How do ConAgra and other food companies reach online consumers?

I found this article in our local newspaper and thought it was interesting talking about online shopping trends.

Posted: Tuesday, July 21, 2015 1:02 pm  By Barbara Soderlin / World-Herald staff writer

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The growth of online grocery shopping – like Hy-Vee’s new online ordering service – is a risk and an opportunity for food manufacturers like Omaha’s ConAgra Foods and its competitors.

Packaged food manufacturers, already seeing stagnating sales of some flagship brands, “face obsolescence” if their products aren’t online where shoppers want them, according to a 2014 report from IRI Worldwide, a Chicago retail analytics firm. 

Manufacturers also face urgency in getting on a consumer’s online shopping list because 55 percent of online shoppers start with the same list each time they buy online, according to a Kantar Worldpanel study from July, which predicted online grocery sales will reach $130 billion a decade from now.

While supermarket sales as a whole are growing slowly, products like ConAgra’s could gain a route to faster-growing sales with the rise of grocery e-commerce. Shoppers are “willing to increase their spending significantly in this channel,” and to pay extra for the convenience, but only if the right kind of distribution systems are available, according to a 2015 study of online grocery business models by Chicago-area research firm Willard Bishop with University of Michigan Ross School of Business professor Amitabh Sinha.

So how do manufacturers – good at getting their products on grocery store shelves – also get their products stocked on stores’ virtual shelves, and make sure the products are easy to deliver to customers’ homes?

Those are some of the questions companies like ConAgra are wrestling with.

John Stichweh, ConAgra’s e-commerce director, said ConAgra works with its retail customers to make sure its packaging and products are designed for all their sales channels — in-store and online.

“We have a different assortment for each retailer depending on their model and how they work,” he said. “My job is to collaborate with them, to figure out in the most cost-effective way, how to get our products to the consumer when she wants it and where she wants it.”

For example, ConAgra works with Amazon to sell shelf-stable products like Slim Jim meat snacks or Orville Redenbacher’s popcorn.

“It fits the way they distribute very well,” he said.

On the other hand, ConAgra sells more frozen and perishable food through Peapod, which is known for same-day delivery of fresh foods.

ConAgra also is thinking about how its products are packaged. One consideration is the size, as Amazon Prime Pantry, for example, ships a certain size box at a flat rate.

Another is the volume of product packaged together. While a plant might traditionally pack canned food in large cases for supermarket delivery, it now may need to shift to packing cans in smaller boxes, say in four-packs, in a quantity that a home delivery customer would order.

Even shelf displays are something to consider. While a grocery store has limited shelf space, online “shelf space” is unlimited. That sounds good, but it leads to a different set of challenges in getting your product noticed, ConAgra said, such as making sure that retailers have current product photos and up-to-date nutritional information on their e-commerce sites.

Even as ConAgra steps up its e-commerce presence, don’t look to buy its products directly from conagrafoods.com.

While some packaged goods firms are selling their products online from their own websites – Procter & Gamble sells Pampers diapers and Gillette shaving cream from its own site – food companies including ConAgra, Kellogg Co. and Kraft Heinz generally aren’t doing so. Rather, they direct consumers to where those products can be purchased.

“It’s not intended to be a diversion around our current retail partners,” Stichweh said.

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