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Big Food Brands Bypass Retailers in Pandemic

Big Food Brands Bypass Retailers in Pandemic

Big Food is using this time to venture into the direct-to-consumer market.

Some of the world’s biggest food brands are selling directly to consumers in the pandemic, using coronavirus disruption to bypass retailers. PepsiCo, for example, started selling boxes of snacks and drinks, including Tropicana fruit juice, Cap’n Crunch cereal and Quaker granola bars this month on its PantryShop site, which ships to any zip code in the US.

A sister site, Snacks.com, allows online shoppers to pick from more than 100 Frito-Lay products, such as Doritos and Tostitos chips. In the UK, Kraft Heinz began delivering bundles of its canned food and sauces about six weeks ago.

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The prospect of cutting out grocery retailers might seem like a big prize for food manufacturers since the absence of a middleman should mean they can retain the profits themselves. However, like most grocery delivery ventures, the sites are not expected to be profitable . Executives behind them say they have no ambition to replace retailers on a substantial scale any time soon.

Instead, they are using the initiatives to learn first-hand what works and what does not in ecommerce, and to gather valuable data about customers that are normally captured by retailers. Big food companies have made several efforts before to go direct, both online and in stores, including Kellogg, which once had a cereal café in New York’s Times Square, and Nestlé, which tried delivering premium KitKat chocolate bars to households in the UK.

For most big food companies, direct sales tend to get lost in the rounding of their annual accounts. Delivery costs, for example, are a huge barrier to going direct. Grocery delivery is more cost effective for retailers, which can pack several low value goods into the same basket, although even most of them fail to turn a profit from it.

Appetite for processed food has risen in the crisis, reversing a multiyear trend in which consumers shunned old brands in favor of fresher and healthier alternatives. At the same time, shoppers have encountered bare shelves in supermarkets and struggled to secure online delivery slots.

Stockpiling in lockdown has boosted demand for bundles. PantryShop’s kits are based around themes such as breakfast, family gatherings and workouts, and cost $30 or $50, depending on the size. Heinz to Home offers similarly-themed kits.

In taking the tentative steps in selling directly, the companies are part of a much bigger rush into ecommerce during the pandemic. The data that PepsiCo and Kraft Heinz have gathered relate both to who the online shoppers are and also how they behave on the sites.