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Competitor Strategies in Packaged Food

June 2020

Under growing scrutiny, packaged food leaders were focused on elevating their offering to fend off competition from private label and new brands with strong nutritional and ethical profiles. Yet the COVID-19 outbreak disrupted this state of play globally. Companies such as Nestlé, Unilever and Kraft should benefit from consumers’ return to familiar brands and shelf stable and frozen staples. In addition, e-commerce has become vital in many markets, and direct-to-consumer offers potential.

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Key Findings

Packaged food leaders prove resilient amid shifting competitive dynamics

As global sales of packaged food expanded by 2% in 2019, its 10 largest companies all saw value growth. The leaders are having to elevate their own proposition against an increasingly premium private label offering and new disruptive brands. Yet the global coronavirus (COVID-19) outbreak should favour leading players, as consumers retrench to known brands.

Snacking behaviour to further reshape the competitive landscape

Consumers’ increasing snacking behaviour, which has eroded mealtimes, has contributed to the packaged food hierarchy being dominated by snacks players. The coronavirus-related lockdowns hit out-of-home eating, but as economic conditions toughen, snacks leaders such as PepsiCo, Mars and Mondelez could do well. They will, however, face more competition from private label in mature markets.

Nestlé, Unilever and Kraft need to pick their battles

PepsiCo stands out among the leaders, benefiting from unique momentum in savoury snacks. Nestlé and Unilever, whose relative shares are receding, need to further refine their scope of operations and cement their new nutrition-focused identities. Kraft, in an even tougher position, needs to bolster the presence of its power brands outside of North America.

In chocolate, ethical values and the consumer experience are areas of focus

The COVID-19 health crisis should weaken the premiumisation trend and render more affordable treats attractive; yet the desire for ‘healthier’ treats will remain important. Against Ferrero’s acquisition spree and Mondelez’s sustainability push, Mars needs to take a bolder approach to growth, involving channel development.

Mergers and acquisitions key to expansion in dairy

In the dairy aisle, Danone seems well-placed to be one of the biggest benefactors of the rise in plant-based alternatives. Yet the group needs to futureproof some of its core yoghurt brands. Mergers and acquisitions will be a major aspect of company expansion in dairy; this will propel Lactalis further, but also enable Asian dairy groups such as Yili and Mengniu to enter the international scene.

Introduction

Scope
Key findings

Competitive Landscape

Coronavirus impact summary
The five-step consumer progression of coronavirus
Challenged key players in packaged food will prove resilient
Coronavirus gives leading companies the opportunity to cement trust
Packaged food leaders prove resourceful
Grazing behaviour to endure, but consumers will spend less on snacks
Spreading bets across industries is wise; but not at expense of expertise
Nestlé and Danone to benefit from their wide geographical presence
Strategic divestments and acquisitions to curb declining market shares
PepsiCo and Danone in favourable positions in their respective categories
Brand development remains key to maintaining leading position
Chinese and Indian dairy players among fastest growing

Key Protagonists

Nestlé’s repositioning sets the tone
Nestlé’s large focus and multifaceted approach to innovation to pay off
Amid good results, PepsiCo could reduce its reliance on the US
PepsiCo solidifies its wholesome snack offering
Mondelez aims to excel in snacks
Developing markets key to Mondelez’s growth strategy
Ahead in dairy alternatives, Danone needs to ‘upgrade’ its dairy assets
In baby food, Danone goes head to head with Nestl é
Kraft Heinz’s legacy brands need a shake-up for future success
Unilever to benefit from further refining its scope of operations in food
Mars’s strong brand equity part of the answer; so are new retail models
Lactalis spreads its wings and reduces reliance on Western Europe
Whilst growing its chocolate expertise, Ferrero aims wider
With a global size, Yili eyes global reach

Key Opportunities

Key opportunities globally
Drinking yoghurt in Southeast Asia
Cheese in Latin America
Rice, pasta and noodles in the Middle East and Africa
Plant-based meals in North America and Western Europe
Nut- and seed-based products in Western Europe
Milk alternatives in Eastern Europe

Conclusion

Post-coronavirus world changes strategic outlook
Packaged food companies in the ‘new normal’

Appendix

Projected company sales: FAQs (1)
Projected company sales: FAQs (2)
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