This post is sponsored by Deloitte.
How consumers purchase food is no longer just about clipping coupons and meal planning – consumers today are more aware of how food purchases and decisions affect their own health and wellness, as well as the health and wellness of society as a whole. As information is easier to gather – and share, via social media – than ever before, food retailers and manufacturers are being pushed to the realm of transparency, requiring companies to evolve along with customers and their “Evolving value drivers,” as Deloitte identifies them in a new report.
Here, we talk to Jack Ringquist, consulting partner and global sector leader of consumer products for Deloitte, about what is now influencing consumers’ purchases, and how food retailers and manufacturers can seize the opportunity to capture these consumers’ attention.
Question: The report focuses on the rise of “Evolving value drivers” in consumer food purchases. Can you explain what those value drivers are and why they are on the rise?
Jack Ringquist: Our study shows a pervasive shift in consumer preferences and shopping behavior. Roughly half of surveyed consumers say their purchase decisions are significantly influenced by “Evolving” drivers in addition to the “Traditional” drivers of Taste, Price and Convenience.
These Evolving drivers are:
- Health and Wellness: The most important and complex of the Evolving drivers. Consumers’ considerations are broad and tend to vary at the category level.
- Safety: Consumers now consider both in the short-term (e.g., toxin free) as well as long-term (e.g., no carcinogens) and as a result has an interplay with Health and Wellness.
- Social Impact: Reported as a strong preference by a small number of consumers, but represents a loud and vocal group that can sway public opinion.
- Experience: The way consumers interact with brands beyond the actual product or service, which can elevate satisfaction, trust and loyalty as consumer expectations increase.
- Transparency: The desire of consumers to access many types of product/brand information and to access it across multiple mediums in real time.
Consumers today have unprecedented and growing access to information about the health of themselves and their families, the evolving science of nutrition and wellness, new products and services, and the values and practices of manufacturers and retailers. This information is shared and discussed directly amongst consumers via social media and many consumers signal a distrust of the established food industry. This is in spite of retailers’ and manufacturers’ traditional efforts to keep consumers positively engaged with their brands.
As the food and beverage industry struggles with stagnant overall growth, such consumer-led disruption is compounding the growth challenge for individual companies. This consumer-led, information-enabled disruption represents an opportunity, even an imperative, for manufacturers and retailers to reset and reposition themselves with consumers and shoppers.
Q: What does this actually look like in the marketplace? Can you give an example of a food company that is catering toward these new customer needs?
JR: One of the most impactful ways for a manufacturer to shape the consumer experience is by providing relevant information that enlightens and educates consumers, and enables new ways for them to interact with the brand.
This is something a large, global ingredient manufacturer discovered when it began looking to boost the sales of its spices and seasonings through more creative, deeper consumer engagement. An output of that effort was an online tool that enabled consumers to build a unique “flavor profile” by answering a series of questions. Based on that profile, the online tool issues personalized suggestions for recipes using the manufacturer’s products that align with consumers’ preferred flavors. Consumers can continue to refine their flavor profile over time by rating the suggestions as they try them. In addition to engaging consumers in a new and different way, the manufacturer also gains tremendous insights to better inform their R&D and innovation efforts.
In the two years since its launch, the tool has been successful and the manufacturer has decided to spin off the underlying technology into a new company – a true example of business model innovation as well.
Q: What solutions can CPG companies and their retail customers consider to address these evolving disruptors?
JR: There is no “silver bullet” that solves today’s consumer food value equation; every company’s situation is unique and choices must be based on that context. What will likely hold constant across the food and beverage industry is that driving growth will require systematic, integrated and distinct choices that support a broader consumer agenda while mitigating risk.
Most successful companies will ask themselves the following questions when addressing the emerging market realities created by the evolving consumer value equation and consumer-driven market disruptions:
- How can we reframe and revisit current strategies, portfolios and value propositions to assure alignment with these evolving preferences and behaviors?
- What innovative products and services can we create that engage the consumer across multiple Evolving drivers, and are we applying appropriate measures of growth, margin and risk?
- How will we engage consumers in an authentic, responsive, two-way dialogue to build trust and assure alignment with consumer priorities and preferences as they evolve?
- What capabilities, systems and business models do we need to provide the necessary level of speed and flexibility to anticipate and meet the evolving needs of our consumers?
Shoppers and consumers can once again be excited about the products and experiences being delivered by manufacturers and retailers who demonstrate a clear, informed sense of their evolving preferences. Deriving solutions to these questions, customized appropriately to an individual company’s unique context, will chart a path back to meaningful growth.
Q: Factors such as Social Impact and Experience seem like they would only hold true to younger consumers. Is this trend specific to the millennial set or did you find it present across other age groups as well?
JR: It’s important to know that the shift towards Evolving drivers and a broader purchase consideration set is not driven by a certain region, age or income group. It is pervasive across region, age and income. This means that each and every consumer targeted by food manufacturers and retailers has changed in a fundamental and impactful way.
Specifically for Social Impact, we found that consumers’ definitions encompassed many aspects including food safety, fair treatment of workers, local sourcing of products, overall mission and values, environmental responsibility and role in the community. Twenty-three percent of consumers surveyed choose one or more of their shopping destinations based on Social Impact attributes. In addition, the diversity and purchasing profile of this small but growing group make them a highly sought after portion of the population. While millennials are represented in this group, so are higher-earning consumers and consumers with children. These groups are most attuned to Social Impact and make purchase decisions that reflect their value-based lifestyles.
Experience encompasses how consumers feel and interact with the brand or company along each step of the purchase journey — everything from searching for product information to consumption to customer service interactions. Experience is one of the most difficult value drivers to deliver on, as it is less tangible or directly measurable in many ways than are other value drivers. If retailers and manufacturers can use the shopping experience to substantially differentiate themselves in the market, they can create a sustainable advantage. Many consumers now desire and often expect one-on-one, personalized engagement and conversation whether they shop in-store or online.
Q: Where do we go from here? What do you think the food value equation will look like in two years?
The speed of change continues to accelerate. While it’s difficult to predict which trends and preferences will emerge in the coming years, I do believe we will see the following:
- Consumer purchase decisions will become more and more based on mixture of both Traditional and Evolving drivers.
- Consumer tastes and preferences will continue to fragment.
- Retailers’ role influencing consumer purchase decisions will increase.
- Smaller, newer companies will leverage new technologies, third-party relationships, and improved engagement to earn consumer trust and to compete.
- Larger competitors will adjust to fulfill new, unique value propositions.
- Market success will be determined by building purpose-driven competitive advantages.
Consumer value drivers will continue to shift, and manufacturers and retailers, informed by deep consumer insight, need to monitor where they reside in this evolving equation. With an increasing number of consumers redefining their “value set,” market dynamics will continue to change, creating both new challenges and new opportunities for those that are prepared to compete.
Jack Ringquist is a consulting partner for Deloitte based in Los Angeles. For nearly 30 years he has worked to improve business performance and results for his clients in the areas of sales and marketing, supply chain, procurement, information technology, human resources and finance. He specializes in strategy, planning and implementation of large-scale business process change and information technology for leading companies in the consumer products industry.
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