CPG Trends 05 June 2023

Our May Roundup: DTC vs brick-and-mortar, elevating functional foods and ‘hater-debunking’

In this month's roundup, brick and mortar retail versus eCommerce strategies, the usefulness of AI 'hallucinations' for marketers, functional foods and the future of whole-genome sequencing.

P&G Invests in Digital as Consumers Shift CPG Spending Online

From PYMNTS

P&G has said it will turn its focus to promoting eCommerce channels, seeing a better ROI over brick-and-mortar spending. This trend is supported by PYMNTS own study drawing on over 2,400 US consumers that found 45% shop for groceries at least some of the time, a share which increases for CPG categories. 

Inflationary pressures continue to impact consumer budgets and there is pressure in Europe from retailers, as consumers seek out less expensive alternatives. CFO Andre Shulten has said:

“We see the price differential between private label and branded competitors increasing, as private label is delaying price increases. The consumer continues to be under pressure there. So that’s going to be a continued headwind, I think, from the volume side.”

This will be a key consideration as P&G continues to promote eCommerce, particularly considering the success of offerings like Subscribe & Save on Amazon, which offers consumers discounts for product subscriptions.

The reasons why CPG brands are returning to retail

From SmartBrief

In contrast to the previous piece, this article examines the return to brick-and-mortar across the CPG industry as some reports demonstrate a consumer preference for returning to stores. An example given is Sweet Nothings, a CPG brand pivoting away from its DTC business and towards retail. CEO Jake Kneller has said:

“DTC was necessary during the pandemic, but became less essential when we achieved a larger retail footprint.”

Kneller suggested three main reasons to shut down its frozen DTC operations: better retailer availability of products across the US, eliminating complicated logistics and reducing the company’s carbon footprint. It is also suggested in the piece that widespread brand awareness and customer loyalty are difficult to cultivate with online-only efforts. Interesting considerations for attempts to strategically balance online and brick-and-mortar offerings.

Elevating the benefits of functional foods

From Food Business News

Functional foods are growing in interest and popularity amongst consumers. In this piece, the emerging ingredients are discussed, breaking down the potential real benefits of ingredients such as adaptogens, probiotics, botanicals, and nootropics.

Research thus far highlights that despite the growing popularity of micronutrients in new product development, they are not a substitute for a healthy and balanced diet. Also, the potential benefit of these ingredients still comes second to the importance of taste in the minds of consumers.

Sevendots Partner Andrea Bielli says:

“Consumer expectations towards food are continuously increasing and functional benefits will play a strong structural role in this change. The challenge exists on two sides: identifying new ingredients and micronutrients that are able to boost benefits and provide ‘closed loops’ where consumers can check the efficacy of the functional foods they consume.”

Boosted by biotech: How scientists hope to deploy genome sequencing tech to disrupt the food and supplement space

From Food Navigator Europe

Whole-genome sequencing (WGS) technologies have revolutionised food safety, as manufacturers have been able to trace the transmission of pathogens and spoilage organisms more accurately in food production, as well as better identify potential sources of contamination. This has enabled manufacturers to prevent the spread of harmful organisms more proactively.

However, this piece examines the potential for this technology to go further, in particular to engineer better food supplements. In particular, sequencing an individual’s genome may enable the creation of food products and supplements formulas that are tailored to the consumer. UK start-up Myota offers at-home testing which is on track to become one of 2023’s fastest-growing health trends. Consumers are primed for more individualised use of the technology becoming available, combating ‘health-washing’ and under-evidenced claims in product marketing that fail to deliver real benefits.

The food sector is not on track to meet climate targets. Here is what will help

From AG Funder News

An opinion piece from Kenny Fahey, CEO of Leading Harvest, a non-profit working to harmonize sustainability standards across the food sector. Fahey argues the largest food companies have made commitments they are not on track to achieve. He suggests the key lies in the transition to regenerative agriculture.

He unpacks the barriers and suggests that the sector must ‘rally behind one overarching, holistic framework for sustainable and regenerative agriculture’ if the transition is to succeed. This also means offering a spectrum of success, rather than a simple binary. He also advocates away from self-assessment, in favor of stronger validation practices.

Learn more about the transition to regenerative agriculture in our latest podcast episode.

Why hater-debunking FckOatly.com is more than a PR play

From The Drum

Oatly has created FckOatly.com, an anti-oatly website that collects the negative headlines, posts and petitions in one place. To quote the piece:

Not all controversies and criticisms will end up on the site. The company is only publishing the negative reactions to decisions Oatly still firmly stands for.

It’s a move to demonstrate their commitment to certain efforts they feel are important to their DNA as a company. The company also claims there’s an added benefit, as a place to direct any questions about controversies that crop up. It’s all part of Oatly’s “consistently inconsistent” strategy, aiming to break “the traditional rules of marketing”.

When ChatGPT hallucinations are ‘a feature, not a bug’ for marketers

From Insider Intelligence

Dissecting the value of ‘hallucinations’ from ChatGPT (i.e. made up information). The piece argues that this may be useful to marketers for checking false ideas, namely how your brand exists “In peoples’ minds, not in your strategy deck” to quote Redscout CEO Ivan Kayser.

Additionally, these ‘hallucinations’ can be used to understand brand attributions and characteristics, assessing identity markers without focus groups, or churn out product, descriptions and messaging for a variety of demographic groups.

Sevendots Partner Colin McAllister had this to say:

“When watching the hyperbolic evolution of AI in our daily business lives one of the terms we will start hearing more about is ‘hallucinations’. We’re no longer talking about the effects of substances, as a few decades ago, but those of software in creating alternative realities that are perfectly believable as they rely on available data. The perspective presented here is fascinating: could this be an opportunity for marketers, or should the risks be seen as predominant and a source of concern to be immediately addressed?”

Colin McAllister

The discussion around the potential for AI as a tool continues…

Nestlé withdraws ‘nutritious’ claim in row with Henry Dimbleby over Kit Kat Cereal

From The Grocer

Nestle has been forced to withdraw claims of its Kit Kat breakfast cereal by health tsar Henry Dimbleby. Nestle has claimed it is setting a new standard for transparency after revealing 40% of its sales of everyday food products are high in salt, sugar or fat. The Kit Kat breakfast cereal describes the product as ‘tasty and nutritious’, due to its B vitamins and minerals. However, Dimbleby has said this is not credible. With new regulation coming into effect for HFSS in the UK, this is a new example of a product receiving backlash for nutritional qualities that do not meet its marketing claims.

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That’s it for another month! We’ll be back next month with your quick catch up on everything you need to know from across the CPG industry.