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How Food and Beverage Brands Handle Choice, Change and Amazon



October 16, 2020 12 min read

Opinions expressed by Entrepreneur contributors are their own.

Consider the word “husky.” 

For some, the word conjures a majestic, white, fluffy-furred, blue-eyed dog. For me, it’s a painful memory about body type. I was a “husky” kid. When I’d had enough of the jabs from other kids, I decided to get healthy, and started lifting weights. It turned out I was a pretty competitive guy—and with the right nutrition and training, eventually broke a state record in the deadlift. As time went on, my personal and aspirations began to merge. What’s better than turning a passion spawned by a highly emotional experience into a business opportunity? I used my personal experiences and knowledge to help sustainable food and beverage brands gain market share through ecommerce development and .

Related: 10 Under 20: Kid Food Entrepreneurs Fighting to Make a Difference

Fast forward to today. In an effort to understand marketing practices during and after Covid-19, my team and I interviewed leading marketing, , and strategy executives from a variety of food and beverage brands. We uncovered three recurring themes throughout our interviews: a newfound focus on distribution, shifts in , and a certain repentance about relying too much on .   

Getting distribution isn’t the biggest challenge

Neil Kimberley, Chief Strategy Officer at Essentia Water, the number one selling bottled water in natural food retailers, and the #3 overall premium bottled water, shares his thoughts on distribution—and it isn’t all about locations and logistics. In his previous work as Director of Marketing at Snapple after it was acquired by Quaker, Kimberley says over-availability is a key challenge. “Merchandising discipline is critical to a brand’s success. If you over-proliferate alternative flavors on the shelf, you can be in a situation where sub-par velocity items take the space and attention from your highest velocity items, reducing your shelf productivity. Getting to the right, optimized flavor assortment was critical for Snapple in order to avoid choice overload for shoppers.” Case in point: Snapple has over 40 flavors. And that creates a choice overload for shoppers. 

Related: WTF Do I Eat While I WFH?

A landmark study authored by Sheena Lyengar, a professor of business at Columbia University, conducted a study that found customers will buy more (30% vs 3%) when presented with fewer choices. Though, there is a distinction between choice overload and information overload in the context of purchasing decisions. For instance, a habitual purchaser of Snapple who has tried lots of flavors has less cognitive load when scanning their options because they already know what they want. Kimberley went on to explain that Essentia is staying true to its brand strength, and avoiding line extensions and unnecessary product innovations that may reduce shelf productivity.

While distribution is a big challenge for food and beverage brands, competing with established exemplar brands is a bigger challenge. Their overwhelming shelf presence casts a large shadow, even with the challenge of proliferation. Emerging brands are using their nimbleness and agility to increase velocity by leveraging customer insights while expanding their boots-on-the-ground efforts to keep their brands top-of-mind. 

Essentia is competing against behemoths like Pepsi and Coca-Cola, who have a greater share of shelf space due to their expanded portfolio of brands. Kimberley and the Essentia team decided to create top-of-mind in-store awareness for their brand by having local sales associates visit stores to ensure the best possible store conditions. Having the right people in the right place helped Essentia gain a disproportionate share of versus its bigger competitors.

Related: 9 Bloody Brilliant Ways Businesses Are Navigating Meat Prices

As Chief Innovation and Brand Officer at King Juice/Calypso Lemonade, Matt Andersen told us that his biggest challenge was keeping up with demand. Andersen came to King Juice/Calypso Lemonade with a decade of marketing and management experience from The Hershey Company, and, before that, was a consultant at Bain & Company. He says that at King Juice/Calypso, ACV is about 30%, and has grown by 10% over the last year. “We’re seeing new distribution opportunities, but part of it is that we are the fastest turning brand in the category. Velocity leads distribution.” He explained how they drive velocity at high rates and are seeking to establish successful planogram exposure with current retailers. Unlike Essentia Water, they are planning to introduce product innovation. Being close to their consumers, they know there is a desire for low-calorie, low-sugar products. This insight helped inspire a new product launch, Calypso Light, which comes in five flavors. The product was a hit and was recently rolled out across the entire Kroger network, among other retailers.. 

Consumer behavior shifts dramatically

“People don’t spend time shopping online like they do when they go out and shop in stores,” said Pietro Guerrera, Head of Ecommerce and Marketing at La Maison du Chocolat USA. “The experience is different. Especially for digitally native consumers who want an easier way to buy.” Guerrera, with years of experience managing ecommerce platforms for premium brands like Eataly, explained how is less forgiving than in-store buying. Online, consumers want all the information, and it needs to be a click away. Their attention span is often limited and their purchasing journey usually stimulated (or bombarded) by multiple deals, so loyalty is often at stake. In a store, however, customers can browse and discover. Guerrera spoke favorably about Google Shopping (who recently eliminated commissions on sales). “Google Shopping works well because customers are ready to buy. It’s about perfecting pictures, creating compelling descriptions, and having an effective pricing structure. The feed [from your website] is critical, and these technicalities are important to maximizing your advertising expenditure.” 

With some reports showing online traffic increasing by 29% for food and beverage brands from March to June 2020, and total U.S. online sales reaching $73.2 billion in June, up 76.2% year-over-year, online has become an obvious focus for many food and beverage brands. 

Neil Kimberley at Essentia Water explained how the shift to online has negatively affected sales at convenience stores. That has led to an increased effort in maintaining connection with customers digitally because they are stuck at home and spending more time on their digital devices.

Tove “Danielle” Robinson, Marketing Coordinator and Account Manager at Dirty Hands, LLC, explained how Covid-19 has changed consumers’ behavior with premium brands. “For the higher end emerging brands we merchandise, Covid-19 has been both a pro and a con.” She explained how some of their brands, like those in the snack category, are booming. Many reports published during the initial months of Covid-19 showed substantial increases in snack purchases. Mondelez International reported increased snacking due to pantry loading and comfort buying behaviors. On the flip side, Robinson noted how other brands were out of stock due to challenges in sourcing ingredients. As consumer behavior has changed, we have yet to see if comfort buying behaviors will stick, or if lack of availability will change brand preferences. Research described by Richard Shotton, in his book, The Choice Factory, shows that, on average, only 8% of customers willingly switch brands. But, when there is a significant life event (e.g. marriage, buying a house, an international crisis, etc.), 21% of customers are likely to switch brands. That number will go even higher as brands struggle to keep up with demand.

What do these behavior changes mean for specialty items and organic products? Joni Huffman, Senior Vice President of Sales & Marketing at Healthy Food Ingredients, LLC, said that fear drove people to pull back on spending with healthy-mission-driven brands. When the stay at home mandates were enacted, R&D departments also started shutting down and there was less product innovation, especially in specialty food and beverage items. She said, “New product launches are being pushed to 2021,” and she explained that, even with mandates being relaxed, federal food certification and auditing requirements are still bottlenecked. In addition to delaying new product launches, some brands (Frito-Lay) reduced their SKU’s to get their in-demand products into the market faster. Although they are replenishing more SKUs now, some still remain backlogged. 

Consumer behavior has changed, obviously. You don’t need a crystal ball for that prediction. And these “unprecedented times” also present an opportunity for change. As Stanford economist, Paul Romer, once said, “A crisis is a terrible thing to waste.” Smart managers and executives are using this crisis as a catalyst of sorts to push forward on digital transformation. Now it’s not optional: it’s a necessity. 

The Amazon Effect

What discussion which includes unprecedented times, changes in human behavior, and digital marketing would be complete without mentioning Amazon? Sustainable food and beverage entrepreneur and Marketing Consultant Austin Allan summed it up nicely: “Amazon is a beast.” 

He has years of experience in working with the Amazon Marketplace, having founded and successfully exited the perishable soup brand, Tio Gazpacho. He describes Amazon as, “a whole ecosystem or universe. You have to understand how it works and make sure you have the right partners.” He said the dangers of getting delisted because of inventory and quality problems are real. But he also said the tradeoff is the opportunity to get your brand in front of millions. 

CMO and GM at Theo Chocolate, Jason Harty, agreed, saying that Amazon is not devaluing their brand: it’s allowing them to broaden their access to customers. He explained that their Amazon strategy is performing well because they curated different assortments based upon customer preference. In premium outlets they sell one Theo Chocolate bar, on Amazon, they’re selling a 6 pack, 10 pack, or 12 pack of their bars. He said, “customers are pantry loading, or looking for variety on Amazon. They tend to buy darker chocolate and seek a sku assortment.” 

Pietro Guerrera, Head of Ecommerce and Marketing at presso La Maison du Chocolat USA, offered a different perspective. “Amazon as a marketplace is one of the first places customers shop online”, he says, “we also need to protect our and message.” He explained that with Amazon, brands get blended with competitors, diluting brand equity. Unlike a shelf with a properly organized planogram, Amazon is more like a bargain bin. Brands are unorganized, listed in mismatched categories, sold from disparate vendors, and sometimes counterfeited. 

Guerrera offered an alternative. He seeks out vertical marketplaces that curate premium products and offer a unique experience. Marketplaces like GoldBelly, Food52, and Eataly are prime examples. 

I think Guerrera could be onto something. Some think that Amazon will reduce brand diversity and product innovation. Franklin Isacson, founding partner of Coefficient Capital, a consumer packaged goods venture capital firm, compares online shopping to spearfishing, while in-store shopping is more like net fishing. In an article in the Washington Post he writes, “If you go stand in the salty-snack aisle of Kroger, there is probably a sampling station. You pick up a bag, read the nutritional panel,” he says. “Whereas on Amazon, you’re typing in ‘Heinz ketchup.’ You’re not going to discover Sir Kensington. People who buy groceries online tend to buy the brands that they know…75% percent of repeat online shoppers start shopping in their previous basket, so if you’re a new brand it’s hard.” 

While that is true of some transactions, for others it’s about finding new alternatives, which Amazon actually excels at. For instance, typing in “ketchup” returns 149 results. On the first page, 10 out of 48 are different brands. And within the first row is Sir Kensington. 

During the research I did with my team, another one of our interviewees said, off the record, that they have experienced substantial increases in their Amazon sales. But as with many brands, Amazon is only a small portion of their sales, and it’s difficult to balance direct Amazon and ecommerce sales with their exclusive network of distributors. Although many brands seek to sell direct, distributor agreements prevent aggressive competition. And that cuts both ways. Agreements with distributors allow for brand, price, and other controls that are lacking in the Amazon ecosystem. 

Amazon is complicated. For some brands, ecommerce itself is complicated. According to our off-the-record source, brands like Pepsi can execute online strategy well because they own their own distribution system across the country. Other brands, like Coca-Cola, don’t carve ecommerce out of their distributor agreements, so they have licensing challenges. But even with the opportunity to sell direct, costs for defending a brand’s own name online gets expensive fast. Especially when compared to getting on a shelf in a store. Our source said they are relatively agnostic relative to both channels. Both Amazon and in-store are expensive ways to do business. That said, the old adage rings true: you need to be where your customers are. And many of them are on Amazon these days.

Putting it all together

It’s not surprising that these three themes overlap like a Venn diagram. Changes brought on by Covid-19 shifted consumer behavior by accelerating the adoption of and reliance on online shopping. In turn, this changed traditional distribution as more customers were shopping online, and many of those customers shopped with Amazon, who reports that about 40% of all online sales come through their platform. The key takeaway? If you haven’t already done it, make online sales and marketing a priority. Everyone we’ve spoken to already has.


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The Trump campaign celebrated a growth record that Democrats downplayed.



The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.


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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.



The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.


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Ant Challenged Beijing and Prospered. Now It Toes the Line.



As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.


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