The first two rules of marketing are “The Consumer is King” and “Consumers are always evolving”. These adages are truer today than ever. The last few decades brought some of the most drastic changes in consumer demographics, preferences and product needs. Although farmers do not always sell directly to consumers, they should be aware of the major trends, which are likely to reshape the entire food supply chain; from farmers, assemblers, manufacturers, distributors and wholesalers, logistics handlers, food retailers and food service operations. Traditional supermarkets and grocery stores’ market share of food retailing has been shrinking over time as a result of these trends as certain demographics of consumers are overwhelmingly choosing to access their food through alternative and emerging new outlets. What do these changes mean for farmers and for the entire food supply chain? What should farmers expect from these changes? How can farmers position themselves to understand these trends in order to stay current and relevant?
In this article, we identify 10 key emerging trends that will likely shape the food market and highlight the implications for farmers. We also identify new sources of market-relevant information to help farmers keep abreast of market changes.
10 Key Food Market Trends
1. The Amazon Effect
The term, “Amazon effect” refers to the recent rapid increase in e-commerce and shift to online shopping. Amazon has changed the way consumers shop and bring goods home, including food, with huge impacts on traditional retailers. With its recent acquisition of Whole Foods, consumption patterns are likely to change even more drastically. With Amazon’s dynamic pricing, the price of an item can change multiple times per day based on who is shopping at that moment. Combined with its fast home delivery, traditional brick & mortar supermarkets are struggling to compete and on what metrics (quality, price, form and etc.). Farmers and their marketing organizations need to understand the Amazon effect, the competitiveness of their current supply chain, and its implications for what food consumers want and how they want it.
2. Browning of America
The American consumer looks very different from two decades ago and food preferences are changing along with the shift in ethnic population growth. We call this population shift “The Browning of America”. By 2050, 53.9% of the population will be Hispanic, African American or Asian American, 18% more ethnically diverse than 2010. Coupled with the change in demographics is the fact that the millennials and generation Zs’ are global citizens having travelled and or tasted foods from around the world at a much earlier age than all previous generations. These changes are causing a revolution in the food supply chain. Innovation in the food industry has reflected global taste profiles and production methods that U.S. farmers will be required to understand.
3. Sustainable Food Supply Chains
Consumers are expressing strong interest in sustainability. They increasingly want to know that the food they consume is produced in sustainable ways, the raw materials used are grown in sustainable ways and the packaging contributes to improved sustainability. Food companies are responding by factoring sustainability principles into their raw material sourcing, manufacturing practices, packaging, distribution and logistics. More food companies are measuring their gains by using life cycle inventory (LCI) & life cycle assessment (LCA) methods to reduce the environmental impact and ecological footprint of their production and marketing processes, and touting these changes as part of their marketing efforts. Farmers can take advantage of these trends by aligning their practices to reduce their environmental foot-prints and targeting their products toward companies wishing to meet the consumer’s demand for sustainable products.
4. Traceability (blockchain)
Consumers are demanding more information on who, where and how their food is produced. Blockchain technology is expected to be the technology that coordinates the entire supply chain while improving transparency, streamlining recalls and reducing waste. Blockchains are peer-to-peer databases with built-in features that ensure trust, security, and transparency (maintains an ongoing master list of everyone who has ever interacted with the block). A single block is composed of time-stamped piece of information (data) along with a digital fingerprint, and the fingerprint from the previous block. It is the fingerprinting process which links the blocks together - hence the name “blockchain”. Currently, blockchains are not widely adopted by agri-food firms. Many are still exploring approaches to use it for their own internal recordkeeping and information storage. Farmers need to follow this technology since their information will be a critical block.
5. Generational Demand
Understanding the different preferences of the six major generations is what most food firms are tracking closely. Mining scanner data (data from every item that is scanned in a store as well as from online sales) reveals consumer preferences. Product development is directly tied to this information as well as innovations in how and where products are sold. As with other demographic information, each group or generation in this context along with subgroups within a generation is utilized to decide product offerings and where to place food products on the shelf. As bricks and mortar stores learn from online sales, direct advertising to consumers’ phones based on generational demographics is increasing. Dynamic pricing is also being used to attract different demographics to particular products that are similar to current shopping basket items. Changes in the supply chain inputs are increasingly a result of the analysis and dissection of generational and other demographic subgroups.
6. Farmer to Market Apps
Few farmers have adopted technologies to better connect them to the market and bypass traditional marketing channels. We see huge opportunities for farmers, especially in metropolitan areas, to develop new apps to connect directly to consumers and provide home delivery services. Groups of farmers with credible grading and packaging capabilities may well be able to offer products and services that reduce the impact of the Amazon Effect on them. Connecting to retailers that offer home delivery services may also be an avenue.
7. Urban farming
Urban farming has several advantages: closeness to a high concentration of consumers, reduced logistics costs, and direct consumer marketing opportunities. In urban areas that have experienced significant depopulations, an added opportunity may exist to access small vacant lots for farming purposes. Hydroponic technology now allows urban farmers to produce targeted vegetables in clean and controlled environments for supply to grocery stores, homes and institutions. The USEPA’s Urban Agriculture Resources and Related LinksSite provides resources related to urban agriculture which farmers can take advantage of. Farmers’ experience in agriculture may give them an advantage over others interested in urban farming.
8. Manufactured meats & seafood
The prevalence of science-based foods such as cell-cultured meat, laboratory produced seafood and plant-based meats is still very low. However, many companies are heavily involved in research and development efforts in cellular agriculture which could bring to market new products that are acceptable to consumers. The growing concern about the environmental and animal welfare footprint of meat operations and growing willingness of Generation Z to try new alternatives should be of concern to livestock farmers, aquaculture operations and others. If these new foods catch on, the effects could rapidly change the livestock industry as we know it.
9. Non-traditional channels
Historically, a firm focused mainly on one level in the food supply chain. Tech firms, home construction suppliers and convenience stores all have emerged as food suppliers that are consistently taking market share from the traditional food retail players. For example, Amazon and Gordon Food Service own food retail stores and Menards food section is growing. Simultaneously, Kroger manufactures as well as retails food. In addition, as retailers search for competitive approaches, they are operating multi retail formats under one company: hypermarkets, club stores, convenience stores and online sales. Home delivery is popular in several urban communities but is unevenly spread across the U.S. This blurring of lines between manufacturing and retailing along with retailing formats presents problems for farmers to understand the landscape largely because of the speed that this phenomenon is occurring all at the same time.
10. New & constantly changing products
A traditional supermarket has approximately 45,000 stock keeping units (unique products) for sale. On average, over 22,000 new food and beverage products are introduced annually with approximately 14,000 of them being launched in the U.S. The majority of these products fail or are planned for limited product lifespans but with major impact on improving brand names. Consumers appear to fully engage in this process of experiencing different taste profiles, cultural products and unique product attributes (i.e. cans that reflect the temperature of the content it contains). These ever changing market opportunities are unstable, some of which only last for weeks, and are difficult for farmers to strategically plan for or around. Farmers need to be directly connected to the end consumer to maximize and to prolong these market opportunities.
How to Stay Current: Information and Data Sources
Our top 10 list of emerging issues in the food industry is overwhelming. Therefore, we have included several sources that we use in our research, courses and public presentations. The food industry databases that have the most relevant data and information include:
- Food Institute
The food industry websites that provide daily commentary on changes in the food industry include: