Industry Wars

The speed of change in the food industry makes every last quarter look like a crawl.

For CEOs, shifting their organizations’ gears from reactive and episodic to proactive and continuous is a monstrous undertaking.

Channel customers’ technology and concepts are accelerating value for consumers in a way that is pushing the entire industry faster than any one or two large manufacturers could alone.

Consider a few examples:

Kroger…

• Alliance with Walgreens is a jump start on Amazon.
• Autonomous delivery vehicles are in test; first sites have been selected for robotic, high tech warehouses.
• New “Easy for You” customizable meal kits let shoppers bundle their choices of frozen entrees and sides into packaging that can be taken home and heated up. Includes online video prep instructions.

…versus Amazon

• Morgan Stanley’s “buy” rating based on Amazon’s grocery opportunities alone.
• Opening 3,000 Go stores over the next 3 years (c-stores will be big losers here).
• Cashier-less technology is leverage for Amazon to acquire anyone right now while the rest of the industry waits 3-5 years for similar tech.

Thoughts:

• Consumer experience at the point-of-purchase is where fortunes will be made or lost.
• New product performance differs between channel customers.  The way manufacturers collaborate with them will decide their fate.
• Timeline between announcements of new value and market testing is at the speed of light.

Foodservice

• Three PE “consolidators” are prepared and able to sweep up every national restaurant company for long term investment (Jonathan Maze). McDonald’s and Starbucks will stay public as exceptions.
• Execution of off-premise dining is the #1 concern of restaurant chains.
• Investors pouring tens of $millions into shared kitchens (rented by the hour, day, week or month) accessible to chains to cut overhead, expand footprints, test new concepts, or execute efficient delivery ($365B by 2030) from a central location.

Thoughts:

• “Demand mapping” will pressure manufacturers to invest without commitment to supply.
• Rapid response to unpredictable demands in the system and the market.
• Independents accelerate group purchasing to drive manufacturer pricing down and lock contracts for longer periods.

The next 18 months will be unlike any seen before in our industry. And this is just a start, with much more still under the radar.

For many manufacturers, shifts in both the means and the ends of value creation will prove to be unmanageable…

…unprepared for the cost, the strain on operations and resources, and other implications when customers refuse to be passive recipients of supply.

The inability or lack of readiness to monetize new opportunities and assets in an entirely new industry context will have manufacturers looking down the barrel of extinction.