Why sales of packaged or processed foods are declining
Packaged food manufacturers are grappling with some big shifts in consumption trends. Sales of some of the top brands at General Mills, Kraft and the Campbell Soup Company have been slumping.
As Campbell’s chief executive Denise Morrison recently acknowledged at a conference, many Americans are turning away from foods whose ingredients aren’t “fresh” or “natural.”
“And along with this, as all of you know, comes a mounting distrust of so-called “Big Food”, the large food companies and legacy brands that millions of consumers have relied on for so long,” she told a room full of food industry analysts.
One of the people presenting a challenge for food companies is 23 year-old Nick Neylon. He says the pejorative phrase “Big Food” is part of his vocabulary.
“I would also use a term like evil and the devil and Lucifer,” he says.
I found Neylon stirring a pot of homemade polenta at a Minneapolis event called “Eat for Equity.” People raise money for charities while sharing a big, healthy meal. A mushroom and fennel ragout filled the air with a rich, tomatoey scent. Neylon says that’s his kind of grub. He avoids packaged and fast foods.
Nick Neylon dresses a salad at a Minneapolis event called “Eat for Equity.”
“If someone else made it, don’t eat it,” he says. “Generally you’ll be happier if you cook all your food from scratch.”
Neylon’s age may have something to do with his eating habits. Food and beverage analyst Darren Seifer with the NPD Group says the millennial generation is making a shift towards fresh fruits, vegetables, and meats. Seifer traces the change to the Great Recession — young people ate out less often because they were broke. And instead of cracking open, say, a can of Chef Boyardee, some learned how to cook.
“A lot of it has to do with how millennials got used to their kitchens sooner than we expected them to,” he says.
Food analyst Alexia Howard at Bernstein says women are playing a big role, too.
“Over the last several decades, really since the Second World War, heavily processed or packaged foods — more convenient foods — were embraced by moms-at-home and women wanting to get into the workforce,” she says.
But Howard says a few years ago, sales of products like Jell-O and TV dinners declined noticeably. Her theory: Moms were spending more time on the internet reading about what goes into food and got turned off by additives and preservatives.
Heidi Stark, who’s 37, is a case in point.
“When you start reading what’s actually in the packages, no one wants it,” she says.
Stark says gut problems prompted her to start eating super healthy over the past year. Now she plans out her menu and buys lots of fresh fruits, veggies and meat. On a recent trip to Lakewinds Food Co-op in Minneapolis, she bought the ingredients for a recipe involving pork chops, apples and shallots.
“That sounds gross!” her seven year-old son Anderson complained.
But his mom says he’ll eat it anyway.
Packaged food companies are trying to woo back consumers like Heidi Stark with some fresh products — like baby carrots from the Campbell Soup Company or protein-packed items, like a Kraft snack pack with meat, cheese and nuts. Some are also appealing to the growing interest in simple, organic ingredients — think General Mills’ acquisition of Annie’s, which makes organic macaroni and cheese.
Stock analyst Alexia Howard says even if these products sell well, they’re still a small part of the companies’ overall business.
“The margins on these new products are a lot lower,” she says. “The growth in these new products, rapid though it is, they’re starting from a much smaller base than the bigger, established brands.”
While these big food companies struggle to meet the needs of millennials and moms who want fresher foods, Howard says we could see more cost-cutting — and even consolidation.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
