What Food Companies Can Learn from the Craft Beer Explosion

LDL Voice

For key demographic cohorts, a “one size fits all” approach to food manufacturing no longer works. Consumers are increasingly shifting their food spend toward specialty markets, with descriptors like “local,” “craft,” or “artisanal.” Niche retailers, manufacturers, and distributors will capture a large market share over the next decade, while legacy brands will need to adjust their strategy to align with consumers’ changing values (Technomic). A laser-like focus on logistics to meet the supply chain challenges that result from this shifting demand will become a key differentiator for food and beverage companies in the coming years.

The Rise of Craft Beer

A boom in popularity of craft beer over the past few years is a prime example of how specialty products have taken market share from traditionally popular mass-market offerings. According to Fortune Magazine, American craft brewers now produce one out of every ten beers sold in the United States—an 18% volume jump from 2014. Increasingly, consumers favor local brewers with home-grown, small business stories and unique flavor offerings. Large players are also hopping on the craft beer trend (pun intended). For example, Anheuser-Busch recently acquired two smaller brewing companies in the Pacific Northwest—Elysian Brewing and 10 Barrel (Fortune). As market share for craft beer continues to grow over the next ten years, both small and large manufacturers in the food and beverage industry should take note.

Socioeconomic Polarization

One reason for changing consumer preferences is increased stratification by both age and income. Baby Boomers and Millennials make up the largest generational cohorts, with fewer Generation Z consumers in the middle. Additionally, upper-income families will see increasing wealth over the next decade, while middle- and lower-income wealth will remain stagnant (Pew Research Center). As market share flows toward high-end specialty goods—like craft beer—and value-priced goods, mass-market retailers trying to lure both segments will run into challenges.

Some companies are already working on solutions to the food industry’s emerging two-tier system. Starbucks is building a mix of high-end Reserve Roastery shops and limited-lineup express units to appeal to both affluent and value-conscious customers.  Other companies are doing this through mergers and acquisitions. For example, large legacy players are buying smaller, more upscale brands to diversify their offerings (Technomic).

Revamping the Supply Chain

To meet changing demand, food companies must act small and remain flexible, or acquire smaller companies with these capabilities. Retailers, suppliers, and manufacturers will need to test new products, and be prepared to either scale those products quickly or fail fast and try something else. Not doing so may result in products getting displaced from retail shelves. To remain competitive, it’s important to re-assess all facets of the supply chain—from sourcing and manufacturing to where plants are located and how deliveries are scheduled. The rise of 3D printing will also add to this pressure, as manufacturers will need to re-design networks for more localized production and transportation. Focusing on your logistics infrastructure and execution now will set you up for success in the future.

Looking to get a handle on your logistics infrastructure?  We understand how transportation fits into the changing supply chain landscape, and can help you more efficiently navigate the complexities of dealing with your customers and suppliers. We provide hyper-specialized service, a reliable network, real-time visibility, and the latest technology to help you solve your toughest challenges. Contact us to learn more.  

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