Deglobalisation: How Big Food Is Looking to Tailor to the Individual Consumer

To “move at the speed of our consumer", Mondeléz is adding four regional Chief Marketing Officers (CMO), in addition to appointing a global CMO. This announcement follows Coca-Cola’s announcement last year that it would do away entirely with the global CMO role and focus on regional marketing efforts. “We are moving quickly to structure our organization for faster growth and to ensure we can respond to the fast-changing needs of our consumers, customers, system and associates around the world.”

Nestlé is another company that made the move to regional for a product category. At the beginning of the year, its infant nutrition business ceased to be managed globally and switched to a regionally managed business. Nestlé mentioned the following drivers for this change: “The more agile and efficient structure will enable Nestlé to respond faster to rapidly changing local consumer preferences, evolving regulation, and customer and channel demand for tailor-made solutions.”

These three examples in our view signal an underlying trend. Food companies are adjusting business models, because of the following key drivers:

Consumer preferences continue to change at an unprecedented pace

We’ve often mentioned this, and it continues to be the case: large food companies are struggling with rapidly changing consumer preference, which has become apparent through their stalling or even declining revenues. Adjusting their structure to be closer to the change (by moving closer to the consumer) is one of the ways organisations are trying to find growth.

Personalisation

The ultimate goal in food is personalised everything: food, nutritional value, health, and marketing. And while it will take time to get there, companies are preparing for the journey. With 7 billion individual targets, a global organisation may not be the best set-up to achieve success.

Demand for local food

Demand for locally produced food is high. This trend is especially visible in fresh food, but even in packaged food, local ingredients and local production are becoming more important to consumers. A global organisation may be sub-optimally structured to play into this trend.

These drivers mostly relate to the marketing of food products. If we shift our focus to products and brands, we find ourselves in the middle of the rise of small brands. According to our analysis, large brands have lost share in 60% of food categories in the US and 70% of food categories in the UK, with small brands gaining the most (and, to a lesser extent, private label too). Larger food companies are trying to get with it by acquiring some of those smaller brands. The appeal of these small brands is closely related to the changes we are witnessing in the marketing landscape.

At the end of the day, Return on Investment (ROI) is a key metric for larger food companies – and rightfully so. And while it is impossible for an outsider to calculate the ROI on marketing and branding, it is quite possible that the marginal ROI for big brands is declining.

Quite a few food companies are still focussing on large, global brands, which in some cases generate ten-digit revenue numbers. Historically it made a lot of sense to build these brands and to support them all over the world with marketing spend, among other things. But now that the game is changing, what will happen with these brands? Various scenarios are possible: from continued investment in the brand (which in our view still makes sense for iconic brands), to a slow fade-out, or even a divestment to re-allocate resources to other initiatives. Whatever happens: in future large food companies will march less and less to the beat of overarching formulas, big brands, and global marketing campaigns, instead letting regional structures, and ultimately consumers themselves, pick the tune.