We continue our consumer trends blog series with a high-level look at the fundamental shifts that are taking place in grocery retail and how food and beverage manufacturers can capitalize on these changes.
Grocery Store Trends
Today’s consumers have many options to choose from when purchasing groceries. Most shoppers (76%) buy groceries more than once a week, often to get fresh food, including produce and deli-prepared meals. While most sales still occur in traditional brick-and-mortar stores, retailers now offer grocery delivery and online services through programs like Amazon Fresh and Blue Apron. As the industry continues to evolve, food and beverage manufacturers must adapt to the following trends to compete effectively and sell their products via grocery retailers.
Tech-Savvy Shoppers and Aging Populations
Amazon’s acquisition of Whole Foods for $13.7 billion—a deal that sent shock waves across the entire grocery industry—was arguably one of the most significant changes of 2017. Immediately following the acquisition, the electronic commerce and cloud computing company began making major changes at Whole Foods. Such changes include cutting costs, selling Amazon’s tech brands in stores and internal restructuring, according to an article by Business Insider.
To keep pace, food and beverage manufacturers need to recognize their products’ place among these new innovations. By identifying ways to capitalize on the needs of tech-savvy generations and older populations who may have a harder time navigating store aisles, food and beverage manufacturers will be more likely to increase their reach and drive sales for their products. One way to do so is by selling their products online.
As time-starved consumers and older generations increasingly seek out opportunities for more convenience, they are finding innovative ways to bring the grocery aisles to their doorsteps. In the United States, online grocery sales are expected to reach $41.7 billion by 2022, according to a 2017 report from Packaged Facts. This makes it easier for supermarket retailers to free up shelf space for more “exciting” products like fresh, exotic or artisan foods.
Of course, there are also barriers to online grocery shopping. For example, 69 percent of consumers say they are concerned about product freshness, while 62 percent express concern with overall quality. The longer a product stays fresh, the more likely it can be sold online, which places added pressure on food and beverage manufacturers as they seek to increase the shelf life of their products. Food and beverage manufacturers can increase the shelf life of their products through natural sources, such as enzymes and vinegar-based solutions while meeting demands for natural, simplified ingredients.
Eating Out, At Home
In addition to buying groceries online, many Americans are eating out less and citing cost as the primary reason, according to a Reuters/Ipsos poll. But Americans aren’t the only consumers staying home. In a 2016 survey by The Nielsen Company, nearly two-thirds of global respondents said they follow a diet that limits their consumption of certain foods, with higher rates in Africa and the Middle East (84%) and the Asia-Pacific region (72%). With an increased focus on health and wellness and an aging population, more educated and connected consumers worldwide are adopting “back-to-basics” mindsets. Oftentimes, this means eating at home in order to avoid artificial ingredients, hormones, antibiotics or genetically modified organisms because less than half of today’s consumers feel current product offerings are meeting their needs. Food and beverage manufacturers can better serve consumers by delivering products to grocery stores and other retailers free from unwanted ingredients.
While the recent shift in dining out is typically associated with economic recessions, economists say it signals a change in consumer lifestyles, particularly among aging millennials. As the nation’s largest living generation, millennials (individuals born between 1980 and the early 2000s) are an important audience for food and beverage manufacturers. In addition to seeking more convenient food and beverage options that match their busy lifestyles, aging millennials are spending their money on home-cooked meals rather than eating out. When they do dine out, millennials appear to be spending more per restaurant, treating the task as more of an experience rather than simply a means to consume. As millennials become more conservative with their money, food and beverage manufacturers can capitalize on the demand for products that bring indulgent experiences close to home by selling these items to grocery retailers.
Moving forward, food and beverage manufacturers need to understand the fundamental shifts that are taking place in grocery retail and how today’s consumers are driving these changes. By recognizing the growing demand for more healthful products and indulgent experiences and providing grocery retailers with products that help them deliver on these demands, food and beverage manufacturers will be able to compete more effectively in 2018.