Retailers Revolt

A piece buried in the Business section of the Wall Street Journal recently, Target Puts Some Food Suppliers on the Back Burner, doesn’t bode well for packaged goods companies who have been slow to adapt to the new marketing order.

The giant retailer has taken notice that classic, once venerable brands are nearing the end of their life cycles and must pay the price of less desirable shelf-position, little or no retailer support, or perhaps loss of distribution altogether.

It’s been clear to me for some time now that the muscle of the big companies and push tactics are the only reasons so many products remain on the shelves. I fully expected that the dearth of innovation, the tactic of line extensions ad infinitum and a dearth of image-building, emotionally resonant marketing would upend the packaged goods companies well before now. Retailers may have been slow to notice and their retail revolution may not yet be here in earnest, but it is certainly on its way.

Crest and Colgate combine for over 100 SKU’s. Target, Walmart, CVS & Walgreens may not carry all of them, but they certainly stock their shelves with enough brand permutations to confuse consumers beyond belief. 50 brand choices simply aren’t sustainable. Consumers will demand fewer brands with truly differentiated benefits, and retailers will stock their stores accordingly.

Processed food manufacturers face a more daunting challenge. Ingredient lists that are too long and/or stray too far from “natural” or contain anything deemed as controversial will be finished if not reformulated within acceptable contemporary guidelines. But traditional packaged goods brands with “acceptable” formulations will struggle as well. They are caught in the middle, not so much better than store brands, far less sexy than brands perceived as small, sustainable, natural or locally sourced, and inferior to fresh alternatives.

Packaged goods marketers have long argued against innovations such as brand architecture corrections or aggressive direct, online selling reasoning that such moves would result in alienating retailers and the loss of shelf space. Many also reason that advertising is a bad investment that saps the bottom line and inhibits stock price.

As a result, true consumer pull fleeting for the great majority of supermarket brands today. To quote the late, great B.B. King, “the thrill is gone.

At the root of this pending crisis is the fact that the big packaged goods are so finance driven. Marketing has a very limited seat at the table, and is faced with the impossible task of providing proof of short-term ROI for nearly every expenditure.

The writing is on the wall. It’s not just the thrill that may be gone. Without innovation and reinvention, a good deal of these packaged goods companies may be gone sooner than you think.