Some observations on the future of food and consumer packaged goods:
1. The Carnivore Diet is Taking Off!
Yes, carnivores only eat meat — no vegetables and no fruit — nothing but meat. The carnivore diet is particularly popular among the cryptocurrency community and digitally-savvy libertarians. One friend whose a carnivore is working on a startup in the space, so I’ve been helping him out and learning about the carnivore diet.
2. The Effects of Rising Customer Acquisition Costs
Advertisers complain about rising customer acquisition costs. Due to the scarcity of advertising inventory and the rising number of internet native, micro-brands, advertising on Facebook is increasingly expensive. To succeed in the modern age, I encourage companies to develop and maintain a direct relationship with their customers. In practice, the best brands are producing original content and becoming quasi-media companies.
3. Content Isn’t the Only Solution to Rising Customer Acquisition Costs
I wouldn't be surprised if vending machines and small, computer-powered retail-like experiences make a comeback. You heard it here first! Consider this quote from the CEO of Bird, the bike-sharing company:
"What we’re finding is a vast majority of people that ride Bird actually just do it by discovering Bird on the street. That triggers them to open the app. It's less about opening the app and trying to find one.”
With smart, on-street distribution, companies can reduce customer acquisition costs and improve the customer experience.
4. The Food Industry is Transforming Right Before Our Eyes
The internet fosters higher demand for unique products and these unique products benefit from low barriers to entry. Marketing expenses have switched from large, up-front fixed costs to lower, variable costs. The one-size-fits-all approach to CPG is not as effective as it once was.
In the past three years, over $17 billion in sales has evaporated from the 10 largest U.S. packaged-food companies, according to Bloomberg. Sales are shifting towards small, transparent, health-conscious brands.
According to Boston Consulting Group, $22 billion in industry sales transferred from large to smaller companies in North America between 2011 and 2016.
Large brands aren’t innovating. Instead of spending on Research & Development, they direct their efforts towards marketing. As information flow re-routes and marketing channels diversify, big food companies will struggle.
Transparency is particularly powerful. Consumers want to know what they’re putting into their bodies, and speaking from personal experience, trust in big food companies has plummeted.
5. Say Hello to Oat Milk
This weekend, I spoke at length with two baristas, both of whom mentioned the skyrocketing popularity of oat milk. A New York-based company, Oatly, was founded in January 2017. The vegan drink is riding the health-conscious foodie wave.
Oatly highlights how CPG is being unbundled. I can find the product at my local co-op, but not at my local supermarket; at my local hipster coffee shop, but not at my local Starbucks. However, Oat Milk is a difficult product to sell direct-to-consumer because it needs to stay cold.
I learned about Oatly this weekend, but now, I am seeing it everywhere. Crazy how that happens. The photos of Oatly packaging (shown below) highlight the importance of transparency and the power of purpose brands.