In 2020 the radical change in the market pushed Italian food producers to accelerate towards the digital world, thus determining a change in their companies by transforming them into smart companies.
The direct relationship with customers pushes the manufacturer to demonstrate the tracking of its supply chain with the blockchain and to strengthen the company's brand towards the consumer. In the same way, the "food" companies have developed new services for the direct loyalty of the customer and the possibility of being able to manage direct sales without creating conflicts between the distribution channels.
The "Digital Food Strategy" Report highlights the best Italian and international case studies, comparing them with each other.
2020 has been a year in which the entire food sector has had to race headlong towards the future, years ahead of time. The lockdown has upset all of the supply-chains. While all of the physical stores have experienced hard times for many months, the online channels have experienced a level of demand that is 30-times higher than normal, which has in turn created many opportunities for new traders to enter the field.
Above all, however, the proprietors of consumer brands have witnessed the emergence of a need to interact directly with their end-users. It may not be possible or even viable for all producers to sell their goods on their own website but, in any event, they must be able to communicate directly with their end-users if they are to have any hope of staying in the market. This is not just a technological leap, but above all a cultural one. In fact, many of the producers interviewed for the purposes of this report now use the term “customer” to describe wholesalers and chain-stores rather than end-users, which they describe as “consumers”.
During the course of 2020, even some of the most resistant-to-change producers decided to set up channels to enable direct consumer relations, even if only to manage the potential risk of further lockdowns in the future.
The various food-sector products differ very widely and in this report we have explored their respective characteristics, financial margins and, above all, also the respective needs of their clients. Together, these factors determine which are the best respective online sale strategies to adopt, namely selling via a producer website, a partnership website or via a retailer website. Furthermore, the aforesaid factors also determine what is the ideal online communication strategy, as well as various possible uses for supply-chain food-traceability via blockchain.
Companies that lag behind in terms of digital investment will have lost entirely out on the benefits of the accelerated annual pace of change concentrated in 2020.
An analysis of the digital panorama of food producers in Italy and the evolution of e-commerce in recent years, particularly in 2020, reveals the emergence of recurring models as regards the strategies adopted.
Undoubtedly the choice of model depends on the kind of products being sold and the fact that, for inherent reasons, certain products simply don’t lend themselves to being sold online. The world of fresh and super-fresh foods has to deal with factors such as quick stock-rotation, short shelf-life and the need for an uninterrupted cold-chain, which entails higher operating costs or the utilisation of middle-men. Wine, on the other hand, has a longer turnaround time, longer shelf-life, no problems with temperature and also enables individual deliveries. Furthermore, due to the wide range of available options in terms of wine estates and areas of origin, the chain-store shopper is unlikely to find exactly what he/she is looking for and, therefore, wine is one product that is ideally suited to being sold online.
Depending on the product characteristics, producers may adopt one of the following four B2C Food brand e-commerce models:
Individual products. These are products that have created a mental category all of their own. The customer who buys these products feels like he/she has satisfied a need. In these cases, the producer sets up an online e-commerce presence, aims to develop a strong brand image and is able to sell even just one specific product, albeit in many cases in numerous different variants. In such cases the producer can manage the entire selling process himself. The product is sold online, but often also on the ground in brand-aligned, multi-brand stores (as in the case of Kusmi Tea and La Rinascente) or proprietary stores that are able to properly market the product (e.g.: the Noberasco boutique).In terms of online sales, the product is offered in “Family-size” packs (e.g.: EuroCompany’s “Frutta e Bacche”1 range of nuts sold in 1kg and 1.5kg packs), by regular order or combined sale with the equipment needed to consume the product (e.g.: Nespresso2 coffee subscription with coffee-machine included), as gift packs or products only available online, which also avoids channel conflict (e.g.: Loacker products3), or via QR codes with an online link offering gifts in exchange for contacts (e.g.: Caffè Borbone4 advertises an online competition via a unique QR code printed on the packet). The producer gets to know his customers and is able to profile them and communicate with them directly. This model is generally utilised by those who manufacture products that have a long shelf-life and no logistics problems with regard to refrigeration requirements or the ratio of weight to sale price. For example, Danone does not sell its short shelf-life products such as the Activia, Danette, Actimel and Danacol brands online, but does however sell its Alpro5 long-life vegetable-based drinks in 6-packs online.
Proprietary basket of products. A single producer makes multiple products and sets up a proprietary online e-commerce site on which he/she offers product baskets, thereby expanding the range. Prime examples of producers who utilise this model include Alce Nero6 brand organic products, Ferrarini7, Sant’Anna8 brand beverages and the online stores of Galbusera and Le Tre Marie9 and Garofalo pasta, who also offer larger pack sizes than those available in the chain stores. Fratelli Carli10 also offers its products for sale online in 6 or 12-pack format or multiple product packs (e.g.: 6 jars of tuna fillet or bottles of wine). Parmalat11 launched its online shop in June, immediately after the lockdown, where they also offer all of the branded products manufactured by the Lactalis Group companies (Santal, Galbani, Chef and Zymil), of which Parmalat is part. This model is advantageous for both parties in that it enables the customer to purchase multiple products all at the same time from a single trusted producer, while enabling the producer to utilise the distribution network in a more synergistic manner and to optimise his costs. Sales are driven by the consumer’s faith in the brand and the ability to purchase all the products needed to satisfy a need.
Basket of goods in partnership. In this model, various producers enter into partnership and set up a single e-commerce site promoted by an aggregator, which may be an online platform (like Olivyou12 , which brings together Italian olive-oil producers and their respective products: extra-virgin olive oil, condiments, preserves and cosmetics), an association (like Coldiretti, which markets local products in Milan and Rome via its Campagna Amica13 campaign, or the Fruttaweb14 ), or a single individual brand that, in order to better meet consumer needs and optimise its distribution network, chooses to associate its product with those of other producers, in line with the respective brand values and consumer interests. This option lends itself to getting players online that would otherwise be unable to afford to set up and run their own e-commerce website because, or so they claim, they would have to re-invest their retail sale revenues in advertising and logistics and their products have a short shelf-life, i.e. the limited time lapse between the foodstuff production and consumption dates to avoid any health risk for the customer, as well as the need for a cold-chain, as in the case of the Campagna Amica campaign. Or as in the case of Granarolo15: just this year the consortium launched its own e-commerce site offering a 48-hour, refrigerated delivery service. At the moment, the channel has 500 associates and the brand has entered into partnership with other cold-chain product producers.
Household shopping. In this case, products are sold online either on the chain-store website or via online marketplaces or other platforms. In this way the producer is able to take advantage of the partners’ capabilities in all aspects of e-commerce, as well as their logistics structures, storage facilities and operational capabilities both in Italy and abroad. Entry into e-commerce often occurs thanks to the proactiveness of, and investment by the chain-stores that opt to set up or upgrade the channel, or specific marketplace programmes. In some cases the chain-store adopts an e-commerce partner, as in the case of Unes and Amazon Prime Now, which brings together a chain-store and a marketplace, as is also the case of the Co-op, the Carrefour and others that rely on Everli by Supermercato 24. Whereas the logistics and pricing on the chain-store e-commerce sites run as smoothly as they do offline, in the case of marketplaces and platforms it is up to the producer to demonstrate an explicit desire and to make the effort to offer the kind of product that is ideally suited to this kind of distribution channel (e.g.: in terms of distinctiveness, quantity, packaging...), is ideally part of a broad-ranging virtual basket of products and does not compete against the chain-stores offline. However, many of the brands that fall into this category state that they would not be able to manage an e-commerce site independently. However, the issue at hand seems to be less about the company’s ability or culture, but more about the marginality and pervasiveness of the brand awareness. Producers may for example market their products directly on Amazon, as does Barilla16, , or have them marketed by third parties. This channel is not a priority sales channel for many sectors but, as in the case of Autogrill, it assures them widespread visibility and access to an extensive target market. In some cases, after an advert has appeared on TV, product sales on Amazon have increased due to an increased impulse to purchase.
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