Corporate Profiles - 2021 - 8

EDITORIAL
Mining for trends in still volatile
market for food and beverages
W
ith patterns of consumer behavior still anything but settled amid a
persistent pandemic, food companies over the past year continued to
strive to sustain gains achieved during the early phases of COVID-19
and capitalize on rapid growth of e-commerce business in food and beverages.
Against this backdrop merger and acquisition activity has been limited.
For a second straight year, wide swings were recorded in food and beverage
product sales over the past 12 months. As measured by IRI, 41 categories, with
combined aggregate sales of $37.3 billion, each experienced a sales gain of at
least 10% in the 52 weeks ended July 11, 2021. Only 11 categories, aggregating
$1.9 billion in sales, sustained sales declines of 10% or more. The large
shifts encompassed many mature categories that in previous years dependably
moved by no more than a few single digits in either direction.
Of more than 160 categories, only 43 categories sustained sales declines
versus 119 that posted sales gains. Many of the large
categories that were
weakest over the past year were items consumers were likely to have purchased
heavily early during COVID while stocking up pantries - saltine crackers,
down 8.9%; ready-to-serve wet soup, down 8.6%; condensed wet soup,
down 8%; granola bars, down 7.6%; pasta, down 6.3%; dry dog food, down
4.4%; ready-to-eat cereal, down 4.4%; hot cereal/oatmeal, down 3.7%; and
dry soup, down 2.8%. Within this group, only granola bars were down in each
of the last two years. By contrast, sales of pasta a year earlier were up 19.1%.
Patterns were less obvious but still discernible among gainers, though the large
number of workers who have shifted from offices to working from home appeared
to underpin the strength. Many of the widest jumps were posted in beverage-related
categories, including products that may have been stand-ins for items ordered
at coffee shops. These beverage-related products include other refrigerated milk
substitutes, up 65%; refrigerated ready-to-drink coffee, up 44%; single-serve energy
drinks, up 23%; cappuccino/iced coffee, up 17%; seltzer/mineral water, up
16%; and refrigerated juice and drink smoothies, up 13%. Value-added pet food
also stood out, with frozen/refrigerated dog food up 31% and frozen/refrigerated
cat food up 14%. Several snack categories were strong during the year, including
all-other dried meat snacks, up 22%; jerky, up 18%; other salted snacks,
up 15%; chewy candy, up 10%;
and ready-to-eat popcorn, up 10%.
Various " substitute " categories were
strong during the year, including all
other refrigerated milk substitutes, up
65%; and frozen/refrigerated meat
substitutes, up 15%.
L. Joshua Sosland
President
Sosland Publishing Co.
Among trends clearly advancing
during the year was the importance
of e-commerce in the businesses of
consumer packaged foods companies.
For example, the J.M. Smucker Co. said
a heightened focus on digital business
is an important part of the company's
8 \ October 2021
new commercial delivery model and now accounts for 12% of all Smucker sales.
Food retailers also are aggressively building out their online capabilities.
Kroger Co.'s e-commerce business jumped 114% in 2020 from a year earlier,
and the company said it is on track with plans to double the business again by
2023. At Walmart, Inc., company executives have said investments in e-commerce
and technology, as well as the company's supply chain network, have
boosted its omnichannel capabilities. Walmart Plus, the company's premium
online subscription service, has benefited.
In a September virtual presentation before the NextGen Baker group of
the American Bakers Association, Cyrille Filott, global strategist of consumer
food at Rabobank, identified the explosion of e-commerce as the largest shift
in consumer shopping behavior related to the pandemic. While some letup in
WIDEST JUMPS IN beverage-related categories
+65%+44%+23%
+17%+16%+13%
Other refrigerated
milk substitutes
Cappuccino/iced
coffee
Refrigerated
ready-to-drink coffee
Seltzer/mineral
water
Single-serve
energy drinks
Refrigerated juice and
drink smoothies
sales was seen in the second quarter of 2021, sales remained far above 2019
levels, and he emphasized the large investments made by retailers in the space.
First trying online shopping for safety, many consumers have grown comfortable
with the process. He said the newest form of e-commerce aims to satisfy
consumers' need for impulse purchasing online by delivering product within
minutes. Currently the service is offered only in urban centers and is usually
for indulgent products.
When it comes to mergers and acquisitions, transactions over the past
year tended to be small and highly focused. For example, Kraft Heinz in June
reached an agreement to acquire Assan Foods, a business based in Turkey and
specializing in the sauces market. Kraft Heinz said the deal would provide a
foothold for expansion in Europe, Asia and the Middle East. Grupo Bimbo SAB
de CV during the year acquired Emmy's Organics, a producer of gluten-free
organic cookies. Mondelez International in May said it would acquire Chipita,
a baker of cakes and croissants based in Europe, for $850 million. Relatively
modest for Mondelez, the acquisition makes the company a rising force in the
$65 billion snack cake category. Nestle was more aggressive with acquisitions
and divestitures, but its largest deal was the $5.75 billion purchase of vitamin
and supplement brands owned by The Bountiful Co.
Amid the uncertain direction of consumer demand, the momentum of ecommerce
and challenges posed by escalating costs and supply-chain constraints,
the go-slow approach to acquisitions appears prudent. CP
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Corporate Profiles

Corporate Profiles - 2021

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