“For the longest time we have been brought up on the same iconic brands. But, in recent years, they have been struggling as the face increasing competition from upstart brands that are really making them irrelevant to many of the younger generations,” Nick Fereday, senior analyst of consumer foods at Rabobank, told attendees at the bank’s Annual Food & Agribusiness Summit in New York last week.
He explained that emerging brands are gaining ground on iconic brands because they “are tapping into the consumer trends of convenience, of health and wellness, of being a premium product and all wrapped up in a very, very strong mission statement.”
At the same time, he argues, long-time market leaders are so focused on cost-cutting that they are neglecting the consumer. Rather than evolve with changing consumer demands, he said, they are “burying their heads in the same on the assumption that all this is just going to be a fad and at some point we will all come back to eating Corn Flakes and canned soups.”
Unfortunately for big brands, he argues, this won't happen, and their ongoing complacency will “ultimately spell disaster for those iconic brands.”
Fereday predicts that “by 2030, we will see the end of mass consumption. We will see the end of iconic brands. By 2030, everything will be niche and focused on small markets. Everything will be personalized and we will have in the process created the most demanding consumer we have ever seen who expects endless choices.”
3 signals that big brands can survive
But, this grim prediction for legacy brands doesn’t need to become reality, argued Steve Rannekleiv, global strategist of beverages for Rabobank.
He explained that if big brands focus on connecting with consumers, understanding how their values are evolving and developing strategies to meet their changing demands, then they can take on a more robust role in 2030 that will allow them to regain lost ground.
For support, he outlined three market indicators that signal there is still hope for big brands.
“The first is, even though big brands have been disrupted, not all consumers – and not even all millennial consumers -- are engaging with these innovative brands,” he said.
For example, he pointed to the rise of craft beer in 2010 to 2015 that brought on the scene many small innovative brands that disrupted the market with growth rates of 12-18%. While this may have given big brewers a headache at the time, now the craft beer industry is starting to slow and consolidate after capturing only about 13% of the market.
“The second point I would make is not all big brands are broken, even though it seems that way when you look at the long list of iconic brands that we know are struggling today,” Rannekleiv said. Yes, Budweiser, Coca-Cola and Absolute vodka are in decline, but at more than 100 years old, Jack Daniels continues to grow because it finds new ways to connect with consumer evolving values.
“The problem with most iconic brands that we have on the market today is they were really geared toward baby boomers and they just never evolved. And so, the problem isn’t that they are big. It is just that they are out of touch,” he said.
In addition to predicting the longevity of legacy brands that evolve to meet changing consumer demands, Rannekleiv predicts a new class of iconic brands for tomorrow is emerging today, including Tito’s, White Claw Hard Seltzer, Modelo and Corona.
“This is a wake up call for the industry that it really needs to learn how to connect with the consumer whose values are evolving. … [Big brands] can’t afford to delay any more. When you look at it today, if you are a big brand owner, if you don’t learn to respond to evolving consumer values, there are a slew of brands out there that will do it for you,” he concluded.