Consumers tie purchases to views of companies

by Morton Sosland
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At a time when likely consumer reactions to higher prices are the foremost concerns of most food manufacturing executives, the possibility of other issues being influential in the minds of consumers seems out of place, even odd. Yet, even as marketing attention has been fixed on the best way of convincing shoppers that prices reflect realistic adjustments to dramatically rising energy and ingredient costs, the need remains for identifying ways to differentiate both products and companies. If there is any comfort to be found in the food industry raising prices in line with escalating costs, it is that the need to implement these advances is universal. That no company has been able to differentiate itself by holding prices unchanged in the face of history-making cost upturns makes finding new ways of being unlike competitors all that more important.

Thanks to recent consumer research by McKinsey & Company, food industry executives have an unusual opportunity to improve consumer perceptions in ways that may not only overcome the negatives inherent in rising prices, but may enhance company and brand building. McKinsey carried out a global survey of thousands of consumers with the goal of learning how their views of companies influence their purchasing habits. Food and beverages made for one of four industries studied, along with petroleum, retailing and high tech. The survey was prompted by concerns at the consulting firm that many business executives are unaware of consumer attitudes, and that this neglect translates into marketing strategies that fall short because of this lack of understanding.

While the survey confirmed what McKinsey thought about the overall lack of knowledge by executives, it found in the case of food and beverages a relative advantage. The food industry enjoys the highest trust ratings, at 70 to 90 per cent, of any industry. Because of this high level of trust, which is three times the measure for petroleum, food companies may take fairly small steps in order to boost their already high favor. Considering that consumers in America, even after the past year’s soaring prices, say they are willing to pay to achieve the steps they believe important at food companies should ease concerns about the cost of undertaking any of the initiatives highly ranked by consumers.

For consumers in America, two steps were cited by nearly half of those interviewed as likely to make them more inclined to buy a company’s products over other makers. These are "label products clearly with honest information" and "develop more healthy and nutritious products." Indeed, it is probable that the initiatives already taken by many, if not most, food companies to undertake both of these steps explain the high trust the industry already enjoys. In third place as an important step, which is endorsed by slightly more than a third of those interviewed, is "reduce waste and pollution in manufacturing." In fourth place is "take aggressive action to reduce energy consumption and help prevent climate change."

More than in the other industries, consumers interviewed about beverages and food indicated a definite willingness to pay more for products made by companies that address health and environmental concerns. It is McKinsey’s position that improving a company’s reputation with consumers will definitely help to increase the volume of products it is able to sell. And taking these steps is not alone enough. Initiatives to attract consumer favor also must include ways of being sure that consumers are aware of what companies are doing. The survey showed that nearly two-thirds of consumers had no awareness of what products are made by companies that have taken steps to improve the environment. Considering how progress in this regard may become the most important strategy of the foreseeable future, it is apparent that a more focused effort is required, even as attention of companies, consumers and the media is still concentrated on the course of prices.

This article can also be found in the digital edition of Food Business News, September 2, 2008, starting on Page 9. Click
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