Improved CRM and loyalty essential for food industry

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By: Wise Marketer Staff |

Posted on February 19, 2002

A new report predicts the changes over the next ten years in the food industry. The pace of change is accelerating and loyalty and CRM will play a key role. 

If food manufacturers and retailers want to satisfy the changing consumer demands over the next five years, they will have to consolidate and innovate with brands and retail formats. This is revealed in a new Cap Gemini Ernst & Young report: State of the Art in Food: The Changing Face of the Food Industry.

Global brands will dominate: 20-25 global brands will emerge in various categories of fast moving consumer goods. They will be owned by ten or so global brand manufacturers and will lead the market in more than 100 countries. However, consumers' growing demands for local products will lead to manufacturers launching local products on the backs of their global brands.

The power of the consumer
According to Fred Crawford, executive VP of Cap Gemini Ernst & Young's Consumer Products, Retail and Distribution practice, "The consumer is wielding unprecedented power and the need for establishing a powerful brand � whether retailer or manufacturer � grows as companies try to reach consumers in multiple regions. Understanding these trends and implementing strategies to deal with them effectively is shaping the future of the industry."

Loyalty essential
The report reveals that three in four manufacturers fear the consequences of the retailers' increasing strength and it predicts that manufacturers will look beyond retailers and market directly to consumers. Robert Iorio, the company's VP of European consumer business, says that improved CRM and loyalty programmes are key and that  companies need to build and then never deviate from their "brand pact" with consumers.

Savings could be made
According to  the report, with better supply chain integration, the European market could save 8 billion euros by 2010. In the US, if retailers and manufacturers worked together, they could save as much as US$7 billion. Retailers could also be more efficient if they partnered with other retailers on warehousing and distribution systems.

Hypermarkets in
It would seem that the days of smaller, conventional supermarkets are limited. Squeezed by high overheads, low sales volume and limited product ranges, they will give way to hypermarkets and larger supermarkets � which are constantly expanding their services and product ranges. Discounters are moving towards offering higher quality products at lower prices.

The report predicts that food retailing over the internet will grow slowly and will not represent more than 5% of the global food industry over the next ten years.

Another trend that is predicted is that retailers will buy, and control, the total process � from ingredients through production to retailing the goods.

Regional differences
Unsurprisingly, each region surveyed showed strengths and weaknesses.
·  Western Europe was high on efficiency but low on service and hospitality.
·  Southern Europe was high on quality but was criticised for its labour intensity.
·  North America was high on service and marketing but low on operational logistics.
·  Asia-Pacific was high on service but lacking on overall efficiency.

The report's authors suggest that global companies should look outside their own region and learn from the strengths of others, but apparently few are doing this yet.

The 600-page report is based on a survey of 220 food executives from 19 countries in Europe, North America and Asia Pacific, and detailed interviews with 65 senior level executives.

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