Why food and drink brands are shifting to D2C

Why food and drink brands are shifting to D2C

It shouldn’t exactly be a surprise to many observers that amid the chaos of the coronavirus crisis and the associated widespread lockdowns across our societies, ecommerce has vaulted as a percentage of overall retail sales. In Great Britain, for instance, this percentage was 18.9% as of February 2020, but had jumped to 32.8% just three months later

It is also important to appreciate, however, that in many ways, the disruption brought by COVID-19 has simply accelerated trends that were already evident. Internet sales as a percentage of total retail sales in Great Britain, for example, were just 2.8% in November 2006. Meanwhile, the equivalent statistics for the entire world predict a continued steady climb from 7.4% in 2015 to 22% in 2023

What is the relevance of such a trend to the rise of D2C? 

As its name suggests, direct-to-consumer (D2C) is a model that entails selling products directly to consumers, such as through the manufacturer or brand’s own website, thereby bypassing ‘middle men’ such as third-party retailers, wholesalers and distributors. 

First of all, it is important to acknowledge that D2C was firmly on the rise, in line with the aforementioned climb in the percentage of overall retail sales that are Internet sales, long before the coronavirus crisis came along. 

Indeed, much of the conversation surrounding the reasons for D2C’s emerging relevance revolved around such factors as the climate crisis and the heightened adoption of veganism, which were already forcing food and drink brands to consider how they could diversify their offerings in a competitive market. 

At the same time, there are only so many different iterations of their products that food and drink brands can get into traditional retail spaces like supermarkets. Plus, with recent statistics from IRI and Nielsen indicating that D2C will account for about 50% of the growth in sales of consumer packaged goods (CPG) in the US through 2025, the opportunities for food and drink brands adopting a D2C model seem to be gradually widening. 

A model that offers an abundance of opportunities 

At a time when many consumers are either too scared to venture out very often to physical stores or are growing weary of turning up to the supermarket and being greeted by empty shelves, D2C has accelerated from relative niche status to prominence. Around the world, such major names as PepsiCo, Nestle and Kraft Heinz have been establishing or continuing D2C services. 

The Heinz to Home portal, for instance, has provided the tinned food giant with a means of selling bundles of core Heinz products to customers who may presently have to stay at home; free delivery is also provided to NHS staff and other emergency service workers. Meanwhile, PepsiCo recently set up two D2C websites, PantryShop.com and Snacks.com. That leaves Nestle a relative veteran in the space, having launched a D2C service last year for its KitKat chocolate brand. 

Such brands are seizing upon a range of potential benefits from D2C, including the scope it gives them to offer shoppers a more personalised experience – encompassing the likes of mix-and-match custom assortments and custom packaging – than they would be able to provide through third-party brick-and-mortar stores. 

Indeed, D2C gives food and drink brands greater ownership of the customer relationship, instead of them having to entirely surrender it to third-party retailers. It also means that consumers don’t need to depend so much on such traditional retail stores. Brands, meanwhile, can use D2C as a channel through which to cultivate brand loyalty, offer new and perhaps more premium-priced product lines, and even collect first-party data that allow them to further personalise the customer experience. 

Prepare your brand for an era of changed consumer habits 

While it is impossible to assess exactly what place D2C will have in the wider equation for food and drink brands once the acute phase of the COVID-19 crisis has passed, given the longer-term dynamics and shift towards D2C even before the pandemic, it seems likely to be a model that is here to stay. 

Sure, some consumers may very well revert to their previous habits once the crisis is a mere memory. However, with so many D2C platforms having been set up by leading food and drink brands already, it seems likely to become an enduringly attractive alternative for customers who don’t always fancy lugging heavy food tins around the supermarket and on the entire journey home. In this sense, D2C may well complement, rather than replace, existing channels. 

Would you like to discover more about how our Shopify Plus growth experts could assist your food and drink brand in making the right steps as we emerge from the COVID-19 crisis? If so, simply get in touch directly with the Underwaterpistol team