Most large U.S. fast-moving consumer goods companies find it difficult, if not impossible, to grow at the rate of the economy. One part of the solution is to premiumize and to move to a more organic or sustainable brand portfolio.
We thus constructed the “Whole Foods Test” to see if this is happening. Arguably, Whole Foods’ assortment shows where the FMCG market is heading, especially in food and beverage. What today is the territory for primarily higher income and better educated consumers, is tomorrow’s mainstream norm.
We sent a team of analysts to Whole Foods stores to document how well the large brands of Mondelez, Kellogg, Coca-Cola, PepsiCo, Kraft Heinz, General Mills, and Procter & Gamble are represented. Whole Foods is an upscale U.S. supermarket chain arguably focuses on healthy, organic, sustainable (but also indulgent) products.
Why is this a good test? Is Whole Foods not different from the mainstream markets these companies cater to? It is a good test because it shows the headwind the large brands face. Their often iconic brands have little meaning in the future. If they did, Whole Foods would be compelled to carry them, otherwise consumers would not come to the stores. Think of the alternative; it could easily have been that consumers would reject Whole Foods because they do not carry the large brands.
With this in mind, here are our findings:
The picture is somewhat bleak. Here are the brands underlying the graph:
- Coca-Cola: Glacéau Vitaminwater; Simply; Smartwater
- General Mills: Annie’s; Cheerios; Food Should Taste Good
- Kellogg: Kashi
- PepsiCo: Quaker; Tropicana; Naked
- Kraft Heinz: Heinz
In total for the 7 companies, 11 brands out of 93 possibilities.
Does this matter? It does. Whole Foods has grown 12% annually over the past 5 years. While still a small part of the potential market, surely the large FMCG companies would like to be part of that growth story because all except Kellogg have had anemic growth, as seen below (see also The Canback Fifty):
In sum, the large FMCG companies have a long way to go to position themselves for future growth. The Whole Foods Test shows one aspect of this. We will return to another aspect, international growth, in a later post.