Packaged food and beverage companies are moving away from a growth strategy that prioritizes size, according to analysis from EY-Parthenon. The traditional approach of amassing broad product portfolios has lost its effectiveness in a market increasingly defined by changing consumer expectations and rising retailer influence.
The shift in strategy highlights a significant structural challenge for the food and beverage (F&B) sector. As external factors like evolving consumer health priorities, price pressure, and the rise of artificial intelligence reshape demand, companies must reassess their focus. Retailers have gained a stronger foothold, employing loyalty programs and transparent pricing to enhance their negotiating power, which shifts the balance away from manufacturers.
Research suggests that the F&B sector’s historical emphasis on size is giving way to a greater importance placed on focused portfolios. Transactions in the industry increasingly reflect a trend toward actively shaping brand portfolios instead of merely accumulating them. According to the EY-Parthenon Growth Survey, successful companies in the consumer sector are prioritizing product and market development for growth, a stark contrast to previous models.
This evolving landscape calls for executives to rethink how value is created within their organizations. In the past, F&B companies could rely on cost efficiencies and synergies to justify vast portfolios. However, complexity and size may now hinder innovation and responsiveness, leading to diminished performance. As consumer choices expand and pricing transparency heightens, establishing clear value propositions has become critical.
CEOs and other leaders are increasingly viewing portfolio reconstruction as a strategic opportunity. Rather than a defensive measure, this practice is now instrumental in deepening consumer insights and enhancing competitiveness. Winning portfolios are those that align closely with consumer intent, offer distinct brand propositions, and are designed for quick market responses. Leaders must discern which aspects of their portfolio to develop, streamline, or exit altogether.
Advancements in technology, including AI and data analytics, are facilitating this transformation. Executives can now handle large volumes of data to glean insights on consumer behavior, pricing trends, and brand performance. Predictive analytics enables companies to make informed decisions about which brands to invest in, reposition, or remove from their portfolios.
However, the integration of AI also sets higher standards for success. Consumers increasingly use digital tools to analyze product features and prices, necessitating that portfolio decisions are backed by compelling value propositions. Transitioning to this new approach is not without challenges; companies must break away from traditional management habits and adapt to innovative strategies.
To navigate these changes, organizations can choose varying degrees of transformation, from incremental adjustments to complete reimaginings of their portfolios. A transformative strategy may involve developing new business models and revenue streams or implementing strategic separations, which while disruptive, could yield significant long-term benefits.
