How Food and Beverage Brands Handle Choice, Change and Amazon

Shifts in consumer behavior are necessitating sales strategies for food and beverage brands.
How Food and Beverage Brands Handle Choice, Change and Amazon
Image credit: Westend61 | Getty Images

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
Entrepreneur Leadership Network Contributor
Managing Partner of EMPATH
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.

More from Entrepreneur

We created the SYOB course to help you get started on your entrepreneurial journey. You can now sign up for just $99, plus receive a 7-day free trial. Just use promo code SYOB99 to claim your offer.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Entrepreneur Store scours the web for the newest software, gadgets & web services. Explore our giveaways, bundles, "Pay What You Want" deals & more.

Latest on Entrepreneur