GMA Must Change or Die
Author: Phil Kafarakis
Source: Progressive Grocer
The Grocery Manufacturers Association (GMA) faces a watershed moment. Its traditional path seems to be leading it to the cliff’s edge, but which potential new direction will lead to regained relevance? Recently, Pamela Bailey, GMA’s president and CEO for almost a decade, announced her retirement. This, coming at the same time that the association has been losing key members, offers an opportunity for drastically needed change. GMA needs to adapt to a new way of doing things or fade into the sunset.
What are the forces behind this change? Simply put, the consumer. After three generations of being told what to eat by big food companies — directly enabled by the lobbying successes of GMA and complicit regulations — ordinary consumers have been taking to the streets and demanding change.
This isn’t just happening in the food industry. Dire concerns, marginalized for way too long, are sparking national change. Consider the #MeToo movement addressing sexual harassment and abuse, and the recent rise of teenage victims of gun violence taking on the NRA.
FOOD DISRUPTION ROULETTE
For as long as most consumers can remember, big food brands have reigned supreme: Kraft, Kellogg’s, General Mills. This is an industry that has always pushed products to the consumer, and the people running the companies are legacy CEOs who have been there forever.
The industry continues to resist change: Consider Nestlé’s recent announcement that Paul Grimwood, who has been at the company since 2001, is retiring to nonexecutive chairman status. He’s being succeeded by Steve Presley, the CFO who’s been at Nestlé for 25 years himself. This is a missed opportunity to bring in new, disruptive talent — and it’s par for the course for an industry that had grown rich by advertising to Mom — although the “Mom” they’re targeting left the kitchen years ago.
In the 1980s, a huge business disruption was handled in a specific and industry-altering way that still reverberates today. Phillip Morris, the tobacco-processing company, came under fire as it finally acknowledged that cigarettes are bad for human beings. In a defensive measure, they bought up big food companies — Kraft, Oscar Mayer, General Mills. Phillip Morris renamed itself Altria, thereby disappearing as a holding company, and put all of its new purchases into one big conglomerate called Kraft. Years later, because it had become too big and unwieldy, this entity broke itself into Kraft and Mondelez.
The next reverberating change came when the financial engineer from Brazil, the private equity firm 3G, was founded in 2004. It was concerned with one thing only: cutting costs —and jobs — at the companies it invested in. In the early 2000s, almost no big food company was left untouched by its philosophy and mission, which came to be known as the 3G model. This model is basically just zero-base budgeting and cost cutting. In the course of pursuing financial efficiency, it forgot the consumer. While this was going on, GMA’s lobbying power reinforced 3G thinking, ensuring that regulations weren't going to force big companies to think first about consumers, either.
Now we are in the midst of a third major disruption, dizzying changes in the retail environment exemplified by Amazon’s acquisition of Whole Foods. This, essentially, is a form of market correction, finally addressing consumer desires and putting healthful brands affordably into their hands.
We can clearly see more and more consumers growing into food experts — learning where it’s produced, what’s in it, and deciding where they’re willing to buy it. Consequently, some $18 billion of market share is lost to big food as it shifts to smaller manufacturers. It’s no surprise that, at the same time, GMA’s power structure is faltering. Consumer advocacy groups have risen up and waylaid GMA’s direct line from the big brands to the government.
Now it's these consumer groups, and consumers themselves, that form the power base of the food industry — because consumers are taking choice and purchasing power into their own hands.
WHAT CAN GMA DO?
GMA should, first and foremost, connect the dots. Consumers aren't in hiding — they’re telling the government that they will no longer tolerate food regulation that ignores the most important things about eating: its effect on health and well-being. Consumers are opting for more healthful ingredients, and to find them, they're moving away from the big food companies. They will no longer buy a product because big food companies are marketing it to them.
The people sitting on GMA’s board represent big brands, and some have spent a century influencing food regulation and policy. But they haven’t worked to represent food consumers— that’s where all the future power will reside.
One way that GMA could prove its value and ensure its existence is to follow that new power, the new food shopper. GMA has knowledge — data covering decades, insights into consumer behavior and the forces that change that behavior. The association can leverage all of that knowledge by working directly with consumer groups and serving as a liaison back to the big food companies about consumers’ needs and demands.
If it acted as a conduit — an interpreter, a negotiator — and conveyed consumers’ messages to its big-food members, GMA might well survive and position itself as a credible and needed resource. While this would turn the current model on its head, in this new world where the consumer wields the power, we all need to flip our thinking.
Will GMA choose to cultivate relationships with consumer groups and work with them, rather than thinking of them as the enemy? That remains to be seen. The easiest path would be “business as usual.” But truly, there is no more “usual” business. It's time to address the new reality.