Big Food Is Dying

In business after business, the food industry is finding out that millennials’ preferences are different than their parents’ or the previous generation's.

For me, grocery shopping is a terrible experience. You wander around a poorly laid out, fluorescent-lit warehouse searching for the 10 things you really want. Meanwhile, grocery stores waylay you by trying to induce you to buy things you don’t want by making those things easy to find.

No wonder then that customers are increasingly rejecting traditional grocery shopping.

Instead, they are going for new kinds of services, such as meal kit services, prepared food delivery or online grocers that deliver weekly.

Until now, none of these services really had enough of a customer base to truly go mainstream.

Paul Mampilly’s Profits Unlimited Hits 60,000 Subscribers

However, there’s one thing that’s happened over the last couple of years that’s a game changer … and it’s going to radically alter the face of the grocery and food shopping business.

728x170_DowCracks_article
728x170_savetheworld-article
728x170_2-in-1-trillion-howto-smallstake_updated-article
728X170PRL-IOT_Article_3AdsIn1_article
728x170_small-stake-net98470_article
728x170_CanYouIdentifyRock_article

Bye-Bye, Blue Chips

That game changer is the increasing dominance of the preferences of the millennial generation.

In business after business, they are finding out that millennials’ values, preferences and habits are different than their parents’ or the previous generation’s.

And this shift is causing companies that had built incredible, blue-chip reputations and businesses to suddenly see their fortunes begin to sink.

The grocery and food industry is one of these industries. Big Food, as I like to call it, is companies such as General Mills, Kellogg’s, Coca-Cola, Campbell Soup, Kraft, etc. These companies built their businesses on the preferences and habits of the baby-boom generation. Baby boomers’ habits and preferences were driven by the emergence of office jobs, suburban homes and two working parents. These habits created a huge need for fast, convenient food and giant supermarkets.

However, the millennial generation has different ideas about food. They still value fast, convenient foods … however, they want their food to be healthy and nutritious too. The millennial generation is also the most educated generation in American history, with 37% having university degrees. Because of this, they keep up with new trends and research on food. In their lifetimes they have seen obesity soar, metabolic diseases such as diabetes surge and food allergies rocket higher.

And while the evidence is thus far inconclusive on exactly why this is happening, millennials are changing their food habits. They are dropping the highly processed food that Big Food specializes in and are choosing fresh, natural foods instead. Many millennials also want their food to be organic because they worry about the overuse of chemical fertilizers and pesticides and the long-term damage they do to the land. Finally, some millennials want their food to be ethically sourced, meaning it’s not harvested through child labor or grown through clear-cutting forests for farming.

Now, many of you may laugh or snicker at all these preferences. Whatever you think, these food preferences are having a major impact on Big Food companies. General Mills, the maker of Cheerios and Betty Crocker, just saw its second consecutive year of negative sales growth. You’ll find the same thing at Kellogg’s, Coca-Cola and most Big Food companies.

Many of you own these companies because they pay dividends. And many people have assumed that the Big Food businesses are bulletproof … that it’s just a matter of time before millennials wise up and begin buying the processed foods that they specialize in. But that’s not going to happen anytime soon.

That’s my belief, and some stock market investors clearly get it … which is why you see General Mills’ stock down about 7% in the last year. Many of the other Big Food stocks have been volatile, swinging from small gains to small losses over the last year. I believe that the Big Food companies and stocks have seen their best days … and they are going to see their businesses deteriorate and then die as the millennial generation’s preferences and spending habits become our economy’s preferences and habits.

That’s why I’d tell you that as tempting as it might seem to buy these companies because of their historical performance … it’s time to sell them and stay away. Instead, look out for new food companies that express millennials’ food choices. These are the kinds of companies I’m putting into Profits Unlimited, where the millennial generation is one of two mega trends that I focus on.

Regards,

Paul Mampilly
Editor, Profits Unlimited

  • James

    I notice that when shop for an elderly friend of mine at a Safeway store I’m not as yet familiar with, and I’m working strictly off a list, I’m driven to abject rage at having to wander back and forth all over the store looking for things that I now realize have been deliberately place in a very illogical order.
    What enrages me is that they do it on purpose. It especially enrages me when I’m working off a list and am not going to buy anything on impulse, and also I’m not going to buy anything that is not precisely what is on the list, because my friend is very particular about what she wants.
    When I shop for my self I’m more nonchalant and have a more relaxed attitude, even though I make a list so I don’t forget anything. But when I’m forced to have a more disciplined approach the attitude and method of the supermarket corporation really gets under my skin. I’m printing out this column and giving the manager down there a copy of it. I will try not to cuss them out when I see them.

  • Jim Anderson

    I checked groceries in an A&P store as a teenager and saw significant change in just a few years. It wasn’t enough to save them however and other grocers came in and drove them out of business. The margins were extremely thin then and that hasn’t changed much. Payrolls were very stingy. I agree that the on-line part will continue to grow, but I doubt that Amazon can make a profit with those margins.