Changes in consumer habits are thwarting the growth of big, global food and beverage companies like France’s Pernod Ricard and Danone.
With brands such as Chivas whisky and Absolut vodka, Pernod Ricard is the world’s second-largest seller of wine and spirits. Though it is in good health, the company is combatting two key problems, which seem to be recurring themes amongst food and beverage heavyweights. The first is customer loyalty, particularly amongst millennials. “Back in the day, you had a one-brand consumer,” said CEO Alexandre Ricard. “Now it depends who you are with, where you are, the time of day.” Secondly, there is a risk that younger, more health-conscious consumers could eschew liquor as they have tobacco and sugary soft drinks.
The lack of growth in food-and-drinks sales at big firms is similarly vexing to Emmanuel Faber, CEO of Danone. Consumers are increasingly fickle when it comes to food and drinks, and Danone’s global yogurt and bottled water brands are not immune. “People are walking out of brands that they’ve been consuming for decades,” said Faber. Food industry disruption, he posits, stems in large part from consumers’ growing desire to know where their food comes from, driving them to smaller, local firms.
The shift in consumer habits is most immediate for Danone. While his company currently has a market value of €46 billion, Faber suspects the age of standardisation in food-making could be drawing to a close. In his view, people have little faith in the companies that make their food and drinks, and this is an extension of a general bias against the elite, casting large, global firms in an unflattering light. The public barely trusts CEOs such as himself, Faber says.
Danone’s marketing, for example its “One Planet. One Health.” ad campaign, has been a first line of defence. The company is also changing some basics. Over the past two decades, it has gone from selling mostly beer, wine, chocolates and candies to healthier products, believing the growth potential lies there. Corporate social responsibility (CSR) is also part of Danone’s strategy: It aims to be entirely carbon-neutral. Going a big step further, Danone is looking to become certified as a B-Corp – a for-profit firm that shows high social and environmental standards, The Economist reports. It would be the largest company in the world to do so.
In the effort to win shoppers over and hopefully inspire consumer loyalty, Faber sees the trend towards healthy eating as his company’s best bet. “To survive and regain leadership as a big brand, we must do big things,” he says. Building trust is an important element. For its part, Pernod Ricard believes that at the end of the day people, though less brand loyal, will continue to enjoy a good drink.
