The rise of the hybrid consumer

How food companies can stay ahead

Dutch consumers are increasingly concerned about sustainability and health, but also attach great importance to customer experience and convenience. Rabobank Food Sector Specialist Martijn Rol has tips on how companies can respond.

Listen to this story as a podcast (in Dutch), or read on for the English interview.

Food retail and production companies find themselves performing a tough balancing act. Many consumers today buy standard food products cheap so they can spend more on products with added value. In this climate, mid-market players in the food supply chain are especially at risk.

The Netherlands’ population and food needs are stabilizing and likely to decline longer term. But there are still opportunities for food companies, says Martijn Rol. “The Dutch market may not be growing in volume terms, but there is lots of upside in terms of pricing.”

The prime mover of change here, he believes, is consumers in general and millennials in particular. “We’re seeing changes in when, where and how people eat. What food means to them. All this feeds back into the food supply chain,” he explains. “Consumers are not going to pay more for the product itself – the sandwich, the cheese – but for the broader customer experience. Food is becoming a service.”

“Consumers pay for the customer experience. Food is becoming a service”

- Martijn Rol, Rabobank

The “hybrid consumer”

Rol distinguishes five trends in consumer preferences that industry players need to consider: transparency, health, convenience, sustainability and what he describes as “hybrid consumerism.” People want to know where food comes from, what it contains, how healthy it is and what its impact on the planet is. But when they actually choose products, price and convenience also kick in as deciding factors. Factors that sometimes conflict with their other priorities.

This is what drives hybrid consumer behavior. “Regardless of their income, many consumers want to spend as little as possible on standard products, but they’re prepared to spend more on products with a unique character.” Rol explains. “They may buy groceries at a discount supermarket but still dine in a Michelin-starred restaurant. This trend is especially hard on the mid-market segment.”

“Top brands are losing their dominant position”

- Martijn Rol, Rabobank

Larger food companies are struggling to cope. “The last thing they want is to be stuck in the middle,” says Rol. “Top brands are losing their dominant position. Supermarkets are less dependent on them than before, because they have built strong brands of their own, which they leverage with own-brand products. Mid-market brands are in even bigger trouble.”

How to stay ahead

Top-brand producers have various strategic options to stay ahead, Rol suggests. “For instance, they can take over popular niche brands. The niches, after all, are where innovation happens. Unox is a front runner in this respect.” Unox has taken over the trendy ice cream brand Ben & Jerry’s, and more recently The Vegetarian Butcher, an up-and-coming meat substitute maker.

“Alternatively,” Rol continues, “these strong brands can farm out the actual production to a private label manufacturer.” Here, too, Unox has set an example by selling factories to meat processing company Zwanenburg and merely reselling the output under its own name. By doing so, Unox can concentrate all its efforts on branding and customer experience.

“Meanwhile,” says Rol, “mid-market producers like Zwanenburg that lack a sufficiently strong brand can switch into producing for other parties – either their top-brand rivals or supermarkets with an own-brand offering. This has the charm of generating stable turnover and big savings on marketing.”

“People increasingly want to shop and eat on the go”

- Martijn Rol, Rabobank

The convenience factor

For supermarkets, too, being stuck in the middle is dangerous. The market looks grim for players who are neither high-end nor discounters. Here, differentiation is the magic word, and convenience the most marketable commodity. “People are busier, and spend less time cooking, especially on weekdays. They’re interested in services that save them time, from pre-sliced veggies and ready-to-cook meal kits to prepared foods and delivery,” Rol explains. “Moreover, with jobs no longer nine-to-five, people increasingly want to shop and eat on the go, outside regular hours.”

A company that has understood and tapped into this trend is Spar. A struggling mid-market chain, it actually sold off big stores and shifted into mini-stores in railway stations, lunchrooms in high streets and modest shops inside holiday parks. It’s a strategy that has paid them big dividends.

Sustainability a given

As for sustainability, this is becoming less of a niche concern for consumers and more of a basic precondition that they expect from all the brands they buy and the shops they buy from, Rol observes. “Discount supermarket chain Lidl is actually quite visionary in this respect. They keep raising the sustainability bar for themselves – and for their high-end competitors.”

While governments are starting to flex their muscles to force food supply chain players to speed up their transition to sustainability, Rol continues to see consumers as the biggest force in this process. “As an individual consumer, you can make a real difference with your food choices. Together, the choices people make force the food supply chain to change.”