In the face of new pressures from a volatile economy, the grocery market has been difficult to navigate for many players. High inflation rates have caused a shift in consumer shopping habits, and members of the grocery industry have had to adapt accordingly to remain valuable to consumers and their new preferences.

The food and beverage industry is difficult to traverse in the best of times, requiring brands to be strategic about resource allocation, budgeting, and risk management. At KeHE, our category managers work with a wide variety of brands, helping them to make choices that lead to overall expansion and success. Those who achieve long-term success prioritize high-level planning and organization.

In an industry that has evolved from supply-driven to demand-driven, brands need to be ready to cater to what customers want. This shift is due in part to convenient grocery shopping options such as curbside pick-up, mobile grocery shopping, and home delivery. For retailers to offer this to customers, they must use demand forecasting to update their inventory accordingly and maintain a balance between overstocking and understocking. With the online grocery customer base accounting for roughly 150 million shoppers, this is a business avenue that retailers, distributors, and suppliers cannot afford to miss out on.

The following are challenges emerging brands can anticipate, along with how they can prepare to save their spot within the industry.

New Market, New Challenges
Due to high inflation, which is predicted to continue rising, grocery store prices are also expected to remain high. In just this last year, we have seen the largest annual increase in food prices since the 1980s. There is no doubt that consumers have felt the pressure of their dwindling purchasing power and are now turning their interest toward product choices that are budget-friendly. In fact, of 10,000 US households surveyed, about 95% are changing their purchasing habits to make room for rising product prices. As consumers are becoming more selective, brands need to clearly demonstrate the value of their products whether it’s through discounts, non-GMO ingredients, mission-based appeal, or flavor. Brands that successfully communicate the value of their products will stand out on the shelf whereas newer brands are more likely to build brand loyalty by offering discounted prices.

Pay Attention to the Details
A lack of attention to detail can have a detrimental impact on a brand’s growth. This theme is particularly evident when brands are presented with partnership opportunities. Before the brand offers a price, discount, or promotional plan, the brand must know its budget and potential ROI to accurately measure the benefits of the partnership. To prevent from being stretched thin, they need to prioritize the partnerships that are profitable and will set them up for tangible growth.

Plan Ahead to Withstand New Challenges
Increased efficiency and agility are the name of the game when it comes to meeting changing consumer preferences, and these efforts are only possible through forecasting and planning. Forecasting should include measurable goals, benchmarks, and diligent financial planning, allowing brands to operate successfully for the years to come. Brands should plan their finances at least six months in advance to streamline brand partnerships with retailers, who typically plan their product distribution about ninety days in advance. Additionally, this proactive approach is crucial to establishing a budget and financial backup plan, enabling brands to navigate potential challenges stemming from changing consumer preferences and market shifts.

Partner with an Experienced Distributor

While forecasting and planning benefit everybody, this task can be difficult for even the most experienced brands. The most significant takeaway, however, is that grocery product decisions should be centered around what consumers are searching for. In the face of high inflation, consumers have tighter budgets and are compelled to make choices based on their perception of an item’s cost. This means that even if an item comes at a higher price but offers superior benefits, consumers may perceive its value to be equivalent to a lower-priced, less nutritious alternative. To remain relevant, brands must pair their product offerings to be aligned with what their customers are searching for. As we all know, the distribution industry is competitive, and retailers want to offer products to their customers that meet their needs.

Brands are most successful when they plan ahead, and that can be difficult when you don’t know what to plan for. That’s why many emerging brands seek the know-how of experienced distributors to help them navigate the ever-changing grocery retail market. KeHE’s category managers and in-depth resources are here to help. We understand that both the industry and the customers we serve are constantly changing, and we are ready to meet our suppliers and retailers with solutions.