Last week, we attended the Food and Ag at the Intersection symposium in Omaha, Neb. Through a series of interactive panels, symposium speakers discussed the trends that will have the longest shelf life to generate profits or capital investment.
Food and Ag Trends
Each year, more than 20,000 new products are launched in U.S. food stores, according to the U.S. Department of Agriculture Economics Research Service. Yet, approximately 85% of new consumer packaged goods (CPG) eventually fail. With consumer trends rapidly moving the needle into new and more complex areas, food and beverage manufacturers need to stay current on the trends shaping the industry. Below, we dive into the major trends and insights discussed at the Food and Ag Intersection symposium.
During his keynote presentation, Jayson Lusk, distinguished professor and head of the ag economics department at Purdue University, explained how rich-poor spending gaps tend to grow in good times and fall during recessions. In particular, he pointed out that demand for animal products has fallen among high-income consumers while requests for fresh fruits and vegetables have increased. He said the wealthy typically care more about quality, sustainability and environmental issues because they have the financial means to do so, whereas low-income consumers focus on price. Additionally, he highlighted the significant knowledge gap around genetically modified foods, pointing out that most consumers are against GMOs, yet many (especially low-income consumers) cannot define the term.
Lusk also discussed what these consumer trends mean for our agriculture industry. “What happens to the U.S. livestock industry directly impacts the rest of agriculture because many crops are used to feed our livestock,” he said. In 2018, the total farm receipts were $373 billion, and $175 billion was for animal products. If there is less demand for meat products, crops like corn and soybeans will also naturally take a hit. As a result, meat demand is becoming an increasingly polarized political issue and topic of concern for food manufacturers and farmers alike.
We are also seeing new regulations around sustainability, animal welfare and overall health as consumers become more mindful of their food and beverage choices and the potential environmental impact. “The problem with these types of consumer-driven regulations is that changes cannot happen overnight,” stated Bill Lapp, president of Advanced Economic Solutions, during a panel discussion. When prices increase, it becomes more expensive for farmers and manufacturers to adhere to consumer-driven regulations and demands. Before making drastic changes, farmers and manufacturers must evaluate how much consumers would be willing to pay for products that adhere to said requirements to generate a return on their investments.
Take cage-free egg laws, for example. California and Massachusetts enacted laws requiring that eggs produced and sold in their states be raised cage-free. Rhode Island and Michigan followed suit with bills requiring cage-free production and sales, while Oregon and Washington banned traditional cages. Conventional egg producers outside those states fear that as more egg-importing states enact these laws, they will also be required to go cage-free, which would cost them more per bird in the long run.
Several of the panelists referenced the plant-based foods trend. Historically, consumers have gravitated toward meat as their primary source of protein, but dollar sales show that plant-based alternatives are quickly gaining traction. Motivated by changing ethics and growing health and environmental concerns, more than a third (39%) of Americans are actively trying to eat more plant-based foods, and 87% say they are trying to consume the correct amount of protein from various sources. According to Nielsen Product Insider, plant-based products that are high in protein drove the highest dollar growth within the diet and nutrition, desserts and yogurt categories in 2017.
The meatless burger revolution is one example of how rapidly the plant-based protein trend is growing. As Bruce Friedrich, executive director of Good Food Institute, contended during his panel discussion, “Just last week, the plant-based meat alternative company, Beyond Meat, went public. Its main competitor, Impossible Foods, reported high demand that it’s causing a shortage, and Burger King announced plans to roll out an Impossible™ Burger nationally.” Similarly, plant-based milk is becoming increasingly popular as consumers turn away from traditional dairy products and instead opt for products they deem as healthier. As consumers continue to look for ways to improve their diets and reduce their environmental impact, there is room for growth with plant-based products.
The Digital Evolution
Increased access to new technology has exposed consumers to new types of food and beverages, making it easier to track consumer searches. As Steve Lerch, founder of Story Arc Consulting, stated during a panel discussion, “Google searches don’t lie.” Lerch explained that you can tell a lot about what consumers want just by monitoring their Google search trends — and the results don’t always align with what we may expect. For example, searches for organic and non-GMO foods peaked in 2007, yet industry leaders continue to keep the conversation growing strong today even though many consumers have lost interest.
See related: Anderson Partners Insights Page
In 2003, we also saw decreased searches around terms associated with being “skinny” as consumers shifted their focus toward “getting fit.” As a result, we also saw a rise in boutique fitness studios and clubs like Soul Cycle and CrossFit, which focus on convenience and healthy lifestyle choices over simply being skinny. While consumers approach food shopping differently than in years past, research shows that taste, safety, price and convenience remain important. Finding a balance between all these factors may be challenging, but it’s also necessary.
Looking back on the discussions at the Food and Ag Interesction Symposium, it’s evident that consumer trends are impacting agriculture production now more than ever. The changes will be imminent and ongoing from farm to table in the years ahead.