Leading by Example

Manufacturers of packaged foods will soon have a convenient tool to provide consumers full disclosure about what’s inside.

This new transparency initiative was unveiled during the annual Grocery Manufacturers Association Leadership Forum, held at The Broadmoor, in Colorado Springs, Colo., Aug. 15–16. The two-day education and networking event for the food industry’s top executives included a variety of leadership tracks focusing on e-commerce, omnichannel marketing, shopper behavior and other key issues.

Transparency

Pamela Bailey, president and CEO of the Washington, D.C.-based Grocery Manufacturers Association (GMA), said the voluntary transparency initiative comes in response to consumers’ desire for more information about what they’re eating. It’s also a tactical maneuver, as GMA and other industry groups have opposed the hodgepodge of local and state regulations aiming to wield authority over how packaged foods are labeled.

Calling it “something truly breakthrough,” Bailey described the initiative as providing consumers with full access to the content and makeup of branded products in a “simple, clear digital format.” (GMA requested that the trademarked name of the app not be revealed until it’s rolled out publicly in January.) Consumers can reach the app’s landing page via search, QR code on product packaging of participating brands, or through other apps that partner with the initiative.

GMA Senior EVP Jim Flannery, who led the app’s 18-month development, explained that when consumers scan a product’s bar code with a mobile device, they’ll arrive at a brand landing page where they can find complete ingredient and allergen information. The individual brands control the content, Flannery noted: “The brands are having the dialogue with the consumer.”

GMA has high hopes for public acceptance of the app, based on focus group feedback, video of which was shown during the forum. Consumer panelists praised the app as “user-friendly” and appreciated its simple design, clear presentation and deep resources; some noted it saved them hours usually spent researching ingredients on Google.

Brand manufacturers can participate in the initiative by building their own landing page using GMA’s style guide, outsourcing the web work, or using a “plug-and-play” version designed by The Hershey Co. and donated to GMA for use by its members.

The initiative is an ongoing project, Flannery said: “It will provide brand owners with the opportunity to have a deep dialogue with consumers.”

Evolving Preferences

More consumers favor evolving preferences such as health and wellness, safety, and social impact in their paths to purchase, and both retailers and manufacturers need to respond accordingly.

That’s the overall message conveyed by the results of a study conducted by Deloitte Consulting, GMA and the Food Marketing Institute, and discussed in a session called “Driving Growth Among Disruption: Capitalizing on the Shifting Consumer Food Value Equation,” moderated by FMI SVP Mark Baum.

The study, which included more than 5,000 consumers and 40 industry executives, revealed that more consumers are including a wider set of drivers in their purchasing decisions. These “evolving” drivers — health and wellness, safety, and social impact — are overtaking the historic drivers of taste, price and convenience as the leading reasons for choosing particular products over others.

Deloitte’s Tom Phillips characterized the shift as a “big, nuanced” move toward these new drivers. Overall, 51 percent of consumers surveyed emphasized these evolving preferences more heavily over traditional drivers, Phillips noted.

Perhaps most significantly, this shift is consistent across all ages, income levels and geographic regions. For example, these evolving drivers are cited by 52 percent of consumers age 18 to 34 and 35 to 49, and 51 percent of those age 50 to 80. Further, consumers are defining “safety” as being free of harmful or artificial ingredients, clean labeling and nutritious content.

“It’s not a niche area for business — it’s something that needs to be addressed,” said panelist Beth Ford, EVP and chief supply chain and operations officer for Arden Hills, Minn.-based dairy co-op Land O’Lakes.

Carolyn Sakstrup, VP of Target’s guest center of excellence, noted that Minneapolis-based Target is forging partnerships with multiple manufacturers to create products for its Made to Matter brand addressing these in-demand product attributes.

Jim Borel, EVP at Wilmington, Del.-based DuPont, asserted that transparency is essential in this new normal: “If you don’t provide the information, consumers assume the worst.” Ford argued that technology in food makes consumers uncomfortable: “It’s a marketing and communication challenge, because the facts are quite friendly.”

Rob Aukerman, president of North American commercial operations for Greenfield, Ind.-based Elanco, warned against overreacting to preference changes, lest manufacturers invest heavily in what may turn out to be soft trends. Aukerman contended that the study results demonstrate a demand “for choice in the marketplace.”

In response, Borel urged manufacturers and retailers “to work together to tell these great stories in a way that resonates with consumers.”

That will ultimately determine who wins and loses in the years to come, as good communication will define what a company is to consumers, Ford said, and success will belong to “the companies that are the most agile in responding to consumers.”

CEO Panel

A panel of the CPG industry’s top executives discussed “The New Era of Value Creation: Agile Efficiency and Growth,” moderated by Accenture’s Senior Managing Director Keith Barringer.

The panel discussed the impact on their respective operations and the overall market from fluctuating consumer demand, channel blurring and greater expectations for product customization. Barringer presented 2015 CAGNY data showing that power brands, innovation and supply chain efficiency are leading priorities of CPG companies.

J.P. Bilbrey, chairman, president and CEO of The Hershey Co., in Pennsylvania, noted that he’s paying greater attention to activists, a strategy that has impacted his company’s cocoa procurement and driven its move toward simpler recipes for its products.

“Millennials are the best thing to happen to us,” declared Kees Kruythoff, president of Englewood Cliffs, N. J.-based Unilever North America, because they believe in the idea of a “social enterprise.” Kruyhoff noted that his company’s fastest-growing brands are those with a social purpose.

In discussing Amazon’s impact on CPG companies, Justin Skala, president of Colgate North America and global sustainability for New York-based Colgate-Palmolive, said manufacturers must view it “through the lens of how my core consumers are going to be viewing the brand.” According to Skala, it’s “an opportunity to get closer to our core consumers” in building brands more effectively.

Talent will be a key element of CPG operations moving forward. “We rely on people to drive our agenda,” said Thomas Greco, CEO of Plano, Texas-based Frito-Lay North America at PepsiCo, explaining that his company’s business strategies are built around capabilities, culture and talent. Kruythoff stressed the importance of employee well-being and personal development in maintaining an effective workforce.

The panelists expressed optimism regarding the coming years. “There’s no better time to be working in consumer products than today, except for the future,” Greco asserted. Bilbrey concurred: “There’s never been a more exciting time — anything is possible.”

Other sessions over the two-day conference included:

• ➤ “The Digital Store of the Future and CPG Collaboration in the New Age of Omni-channel Commerce”: Leaders from IGA, PepsiCo and Cognizant Business Consulting discussed how retailers and manufacturers need to forge closer partnerships to better engage consumers. Most sales are the result of some combination of in-store and online experience, yet only 12 percent of retailers currently offer an omni-channel experience. “We have to react faster to what shoppers want,” noted Mark Batenic, president and CEO of Chicago-based IGA. “Loyalty is what you did in the last five minutes.” The future of retailing, the panel concluded, is about “making human nature digital.”
• ➤ “Winning CPG Strategies in Online Grocery”: Leaders of Instacart, Coupons.com and Drizly shared how they’ve helped drive traffic and sales for traditional retailers by helping them leverage online shopping trends to better connect with consumers. Instacart and Coupons.com partner with grocery retailers, while Drizly connects consumers with liquor retailers to facilitate online home delivery. “Shoppers want relevance at every turn,” said Coupons.com’s Mir Aamir. Digitally influenced offline sales are growing rapidly for CPG brands: 40 percent of in-store grocery purchasing is influenced by digital, according to A.T. Kearney research.

Other speakers included retired Gen. Keith Alexander, former head of the National Security Administration, on cybersecurity; and David Gergen, senior political correspondent for CNN and former adviser to presidents including Reagan and Clinton, speaking on leadership, accountability, trust and the current state of politics.

Honoring Their Own

GMA also honored several of its members with annual awards for their innovations and contributions to the industry.

E&J Gallo Winery and Coca-Cola received this year’s CPG Awards for Innovation and Creativity. Modesto, Calif.-based Gallo won for its creation of a next-generation sales system. Having transformed over the past decade from a winery focused primarily on mid- and value-price wines to a wine and spirits company with offerings across almost every price point, region and spirits category, the company needed to change the way it worked as a sales organization, enabling a truly mobile sales force through visual discovery, mobile access, and opportunity analysis and prioritization.

Atlanta-based Coca-Cola won for its highly successful “Share a Coke” campaign, launched in the United States during summer 2014. The campaign, guided by research from the original 2011 campaign in Australia, allows people to find their names and those of friends and loved ones on Coke bottles. “Share a Coke” was a top global trending topic in July 2014, with nearly 700,000 posts across all social platforms.

Additionally, GMA presented its Hall of Achievement Award to George Deese, chairman of the board of Thomasville, Ga.-based Flowers Foods, and Greg Wasson, retired president and CEO of Deerfield, Ill.-based Walgreens. GMA’s highest honor, this award recognizes the extraordinary service and contributions of the food, beverage and consumer packaged goods industry’s most distinguished leaders.