Have a craving for coffee? You’re not the only one.
Nestlé wants us to know it’s a lot more than chocolate. In addition to Nespresso and Nescafe, the company this month announced it is rolling out 24 Starbucks products.
Nestlé CEO Mark Schneider talked about the company’s “unique nutrition, health and wellness strategy” and announced “strategic reviews” for several brands, including Nestlé Skin Health and Herta, its cold cuts business. It’s all part of what Schneider called “meaningful innovation.”
In food and beverage, Nestlé seems to be one of the companies doing things differently and trying to make an impact. But it’s not the only behemoth waking up and smelling the coffee. Coca-Cola is about to debut a new flavor for its iconic, flagship soft drink later this month, after adding diet flavors such as Blueberry Açai and Strawberry Guava. It’s also considering jumping into the cannabis area with cannabidiol-infused beverages. And there was its purchase last year of British-based Costa Coffee for $5.1 billion.
Americans reportedly consume 400 million cups of coffee per day, or 146 billion a year. In the time it takes to read this, Americans drank, well, a lot of coffee.
Coffee is among the biggest commodities worldwide, worth more than $100 billion, according to Business Insider. That mug of black java might as well be black gold. Think about that the next time you head for the Keurig.
Hershey hasn’t “perked up” quite as much in the coffee category, but it has acquired smaller companies as it expands further into snacks not of the cocoa bean variety. The firm bought cheese puff maker Pirate Brands for $420 million. It already owns SkinnyPop popcorn, along with beef jerky maker Krave and Barkthins, those chocolate-coated products including almonds, pretzels and pumpkin seeds.
Iconic food and beverage companies are finding that innovation matters, whether that’s coffee or other categories. We’re seeing big companies start to say, “We better start moving in a different direction.” I like to give kudos to the ones moving more rapidly like Hershey or Nestlé. But some of the world’s biggest brands are struggling. Change doesn’t come easy. And coffee can’t wake up everybody’s sales.
Companies are often set in their ways in terms of how they approach the marketplace. Their people are engrained in a system. They have a hard time getting out of their system and trying new things. So they struggle to be innovative or change directions. Campbell’s, for instance, is currently stressed. The CEO stepped down. An activist group is pushing them to divest some of their core products. Activists and hedge funds start coming in and pushing companies to take action when sales or growth slows. They try to wake up sales in very different ways.
Elliot Management, for instance, just took more than a 4% stake in eBay for $1.4 billion. (It’s outside the F&B arena but still a good example). They immediately announced their "Enhance eBay Plan," which includes spinning off ticket reseller StubHub. If companies don’t change on their own, investors will come in and try to compel them to change. Management, then, may need a strong cup of coffee to deal with do-or-die decisions.
Some food sectors are growing without the need for caffeine. Sales of frozen foods, perceived as processed and unhealthy, slowed as the all-natural category took off. Now it seems they’re starting to catch up. B&G Foods’ Green Giant is showing strong movement in the freezer aisle, and the company is expanding into organic vegetables and veggie spirals.
Companies that ignore change can become victims of it. Companies that innovate can capitalize on it.
Big companies are still slow to change even as activists are starting to take a bigger role, forcing them to move more rapidly. Activists won’t always be right. But big companies need to figure out how to get good at changing and adapting. It can mean Coca-Cola buying a small coffee business and rolling out new flavors. Or as with Nestlé, it can mean partnering with another successful brand like Starbucks. There’s a saying that the only thing that’s certain is change. That’s at least one thing that isn’t likely to change anytime soon. Oh, and the morning caffeine fix isn’t likely to go away. In food and beverage, some people may just need to take their “cuppa” a little stronger.
