Innovate, Differentiate and Export
What’s ahead for the food and beverage sector
The food and beverage sector today is increasingly impacted by consumers’ circumstances and behaviors. Due to the crisis, customers have become more prudent, selective, demanding and informed. More than ever, the consumer has become the center of the entire value chain, with his or her opinions and perceptions determining the success or failure of brands. Succeeding as a company in this environment involves three elements: innovation, differentiation and internationalization.
On May 7 on IESE’s Barcelona campus, the IESE Alumni Association organized a Continuous Education event, "Food and Beverage: Current Situation, Aims and Opportunities for the Industry. " Experts analyzed key issues during the session, which was led by IESE Prof. Jaume Llopis and José María Bonmatí, general director of AECOC.
More Frequently, More Closely
Prof. Llopis, who is also the academic director of IESE’s upcoming 17th Annual Food and Beverage Industry Meeting, reviewed current trends and compared them with previous years. He noted that "consumption has dropped outside the home, while at-home consumption has risen slightly, although values are very similar to those of last year. And the consumer has turned to cheaper products, which have lower margins."
In terms of retailers, he pointed to a rise of discount stores and mid-size supermarkets, which has coincided with a drop in the number of megastores and traditional stores." "People are buying more frequently, closer to where they live and for the short term, reducing stocks they have at home," he said. "They are only buying what they need."
Product and Customer at the Center
In a mature industry, which has to adapt to new circumstances and trends and which retail brands have increasing power, the key is to recover margins through innovation, differentiation and exports, Llopis said.
"To innovate does not mean to launch a new product, since this involves a very complicated process. But a lot can be done in design, creating emotional links with the customer, production efficiency and finding niches in the market. For example, we actually see that luxury products are working very well and also those aimed at consumers with low incomes. Price wars are not the answer; you have to be unique," he said.
Along these lines, Bonmatí, said that today companies that triumph are those "centered on the consumer. The perception of value has changed and it is the client who decides what to buy. They connect with brands through different channels and will pay attention to other customers before advertisements. That’s why it is critical to avoid trivializing products and develop emotional links, which cannot be copied easily by the competition."
Also important is productivity and competitiveness to create the most efficient supply chain possible. "The value chain has changed and so have the functions within the chain. It starts with the client and goes backwards. All the tasks are becoming increasingly integrated, with retailers who innovate in commodities or industries that sell directly to the client," he said. "It is also important to be careful with the selection you offer, since excessive variety can scare the consumer."
Pack your Suitcase, be Fearless
Finally, the speakers agreed that exportation will be another factor in the future success of companies in the sector. Exports "generate economies of scale, boost production output, diversify risks, help react to new competitors and compensate for saturation of the domestic market, Llopis said. Emerging markets, including the BRICs and the Next Eleven, are destinations that can provide opportunities.
Bonmatí said that "it is fundamental to look for and define the competitive advantage that a product can offer before exploring a new territory" and that "you must constantly rethink strategies to adapt to the evolution of each market."