Large food brands will have to walk the ‘regional path’ to keep customers, says Rabobank  

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Fast changing needs of the customer, customer systems and associates around the world, are pushing large consumer food organisations to rethink their global business models, Rabobank said in a report.

A reality check shows that large food companies are currently struggling with rapidly changing consumer preference, which has become apparent through their stalling or even declining revenues. Most feel it is more important to really ‘be closer to the consumer’ if they have to find growth.

There are going to be adjustments in the way these top companies are set up and managed, leading many to wonder what other strategic changes are to follow in the next five years, the report pointed out, adding that the inevitable changes could range from select investments in iconic brands to even the disposal of some global brands.

For example, Mondeléz has decided to move at the speed of its customer by adding four regional Chief Marketing Officers (CMOs), in addition to appointing a global CMO. This follows Coca-Cola’s announcement last year that it would do away entirely with the global CMO role and focus on regional marketing efforts.

Nestlé is another company that made the move to regional for a product category. At the beginning of the year, its infant nutrition business ceased to be managed globally and switched to a regionally managed business.

Nestlé understood that if it needed more agility and efficiency, its structure would have to be more localized enabling ‘Nestlé to respond faster to rapidly changing local consumer preferences, evolving regulation, and customer and channel demand for tailor-made solutions.’

Most of these organizations are now centering their thoughts around personalisation that caters to food, nutritional value, health, and even the marketing bit. They are also looking at making it as local as possible. S

So, here comes the play of local ingredients being used coupled with access to local production.

This is also where the smaller brands have eaten into the profit pie and larger brands are having to battle this big time. According to Rabobank, large brands have lost share in 60% of food categories in the United States and 70% of food categories in the United Kingdom, with small brands gaining the most.

Larger food companies are trying to get on with it by acquiring some of those smaller brands. The appeal of these small brands is closely related to the changes one can see in the marketing landscape.

Market dynamics are changing and for the larger brands to survive the war, they are being forced to march less and less to the beat of overarching formulas, big brands, and global marketing campaigns, instead letting regional structures, and ultimately consumers themselves, pick the tune, Rabobank said.

Uttara is a correspondent with Indoasiancommodities. You can write to her on uttara.malhotra@indoasiancommodities.in.

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