Consumer Food Products Face A Sea Change

Mark Osborn

From 3D food printing to precision agriculture, the technologies affecting the food industry are moving faster than ever. Only two years ago, most of us thought drones were fodder for futuristic sci-fi movies. Today, several companies have already run pilots for package and food home delivery.

Driven by changing demographics and the need for sustainable and secure food supplies (among other factors), there’s a sea change happening that’s affecting how products are made and sold and how consumers buy them.

We’re talking about these market changes and innovations now because the speed at which change happens will only increase as technologies advance, and because it takes time for companies to make fundamental shifts in strategy and operations. By starting now, you can stay ahead of the change and be poised to profit from it.

Keeping up with change

Various food trends, such as companies that deliver fresh food to consumers’ homes, have changed the food industry and disrupted sales for more traditional companies. These trends could cut into your market share and revenue if your company is not able to stay relevant to consumer demands, especially if other companies are keeping up.

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While the often-cited millennial generation play a major role in driving change, other groups are also having a significant impact on the future of food.

Generation Z, those born in 2000 or before, is already on the horizon and ready to change the way our society handles food. You might not think that such young people would influence food purchases yet, but according to Cassandra Report: Gen Z, 93 percent of parents say that their Gen Z children influence the way the household spends money.

Also, a survey by Piper Jaffray showed that Gen Z teens tend to spend the bulk of their money on food and drinks, compared to teens in previous generations, who spent their money on clothing. Both millennials and Generation Z are much more likely to buy groceries online than previous generations, according to the AC Nielson Global E-Commerce and the New Retail Survey.

Meanwhile, on the other end of the spectrum, according to a report by The NDP group on trends shaping the future of food and food service, the baby boomer generation is experiencing a variety of lifestyle changes, such as retirement, becoming empty nesters, and developing health issues—“all of which are typically associated with major changes in the way we approach food and beverage consumption.”

Healthy single-serving and pre-portioned food, prepared foods, and easy-open packaging will become increasingly important to the boomer demographic. As their income shifts to retirement levels, they are likely to seek more ways to reduce food waste and cook at home more often. Home grocery and medical delivery service will have strong appeal to those with limited mobility or other health issues. When they do go out to eat, according to Technomic, they’ll prefer sit-down meals to fast casual options, and will put a priority on friendly and attentive staff.

When it comes to technology, those in the upper end of the population shouldn’t be ignored just because they weren’t “born digital.” According to research released earlier this year by the Pew Research Center, 76% of those aged 60-69 are regular Internet users, 87% own cell phones, and nearly half own smart phones and use social media. The numbers are 10 to 15 percent higher for younger boomers in their 50’s.

In short, while millennials have been changing the landscape of the food industry, it’s important to also keep track of how Generation Z is doing the same, and not to lose sight of the still-substantial role boomers will have in driving new product formats and consumption models, as they’ll be the largest generation through 2030.

Where to focus

It can be overwhelming to figure out what to focus on as consumer demands continue changing. But we’ll let you in on a little secret: At the moment, two essential areas in food are personalization and sustainability.

“In the future, businesses that do not incorporate an element of personalization into their offering risk losing revenue and consumer loyalty,” says The Deloitte Customer Review. Yet the future isn’t far off: Consumers and companies are already moving quickly in that direction. Generation Z wants personalization even at the expense of privacy, according to Retail TouchPoints.

Sustainability in food is also essential as our world is facing a global food crisis. In addition, younger generations care about companies’ impact on society and the environment.

Moving with the current

So how do you adapt to the sea change that is happening? Just as technology is creating advances in the industry, technology can help you meet the challenges.

The Deloitte Customer Review acknowledges that it is difficult for a large company to provide personalized products when its profit model is based on mass production. How do you offer consumers personalized products when you need to push out a large number of products to make a profit? The review discusses the concept of mass personalization by using technologies such as 3D printing to reduce production costs.

While mass personalization may seem complicated and expensive, the review explains that it “allows businesses to simplify their product and service range which means lower marketing and production costs while creating more predictable demand.”

You can give consumers a limited number of customized options, or allow them to create their own product. An example of the first option would be to offer a few different flavors of a food product or a few set choices of food baskets or food kits. An example of complete personalization is Coca-Cola’s Freestyle machine, which, as Dr. Volker Keiner describes in Digitalist Magazine, allows consumers to personalize their soda with more than 100 unique flavor choices. Food kit companies also allow consumers to choose the recipes they want; the companies then send customers the ingredients they need, in the proper amounts. 3D food printing is also expected to offer nearly limitless capabilities to create individualized food.

In addition to allowing consumers to personalize products, your company can use software to track their behaviors and preferences. This enables you to provide personalized offerings based on their past history.

As for sustainability, software allows you to track the ingredients in your food products throughout the farming and production processes. This gives your company the ability to make changes as needed to create more sustainable methods. It also empowers you with information you can share with your customers so they can know more about your practices and ingredients.

Rapid change is normal to consumers of all types of products. Businesses that aren’t running live – creating flexible models that can adapt equally rapidly to the changing demands of consumers – are falling behind, and this applies to the food products industry as much as any other.

Right now, it’s critical to focus on how you can offer consumers more personalized choices, even if you need to start small, with just a few options. It’s also important to consider ways to make food products more sustainable to satisfy consumers and remain competitive despite a global food crises. Sustainability is good for both the consumer and your business’s bottom line.

For more information on the challenges facing consumer products, food retail and agriculture companies today, join us for a discussion on the future of food. Register today!

About Mark Osborn

Mark Osborn is Vice President of Digital Strategy and Business Planning for Consumer Products at SAP. He focuses on strategy and thought leadership development, strategic growth initiatives, and operations and go-to-market planning. Prior to his current role, Mark was the global lead for the Consumer Products industry marketing for SAP. He holds a BA from Washington University in St. Louis, Missouri, and an MBA from the University of Minnesota, Carlson School of Management.