Key Takeaways
- Predicting economic flow is challenging; food and beverage companies must understand changing consumer values beyond just price.
- Consumer loyalty depends on balancing cost with product quality and values, especially in a volatile market.
- Stability is crucial for both companies and consumers, as availability issues can lead to significant challenges.
- Companies should find partners that provide comprehensive support to create stability and redefine value for their products.
- Redefining value through strong partnerships can reinforce market position and enhance consumer confidence.
Understanding and predicting the flow of the economy is difficult, even at the best of times. With all the uncertainty in the global economy spilling over into everyday life, I think it’s safe to say that most consumers would not consider this “the best of times.” Regardless of how temperamental the global market may be, food and beverage companies are still tasked with navigating changing market dynamics. They must also continue to provide consumers with delicious, quality products. As a result, they are constantly defining and redefining value.
However, with commodity prices skyrocketing and the revelation of how fragile the international supply chain can be, most companies would agree with consumers about the pain of these unprecedented times.
What worked to address this in the past may not produce the same results today. As a result, it is critical to understand not only the customer’s needs but, more importantly, what they value about the products they consume.
This definition of value is broader and more personalized than ever. Therefore, companies are forced to look beyond cost and begin to redefine value to better serve their consumers.
Customer Loyalty: A Balancing Act between Values and Price
Consumer loyalty is extremely fickle. Today, while cost is a major factor in purchasing decisions for most consumers, it is no longer the only thing they value or is always their number one priority. As a result, having a long-term vision that meets your customer’s definition of value is the only option that can protect your profits and bring them back.
All that said, even if they choose your product because of its nutritional profile, the quality of the ingredients or its environmental impact, they only have so much elasticity when it comes to how big of an impact your wallet can take. While customers may appreciate an unwavering commitment to quality, etc., a brand that fails to find a way to balance these values with cost could end up hurting long-term brand loyalty. Ultimately, it could even put the brand out of business.
Dealing with erratic market forces and rising costs while satisfying customer needs and pricing concerns can sometimes seem like an almost impossible balancing act. But that doesn’t mean it has to be.
Whether we realize it or not, the most important thing for both customers and companies is stability.
Availability: The Best Ability is Stability
Whether it’s because of online shopping or simply a natural progression in our society, patience is no longer a virtue for most consumers. Seemingly overnight, people got used to getting what they wanted when they wanted it. Therefore, tolerance for product unavailability has become virtually non-existent.
Gone are the days when mom would clip coupons and make a trip to five different supermarkets to find everything she needed. Today, if your product is not available or too expensive at the first stop, they will probably go ahead and buy something else or nothing at all.
While moving from this abundance to scarcity has been a shock to both the system and consumers, for food developers and manufacturers it has been a nightmare.
From a B2B (business to business) perspective, if you are used to specific commodity prices, raw material availability or shipping schedules, any change can cause massive problems. The resulting domino effect ends up being quite chaotic.
Responding with overstocks of raw materials and inventory such as toilet paper during the pandemic only creates a new set of problems. If product velocity is reduced for any reason, you will have to deal with higher storage and inventory holding costs. In addition, there are potential extra losses from any unused material that expires.
Stability comes from reducing volatility and creating consistency. This does not happen in a vacuum, but by leveraging the value provided by its partners.
Looking Ahead: Finding Partners
While finding partners that deliver a lower-cost product helps provide stability, such as consumers, we must begin to take a more holistic view of value, to redefine it. When choosing partners, you should consider the quantitative and qualitative value they bring to the relationship.
When evaluating product formulations for cost reduction opportunities, a good partner should not only provide the ingredient, but a full service that is complementary. For example, do they provide R&D support to achieve the best possible reformulation? Additionally, what about regulatory support and ensuring that documentation is correct and available from the outset? Marketing and quality control also matter. In fact, the list can go on and on, about how much they can elevate your product while reducing your costs.
Providing qualitative solutions can also directly stabilize your bottom line. A great example of this was a partner of ours who was struggling with rapidly rising freight costs. As a flavor supplier, this is something over which we have no direct control. However, as the valued partner we are, we were able to help them adjust their ordering pattern in a way that reduced their shipping costs. This reinforced the stability of their supply chain.
Redefining value around the stability that strong partnerships provide can not only help you consolidate your position in the marketplace, but also create a ripple effect that strengthens consumer confidence to weather this storm.
To discuss this topic in more depth, don’t miss our webinar recording where industry experts from Edlong, Bedacom, Ingredion, and Griffith Foods talk about how flavor can be your best ally in reducing costs.
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