If you're a big CPG com-pany and you're sitting on the sidelines, you're going to miss your opportunity.

Burn through the last box of Kraft Macaroni & Cheese? Run out of Maxwell House coffee pods? No need to run to the store. Just push a button on a little gadget in the pantry and in a couple of days, like magic, replenishments land on the doorstep.

Burn through the last box of Kraft Macaroni & Cheese? Run out of Maxwell House coffee pods?

No need to run to the store. Just push a button on a little gadget in the pantry and in a couple of days, like magic, replenishments land on the doorstep.

A new service from Amazon.com called Dash is the latest, and perhaps most aggressive, effort yet by Internet retailers—and mature consumer packaged-goods companies like Kraft Foods—to tap into the multibillion-dollar potential of online sales of groceries.

Today the industry stands out as a laggard. Online sales of food and beverages accounted for just 2 percent of the $300 billion-plus that consumers spent in online retail in 2014, according to an estimate by research firm eMarketer. Looked at another way, online sales accounted for just 1 percent of the $666 billion of consumer packaged goods purchased in 2013, according to a report by Boston Consulting Group and the Grocery Manufacturers Association.

In an industry where revenue barely budges—total sales rose just 1.5 percent in 2014, according to market research firm IRI—the web represents the biggest opportunity for processed-foods makers in years. The Grocery Manufacturers' report forecasts Internet sales of groceries will make up 5 percent, or about $35 billion, of total sales by 2018 and 10 percent shortly thereafter.

That's why Northfield-based Kraft and peers including Mondelez International, Procter & Gamble, General Mills and Coca-Cola are shifting more dollars into digital marketing, forging relationships with e-commerce retailers and burning their tried-and-true conservative playbooks in favor of novelties like Amazon Dash.

“Our goal is to be where our customers are shopping—including online,” says Basil Maglaris, a Kraft spokesman. “This gives people a fun and easy way to order the products they love.”

So far, though, the industry's efforts are not much more than a stab in the dark. “Everyone knows (the online channel) is important and it's going to matter, but nobody's really put a good formula in place with how to be present in e-commerce and keep their traditional (bricks-and-mortar) customers happy,” says Rich Nanda, a Chicago-based consultant at Deloitte whose clients include packaged-food companies. “I wouldn't say anyone has it quite figured out yet.”

Dash, for instance, is likely to be just the first of several iterations of an emerging technology—after all, how many consumers are going to embrace little buttons all over the house? Still, industry analysts say it's a smart play as companies explore ways to build brand loyalty on the Internet.

UPSTARTS
Unlike conventional stores, where brands must fight—and pay—for prime shelf space, online shopping venues like Amazon have an essentially endless shopping aisle, which levels the playing field for upstarts that lack the marketing budget and clout of the establishment players. That has allowed agile little guys to build sales, particularly if they offer products touted as local, hand-crafted, organic or allergen-free, says Beth Bloom, a food and drink analyst at Mintel.

“The demographics of people who are shopping online favor the smaller brands,” Bloom says. “We're talking about millennials, younger Gen Xers and higher-income households, which tend to be more interested in newer offerings.”

Most big packaged-foods company executives have been slow to embrace the web. In part, it's because they don't want to alienate longtime retail partners that fear online sales will eat into in-store sales, particularly if pricing is competitive. They also face structural issues. Traditional consumer packaged-goods companies were built on the premise of scale: mass production, mass marketing, mass distribution.

But increasingly these companies are realizing that standing pat may be even riskier. In a recent Deloitte survey, 92 percent of CPG executives agreed that “the e-commerce channel is a strategic sales channel for CPG companies.” (Only 43 percent of them, on the other hand, thought their company had a clear, well- understood digital commerce strategy, the survey found.)

One look at their marketing budgets shows many of the companies are serious about the shift. Deerfield-based Mondelez is undergoing a massive reconfiguring of its ad spending. Digital is expected to make up 25 percent of its global media budget this year, up from 13 percent in 2013. In North America, it plans to allocate more than half its ad budget to digital channels, up from 25 percent in 2013, a shift the snack-foods company says helps it better influence customers “in the point of buying.”

“If you're a big CPG com-pany and you're sitting on the sidelines, you're going to miss your opportunity,” says Bob Tantillo, senior manager at West Monroe Partners, a Chicago-based consulting firm whose clients include large and midsized consumer products companies. “CPG companies have to realize that any shift in share is going to be a big blow.”

And with slow growth and antsy investors, these companies are in no position to let opportunities pass them by.To view this article as it originally appeared in Crain's Chicago Business, please click here.