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.”
Strengthening brand loyalty
So what is the future for food manufacturers on the Internet, and how will they attract their quota of the predicted online shoppers? So far, the marketing lead has been taken by the major manufacturers in their insistent focus on building better brand loyalty through websites, the online provision of specialist food services, and even the establishment of schemes which turn the food manufacturer into a solutions provider for lifestyle choices.
Major food manufacturers are using the Internet as a billboard to expound the positive virtues of their products, such as taste, convenience and nutritional value, above giving net surfers the hard sell. Campbell Soup had to revamp its marketing strategy after poor sales led to a Q4 shortfall of 50% in profits, and is increasingly focusing on the Internet. Spokesman John Faulkner said: “What we are really trying to do is to have fewer, bigger initiatives behind core brands, and our Internet strategy has to be tied into where we put our big guns.”
Niche markets are a godsend for the Internet, which has the space to deal with specialist goods that it is not always economical to stock in food stores. The Heinz site offers a delivery service for the favourite foods of British expatriates who are now living in the US. Heinz spokesman Jack Kennedy explained: “If you were born in London… you don’t have to wait for your cousin to come over at Christmas to get your salad cream. You can just order it through the Web site.” Similarly, The Quaker Oats Co offers nostalgic consumers home deliveries of a popular 1970s cereal, Quisp.
Solutions for lifestyle choices
Augmenting their range with bygone products is one way to ensure customer loyalty, but some online food stores are also encouraging the public to visit them first for every kind of service, from dry-cleaning to video rental. Busy US lifestyles are also being exploited by grocery manufacturers who are providing not only food and services but also life management. Campbell Soup sends daily e-mails containing easy recipes featuring the company’s products: “What we are really addressing is the fact that 50% to 60% of Americans don’t know what they are having for dinner yet at 4 in the afternoon,” said Mr. Faulkner on behalf of the company. Kraft Foods is meanwhile developing a scheme whereby US consumers can receive recipe solutions through their palm pilots which contain three ingredients on hand in the kitchen. McCue explains, “Companies get the information about consumers and can tailor solutions for them.”
For an industry which does not necessarily believe itself suited to the online marketplace of the Internet, food manufacturers are displaying a good deal of innovation to capture their fair share of the market. With online shopping figures predicted only to rise, it remains to be seen what more the companies can do to maintain brand loyalty and consumer interest in their services.