Tainted tastes a bitter ‘no-no’ for consumers as firms battle cost-cutting culture

By Will Chu

- Last updated on GMT

The quest to produce nutritionally enhanced food despite the industry’s cost-cutting culture is one of the biggest challenges the food industry is currently facing, according to Mondelez’s Gil Horsky.

Speaking at the recent Future Food Tech conference in London, Horsky, global innovation lead at Mondelez, spoke of an ongoing transition within the sector that favoured company-wide consolidation in order to boost investor confidence.

“On the one hand we have consumers demanding rightfully for more nutritious products,”​ he explained.

“On the other hand the food industry are told to cut costs by investors and Wall Street,”​ he added. “Active investors are pretty much buying or entering every company pushing for mergers.

“At the same time they are pledging to change their portfolio and have healthier products. That doesn’t usually go well together.

“Healthier products mean you are going to reformulate your products, which are going to be more expensive.  

The changing food landscape

Horsky remarked on the changing food investment landscape that was favouring consolidation as a remedy to ongoing pressures demanding a growth in sales.

This shift culminated in the failed €128.4 bn (£115 bn) merger of Unilever by Kraft Heinz earlier this year. This closely followed Kraft’s controversial takeover of Cadbury back in 2010.

He continued with the idea that most food companies were struggling with achieving this balance and revealed details of Mondelez’s own innovation approaches that took into account just how far consumers would tolerate  changes to a beloved product.

“There is the observation that consumers will pay a premium for foods is a myth. They won’t.  Yes, you can charge a certain premium but not much.

“We have something called ‘Design to Value.’ When we work on innovation, we say upfront, ‘What are the most important things to us and what are we willing to sacrifice?’  

“So, for example, we might design the packaging to be less appealing but bring in certain ingredients to keep the pricing within an affordable range.”

“Another thing we’re investing in is something called ‘Price-Pack Architecture (PPA).’  It's basically trying to find the sweet-spot between the price and the pack that is being offered. So one thing would be to play around with the format size to instill the same price point and the margin.

“I think it’s a tension point that is just beginning and will continue in the next few years because we’re not going to see the cost-cutting going away.”

Don’t mess with chocolate

Horsky also described the challenges Mondelez and other companies were having on the taste compromises that came with reformulation.

“I think it varies by consumer segment,”​ he explained. “If you speak with consumers about chocolate, they want you to leave the food alone. They want a great tasting product; they don’t want you to change anything."

He spoke of the furore that occurred last year after his company’s decision to space out the distinctive triangular chocolate chunks in two Toblerone bars sold in the UK.

Mondelez said it had changed the design to reduce the weight of what were 400 g and 170 g bars.

“Consumers will actively penalise you,”​ he said. “Chocolate has a purpose in life. It’s about joy and unwinding. They would only accept a reduction in sugar if the taste were kept.

“There’s a big difference between the big players and the small players. The big players, with their brands and business are trying to find the right way of transitioning. That takes time but I think its happening too slow.

“It’s not just about the food makers,” ​Horsky continued. “Everyone needs to hold hands together. It’s the food manufacturers, it’s the health and policy makers and retailers.

“It’s also about the direct to consumer firms like Amazon, who will take out a huge margin from retailers. And it will enable players like us to sell directly to consumers gaining huge amounts of margin in the process.

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