Online sales are now expected to grow from initial predictions of 11% to 19% in 2020 – reaching £78.9bn, up from £66.3bn in 2019 – according to data analyst Edge Retail Insight.
The figures followed a report from LCP Consulting in 2017, which claimed that food manufacturers could boost their revenues by 5% by opening direct-to-consumer (DTC) supply channels, which it said was an “excellent way” for smaller businesses to establish market demand and drive growth.
One business that has seen great success with this model has been flavoured sparkling water brand Ugly Drinks. The DTC route has helped the manufacturer enter the US market by sidestepping the overcrowded retail sector.
Hugh Thomas, chief executive and co-founder of Ugly Drinks, told Food Manufacture that DTC had always been part of its omni-channel strategy since day one.
“We were aware of changing buying behaviours and know that consumers like to try and discover products through multiple channels, whether that’s direct-to-consumer, Amazon, or at the local supermarket,” he explained. “We wanted to play in all of these channels and meet the consumer where they are.”
The spread of COVID-19 has opened up the brand to a new stream of customers, with more people choosing to turn to online for their drinks needs.
“In 2020, our UK DTC is up over 500% year-on-year, and we’re lucky to have built the infrastructure and systems that allowed us to scale quickly,” Thomas added. “What’s great about DTC is that it really feels like we have a quick one-to-one relationship with our consumers, and learn product feedback and gather really rich data that helps us make better decisions for[both] our customers in retail and consumers.
“We’re excited by the future; with more people engaging with our brand online, we are able to be nimble and compete with larger competitors. At the same time, we know we need to play in multiple channels, so continue to push forward with our omni-channel approach, built around the Ugly consumer.”
Jumping on DTC
The advent of the coronavirus has seen a number of food and drink manufacturers turn to DTC supply models in the hopes of securing custom that has been lost during the wholesale closure of the foodservice and hospitality industries.
Heinz caused some concern among its customers when it launched a home delivery service of boxes containing a selection of its beans, spaghetti hoops and soup. However, it claimed the service would have no impact on its trade deliveries.
Despite the growing call for DTC services, there have been some areas of the industry that have been hesitant to jump on the bandwagon.
In particular, the food packaging industry could be forced to move with the times and risk being made redundant if they don’t adapt to the changing landscape. If products aren’t heading to the stores, then there is no need for big bulky packaging or large multipacks to fit on pallets.
In a recent comment piece for Food Manufacture, freelance packaging journalist and editor Paul Gander mused: “Attempting to cut out the middle-man appears a more tempting prospect than ever.”