400 food start-ups have absorbed more than $6 billion in funding, which raises the stakes for big consumer brands who want to remain relevant.

Observers cite several trends are at work. Consumer tastes are shifting in ways that are putting big brands on the defensive, they say.

“Consumers are becoming very distrusting of the food brands they grew up with, rejecting the artificial ingredients those foods contain,” Vani Hari, author and activist at FoodBabe.com, explained to CNBC recently. “They’re now opting for new start-ups that are putting organic, non-GMO [genetically modified] foods on the market.”

Hari said it’s easier for certain companies to buy or partner with start-ups, rather than re-engineering their products. However, although buying out smaller competitors is the time-honored way to boost market share and lure in new customers, that strategy may not always pan out if smaller companies don’t want to play along.

Last month, yogurt maker Chobani recently rejected PepsiCo’s offer for a stake in the company. Chobani said its independence remained a key asset to the company and brand.

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