For over a century, brands such as Kellogg’s cereal, Campbell’s soup and Aunt Jemima pancake mix filled pantries of American households that wanted safe, affordable and convenient food. They provided companies with reliable revenue growth from grocery shelves, and there was little reason to mess with that formula.
Today, these giants are struggling with competition that is corroding business from both ends. High-end consumers are shifting toward fresher items with fewer processed ingredients while cost-conscious shoppers are buying inexpensive store brands. The makers of staples including Chef Boyardee canned pasta and Hamburger Helper meal kits failed to spot the threat and didn’t innovate in time.
Anyone searching for macaroni and cheese, a childhood staple, can opt for fancy pasta with organic ingredients or inexpensive store brands such as Kroger Co.’s. Squeezed in the middle are Kraft Heinz Co.’s venerable blue-and-yellow boxes.
The pressure has set off a bout of soul searching in the industry as well as some dramatic restructuring. Some companies are shedding underperforming brands, others have contemplated mergers. Nestlé SA, which said in June it was looking to sell its U.S. confectionery business, is now the target of an activist investor.
Younger companies such as Chobani, the Greek-yogurt maker, have taken market share from giants such as General Mills Inc., which came out with Greek-style Yoplait yogurt, but too late to catch up. “We were late to respond as Greek yogurt developed early in this decade,” said General Mills Chief Executive Jeff Harmening, noting double-digit declines in Yoplait sales lately. “Our sales have suffered as a result.”
The plight of the packaged-goods companies is a classic business tale. An industry creates winning products, carves out strong market positions and enjoys reliable, sustained revenue—only to be too slow to adapt to changes that threaten those cash cows.
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“A lot of what’s crept into big companies is internal focus, bureaucracy, PowerPoint presentations—the antithesis of agility,” said Sean Connolly, chief executive of Conagra Brands Inc., maker of Hunt’s ketchup, Peter Pan peanut butter and Chef Boyardee. Mr. Connolly joined Conagra in 2015 and said he is trying to shake this mentality and move faster at coming out with new products.
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