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.
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.
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.
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.
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.
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.
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