Have we now passed ‘peak purpose’ for food and drink brands?

For some years now, brands with a clear message about their purpose and commitment to meaningful change had something distinctive to lift them above the fray.  But today being purpose-driven is the expectation, brands have to offer more to succeed.

Pre pandemic, legacy brands were finding growth hard to come by, while startups began to carve out a role for themselves in the grocery arena.  SMEs with a clear message about ethical ingredient sourcing, minimal processing and environmental responsibility exposed the sometimes less than optimal approaches taken by their bigger brand competitors.

Their messaging chimed with consumers, and buyers took notice.  Many invested a significant amount of their seed funding in branding and often skilfully took advantage of the rise of social media to engage with shoppers – often so much more authentically than the big beasts they were up against, whose traditional approach to big marketing investment to preserve and grow share had served them well to date. Retailers gave full listings to some and trial exposure to others, via initiatives such as Future Brands from Sainsbury’s, with brands ranged on a special fixture in a limited number of outlets.

B Corp

Many have gone through the B Corp certification process.  Of the now 1400 B Corps in the UK, some 200 are food and drink businesses (The Grocer July 2023).  The vast majority of these are SMEs and startups. While achieving this accolade is of course a source of pride and a great story for customers and suppliers, another key benefit is joining a close-knit community and advisory network. 

But many in the B Corp community were less than happy when Nespresso became accredited, citing parent company Nestle’s human rights record – and were also concerned that multinationals could now achieve the same recognition as purpose driven startups.  Others (including in the B Corp community) would equally argue that the best way to effect global change and for business to be a power for good is to have big companies on board.

Investment Climate

The investment climate has also changed significantly since the heady days when DTC growth surged, low interest rates seemed like they might last forever and new food brands with a compelling growth story (never mind the non-existent profits) could readily find investors. 

Nowadays, however purpose driven brands may be, if they cannot demonstrate a resilient business model, combining strong sales growth with a clear route to profitability, they will not pass the test. Topline growth is all very well but without gross margin and a focus on EBITDA investors will look elsewhere.

Challenger brands do not have it easy.  There are few markets as competitive as UK grocery, so it’s hard enough in the first place to get the attention of buyers, assemble the right commercials and marketing mix to win limited space available away from established brands – and then to stay listed into the medium term with constant sales growth.  Throw in a pandemic – when retailers paused or delisted many in favour of their bigger suppliers able to guarantee levels of stock – and a more discerning investment community, and things are harder still.

Brands who realise that purpose and sustainability are table stakes and who have a clear-eyed plan for profitable growth will be the ones to attract buyers and investors – and likely still be on the shelves in the years to come.

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