Hershey snack mixes and snack bites
Hershey plans to expand its snacks portfolio to participate in more snack occasions.

Adapting to change

Additional retail trends that will affect food and beverage companies include consumers continuing to purchase non-perishable items on-line, polarization of the market with value and premium offerings pushing out “middle market, homogenized products,” and decreased demand for processed foods, Mr. Vitaro said.

Food companies are rapidly attempting to adapt to the change.

“We’ve been focused on e-commerce, but we are doubling down a bit more than we had in the past with the dedicated team, a reinvestment of additional resources and really partnering closely with our customers,” Michele Buck, president and c.e.o. of The Hershey Co., Hershey, Pa., said in a July 26 conference call with securities analysts to discuss the company’s financial results. “One of the biggest changes I’ve seen in the marketplace is a lot of our brick-and-mortar partners are now really dialing up their efforts on omnichannel. Those click-and-collect and multiple forms of home delivery and then, of course, there are the pure plays out there.

Michele Buck, Hershey

“So, I guess, I think about that business in two ways. One, I think that we have an opportunity to say, how do we capture the planned nature of how consumers purchase in that channel and dial that up and really capture that on our business. And at the same time, several of our retail partners have come to us and asked us to partner with them in terms of figuring out how to optimize impulse in an e-commerce world. I can’t tell you I have the answer to that right now, but I can tell you, I think we are in a good position to really be partnering with our retailers on that.”

A challenge The Hershey Co. may face in the future is the possibility of diminished impulse buying in the event consumers shop brick-and-mortar retail less.

“The way that we think about the business is, we need to win with growing customers,” Ms. Buck said. “Our goal is always to outperform the marketplace and to gain market share so that if there is softness, we get even more of our growth from market share gains. And we’re heavily focused on that because it’s our profit engine.

Hershey candy in checkout lane
Hershey may be challenged by a decrease in checkout-aisle impulse buys.

“At the same time, I would tell you, I think about this marketplace as a time where we have a great core business that we’re going to continue to drive. And at the same time, we have some opportunities to evolve our product and brand portfolio and also to evolve our channel mix to adapt to the changing marketplace.”

Later she added, “What we now want to do is expand our portfolio so that we can participate in even more snack occasions and ensure that we have the right portfolio and channel development to maximize those opportunities.”

Indra Nooyi, chairman and c.e.o. of PepsiCo, Inc., Purchase, N.Y., said in a July 13 conference call that consumers are rapidly evolving as new retail formats emerge and food and beverage companies must as well.

PepsiCo e-commerce
PepsiCo is investing in making changes to its snacks and beverage businesses to capitalize on the growth of e-commerce.

“ … Virtually every channel is melding aspects of grocery, convenience, food service, meal kits, prepared meals and home delivery,” Ms. Nooyi said. “So, with all this change occurring and at an accelerated pace, we can look upon this period in our industry with hesitation and pessimism or with a sense of excitement and optimism.

“We choose to take the optimistic approach because this period offers a once-in-a-lifetime opportunity to strengthen our business and capture new avenues of growth.”

PepsiCo is investing in making changes to its snacks and beverage businesses to capitalize on the growth of e-commerce.

Indra Nooyi, PepsiCo

“We want to make sure that our snacks are more shippable, not just in click-and-collect, but more also for deliveries so that the cube efficiency is there,” Ms. Nooyi said. “And on beverages, I think there are two issues: One, is the cold delivery of the beverages if consumers so desire ice-cold beverages delivered to them, which I find it hard to believe, but you can never tell. And then how do we make sure that we address this whole delivery of water because beverages are largely water. So we are looking at meaningful innovation, both in snacks and beverages, in order to address the exploding growth of e-commerce.”

Many of PepsiCo’s products are impulse-buy oriented at brick and mortar, but Ms. Nooyi sees potential in those products achieving growth on-line.

“I think the whole e-commerce area is going to be impulse as you see it in a brick-and-mortar store, which then translates to e-commerce, and it becomes part of a replenishment cycle,” she said. “We’ve seen so many virtual reality tools right now. You can actually simulate grocery stores or whatever version of a grocery store you want on-line. And you can easily navigate the aisles, and just with a click, shop for whatever you want. So, I think in an interesting way, there’s infinite possibilities to create impulse all through technology on-line.”