Expert Insights: Disruption Impacts Trade Spend

There has been a lot of talk about disruption in the food and beverage industry over the last few years. With the introduction of new technologies (like voice assistants and social media) and new competition (like Amazon and Uber Eats), the food and beverage industry has been on a roller coaster.

Given the numerous changes in the industry, we asked experts what they considered the biggest disruptions for food and beverage manufacturers in 2018 and how those disruptions impact trade promotion.

We asked:

1. What has been the biggest disruption to the food and beverage industry in 2018?

2. Has it/will it impact trade spending now/in the future?

Here’s what they had to say:

Jim Klass, MarketIntelligence Solutions

“Biggest disruption? There are two:

1) Rapid pace of consumers moving to what I call attributed foods (non GMO, Local, fresh sustainable, authentic etc.) and the inability of food and beverage companies with their long production runs to react quickly.

2) Labor, both costs and skill sets. Operators can’t afford to pay $15/Hr. and sell value meals, in addition, think about Chipotle problems in Ohio – the consumer expects (as they should) safe food products if an operator loses that thrust they are gone.”

“Despite continued industry consolidation, technological advances, effects trade policy, and the looming threat of a significant market entry by Amazon, 2018 was very much the year of the consumer.

As consumer tastes have continued towards fresh/ local/ sustainable/ functional/ ‘foodie’/ plant-based protein (etc!), and these preferences thus continue to affect the foodservice operators’ menus & underlying ingredients (in both commercial & non-commercial segments).

Additionally, we’ve experienced a cultural (and thus consumer) sensitivity towards ‘big food,’ and awareness of social issues related to food production and supply chain, such as end-to-end waste reduction, farmer livelihood, etc. Foodservice distributors continue to adjust their sourcing, procurement, assortment, and (especially!) their private label offerings to meeting these changing tastes.

Foodservice manufacturers, especially legacy CPGs, continue to follow a strategy of acquiring smaller, nimble food startups (to varied results so far), and differentiated products (e.g. unique, ethnic flavors).

While consumer preferences changing did not start in 2018, certainly this trend continued to build steam, and it’s hard to imagine it will not continue into 2019 and beyond.

Trade spending has, therefore, never been more important so long as it’s agile and nimble enough to affect purchases across a changing landscape of operator group/ GPO/ distributors/ competitors; and paired with actionable insights, consultative & technologically equipped sales teams.

Sales teams that are trained in the economics of the gross to net trade/spend waterfall, trained to leverage insights and build alliances, and deployed at the appropriate level of customer/segment/geography.”

Laura Bonich, Wolf Search Solutions

“The biggest disruption in 2018 isn’t as obvious as some of the more technical aspects of our industry. A talent crunch within the foodservice industry as well as cultural shifts are beckoning notice across all levels of an organization, especially with hiring managers.

The talent crunch has an impact on trade spending because trade management isn’t just about ensuring that all programs/deductions are in compliance with the interpretation of an agreement. Hiring managers want to build their teams with members that have a more holistic view of the company, customers and competitors.

The industry demands a higher level of sophistication and respective skills and at the same time, there is a reluctance to look outside of the foodservice industry to cross-pollinate and build the bench strength.

The lack of talent bench strength, that has the skill set hiring managers are looking for today to lead trade management teams, is having and will continue to have an impact on foodservice companies. For many years large CPG companies fed these benches with recent college graduates who went through extensive corporate training.

In the face of zero-based budgeting, corporate consolidation, and/or the constant race to stave off being acquired by certain entities, companies have been pulling back on their graduate recruiting programs and have either reduced or dismantled corporate training/development programs.

In addition, the individuals these managers seek to hire, are becoming more reluctant to relocate to new cities and are looking for more flexibility in work-from-home environments. With more and more talent requesting this, companies are having to reconsider their overall culture.

Ultimately, hiring managers are looking to their talent to develop and lead the strategies that will, in turn, disrupt the long-held trade management paradigm and actually have spending dollars work to drive business vs being ‘sheltered income.’ The talent crunch is impacting and will impact how our industry hires for trade management roles which are, at times, the unsung heroes working to ensure spend ROI every single day.”

Jessica Bormann, ACH Foodservice

“To answer part of your first question – hands down, the biggest disruption in the industry has been the trucker shortage alongside the electronic log mandate.”

David Thorne, Blacksmith Applications

“Technology, both in the consumer’s and manufacturer’s hands.

Radical consumer shifts driven by technology have and will continue to disrupt the food industry. According to Fortune, the top 25 U.S. food manufacturers have lost $18 Billion in market share in the last 5 years. This is largely a result of consumers having more “control” over their choices and this is enabled by technology.

Consumers can instantly consult sources to make different food decisions, including those based upon health, nutrition, trends and novelty. Mainstream manufacturers have been unable to react quickly to the decisions consumers are making.  This is demonstrated by Kellogg acquiring RX Bar, which grew rapidly and could not be “matched” by mainstream manufacturers.

Technology, in general, is driving innovation faster than ever, and some start-up food companies are not only exploiting technology to bring novel products to market, but they are also exploiting it amongst tech-savvy consumers to rapidly communicate to them in order to drive demand. Think Beyond Meat and their inability to meet (no pun intended) the demand for their products.

From a trade perspective, the empowerment of the consumer would indicate that trade spend should increasingly move toward pull from push.  That is, manufacturers should target their spending at the consumer/operator to meet the needs of the consumer vs. pushing into and through the distributor.  Of course, that requires branded items with clear differentiation.”

Let Us Know Your Thoughts

What disruptions have you seen affecting the food and beverage industry? We would love to hear your thoughts, reach out to us directly: hello@blacksmithapplications.com.