In my hometown of Louisville – a city proud of its food culture in a state proud of its farming culture – a local non-profit that I founded called Seed Capital Kentucky recently released the first ever study evaluating the demand among consumers and commercial buyers (supermarkets, hospitals, and the like) for locally grown and produced food. It holds some interesting lessons for companies engaged in food licensing.
The results of that survey were surprising – surprisingly large. 72% of consumers across the community said they were already buying local food, and wanted to buy more. Consumers would like to spend between 10-20% of their supermarket food dollars on local food (primarily vegetables, fruit, dairy and meat).
IMC has worked with some of the largest food brands and food companies in the world (including Kraft Foods, General Mills, and Kelloggs), and I love their brands and products. But achieving growth in mature product categories is hard enough for these brands without trends that undercut their goals. The growth of private label is one such trend, and if Americans bought as many private label food products as European consumers buy, it would be bad news for the biggest U.S. food brands.
The local food movement is another such trend. It will take sales and market share away from the biggest U.S. food brands if consumers devote more of their food dollars to food produced by local/regional companies.
While packaged foods are probably more immune from losing business to local foods, almost no category is completely safe. Locally produced vegetables, now available in many communities year-round, take business away from Green Giant frozen beans and the extensive line of Green Giant-licensed produce. Locally produced cheese takes sales away from Kraft. And locally roasted coffee takes people away from brands like Folgers and licensed coffee brands like Dunkin Donuts.
No retailer is off-limits either, since this trend is not limited to farmers markets and Whole Foods. The country’s largest food retailers (Kroger, Safeway and Wal-Mart) are working hard to offer local food in their stores; even Amazon is evaluating whether local food can launch it into grocery distribution.
How can brands address a movement that threatens to reverse decades of consolidation and growth of a national grocery industry? And how will this impact what and how they license?
First, they need to show that they support farmers and local food economies. All food comes from some community, and national brands may need to start telling the story of their ingredients and the farmers who produce them.
National brands may even need to start customizing products for different parts of the country, and showing shoppers how they are supporting farmers and food-related businesses in each region. In the Seed Capital KY study, both consumers and commercial buyers said they buy local food because it supports local businesses. National brands are going to have to show support for this part of the economy. As brands like Chipotle and Stonyfield Farm show, it is possible to do this even on a very large scale.
Food and beverage licensing (a specific area of IMC’s expertise) can also be part of the answer. It may be easier for licensees, who are often part of a smaller market than the brand’s owner, to source from local food producers. Brands might actually consider requiring this of their food licensees.
And larger companies may need to license smaller, regional brands. Not that using locally-oriented brands on a larger scale would be easy. What won’t work? Consumers will distrust national companies if they acquire or license brands associated with local/regional food production and then dilute their values by driving them towards national scale. This would copy the pattern with “organic” designation, which as it adapted to the needs of large-scale manufacturers and processors became less meaningful in the minds of American consumers.
In terms of partnerships beyond licensing, larger companies may need to copy retailers and start doing more to support local/regional food producers. After 20 years of national consolidation (of manufacturing, distribution, and retail), Companies like Nestle and Kraft may find growth by distributing regionally produced food themselves. They may need to start identifying and buying brands without national distribution, or piecing together a national footprint in one category with an assortment of regional brands. And managing the process by which global companies can source the best local foods will require organizations that certify and guide this work; those too will form important partnerships with food and beverage companies.
It will take a long time for markets to meet the growing demand of consumers for local food, but food and beverage companies that consider this movement a passing trend – or an enemy – will start losing business from consumers who want to know where their food comes from.