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Rabobank: There is a big opportunity for smaller and quirkier brands in the US

Published:  02 June, 2015

Rabobank has argued that many of America's food and beverage companies are in trouble as iconic brands are "increasingly out of favour with consumers", posing a potential opportunity for smaller artisans brands.

According to its recent 'Dude, where's my consumer?' report, massively dominating brands are "not so much being usurped by private label offerings, but by a host of upstart niche brands - from a new generation of small to mid-size competitors. This trend, not fad, is being seen across packaged food, foodservice, soft drinks and across the alcoholic beverage landscape."

The report states that there are six key drivers that are helping to contribute to this shift in consumers behaviour.

One go the most important changes according to Rabobank, is the rise in purchasing power of the 75m millennial generation. A key characteristic of this demographic (those aged 35) is that they are far more experimental in their food and drink purchases and willing to spend a greater share of their income on quality food products.

Social media has also been a game changer for bigger brands as consumers taste, which have always been "fickle", are changing at a much faster rate.

"That consumers are fickle and have changing tastes will not come as a shock to many F&B marketers. But the increase in speed at which changing consumer preferences fan out across the nation has caught many traditional brand owners by surprise, and they're now struggling to adjust. Social media is the principal source driving the acceleration in trends," the report stated.

Particularly millennials are "increasingly showing a preference for the small, specialised operator that passionately sells the mission to provide better quality, oftentimes ethical, products".

There are a few things that bigger brands can do to help mitigate these issues, including acquiring some of the smaller more artisan brands.

"For those companies who have lost their R&D mojo, Rabobank's advice is to continue to outsource innovation by buying companies, but at an earlier-than-normal stage in the life cycle, thereby reducing the risk of paying too much," said the report.

But Rabobank also cautions that if acquiring these smaller artisan brands it is important to keep them independent and said that such acquisitions "need to be nurtured and not suffocated."