McCormick & Company is using D2C to test flavors that could draw new customers into the fold.
On an earnings call with analysts Tuesday (March 28), the flavorings giant said consumers are looking for both novel tastes and quick, easy food options.
“We’re launching new products in the first half of 2023 to inspire consumers flavor exploration as well as deliver the convenience consumers are looking for,” CEO Lawrence Kurzius said. “In direct-to-consumer [D2C], we continue to grow our platform with new innovative flavors as a testing ground.”
He noted that in the Americas, the company has seen double-digit consumption growth in its eCommerce business. Certainly, the digital demand, with consumers looking for that convenience highlighted by Kurzius.
Research from PYMNTS’ study “Changes in Grocery Shopping Habits and Perception,” which draws from a survey of more than 2,400 U.S. consumers, finds that nearly half of grocery shoppers make purchases online at least some of the time. Plus, 7% shop digitally every time, a 36-fold increase relative to pre-pandemic.
Additionally, McCormick noted that consumers are seeking not only convenience but also novel flavors.
“We’re realizing high returns on our [eCommerce] investments, gaining new customers and growing with new products,” Kurzius said. “For instance, Informix popcorn seasonings and Frank’s variety packs are both off to a great start following their online introductions earlier this year.”
According to data from the latest edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” based on a February survey of more than 2,100 U.S. consumers, 44% of the population says finding better deals has become a much more — if not the most — important factor when choosing where to buy retail or grocery items. Moreover, that share has increased steadily over the last six months.
The company’s exploration of D2C is somewhat surprising, given the wave of interest from consumer-packaged goods (CPG) giants in the channel that seems to have more or less passed. In 2020, companies such as Coca-Cola, PepsiCo, Colgate-Palmolive, Kellogg’s, and Procter & Gamble were among the players in the space touting their D2C successes, but by early 2021, the conversation had died down.
Yet D2C as McCormick is using it — a way to test new products before going all in — makes sense, given the channel’s ability to provide brands with more in-depth data about product performance and consumer reactions.
As Mike Pengue, CEO of energy drink brand ZOA Energy, shared in an interview with PYMNTS, D2C enables brands to be “quick” and “agile” in responding to initial results.
“You’re going to stub your toe early on, but you want to stub it early and move on, and [D2C] gives us the opportunity to be able to be very, very fast,” Pengue said.
Also on the call, McCormick provided an update on consumer trends as far as purchasing name brand seasonings versus private-label competitors, with CFO Mike Smith noting that the threat these pose becomes less acute as retailers are forced to raise their brands’ prices.
“We still see price gaps continuing to narrow compared to private label,” Smith said. “That happened in Q4. We saw it again in Q1. It’s really a result of seeing more private label taking price on the shelf. … The impact just continues to moderate.”
Granted, many consumers have traded down. The study “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” for which PYMNTS surveyed more than 2,600 consumers, revealed that 37% of grocery shoppers reported purchasing lower quality products to reduce their expenses in the face of inflation.
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