USA: Food companies revamp their approach to the online market

By Clare Harman | 18 September 2000

A report recently published by Forrester Research Inc has revealed that US citizens should be spending US$1.1bn more in 2004 than in 1999 on purchases of food, beauty and household supplies over the Internet, prompting food companies not only to vie for consumer attention but also to devise new marketing strategies.Selling food online is a difficult business. The grocery industry relies heavily on the actual stores, and consumers do not find it convenient to surf many websites to make up one shopping list. Also, the industry does not have the best profit margins, and the cost of catering for and delivering individual orders is often extremely high. Lisa McCue, of the Grocery Manufacturers of America, explained that selling through the web was not necessarily the way forward: "It makes perfect sense for some industries and doesn't quite work for others. We may fall into the latter." To overcome the prohibitive economic problem, many food manufacturers have registered with online marketers, for example Netgrocer.com or ShopLink.com, where, as Forrester analyst Evie Black Dykema explains, "The name of the game is simplicity. The winners will help consumers replenish their household supplies efficiently, and there's no way for manufacturers to do this as efficiently as the online retailers."It is debatable, however, whether these services are really that successful. Jackie Dulen, editor of the eBusiness Briefing at Technomic Inc, told the Wall Street Journal: "You've got all these online grocers, but most of them are struggling." And why is that? "They erode brand loyalty." The president of Philip Morris' E-commerce division, Paula Sneed, agrees that this is important: "Strengthened brand equity translates to volume and ultimately profitability."