CHICAGO -- The food industry is at the shores of a major transformation, one with lots of opportunity for either premium or affordable brands and little for mid-tier products and venues once geared to the middle class. It will face continued consumer and regulatory demands for transparency, new labor models, urbanization and more, and how each retailer, operator, manufacturer and distributor reacts in the coming years will prove either their evolution or obsolescence.
Chicago-based research firm Technomic is revealing a new report that explores the future of the foodservice and food retail industry over the next 10 years as it faces major consumer, economic, regulatory and environmental shifts.
According to Food Industry Transformation: The Next Decade, the “developing upheaval in the food industry will affect every aspect of the business from farm to fork, including sourcing processing, distribution, operations and marketing.”
The food industry is projected to grow by more than $700 billion by 2025, reaching more than $2 trillion in annual sales.
“To grow their share of industry sales, food providers need to continually reimagine, reinvent and reallocate resources to align their offerings with the evolving technology-enabled supply chain and the changing needs of consumers,” said Technomic executive vice president Bob Goldin.
Among the seismic changes affecting the future of the industry:
- Changing Consumer Needs. Consumers are becoming more ethnically diverse, but also polarized in terms of age and income. They want either meaningful, upscale food experiences or maximized value. They are increasingly demanding healthful food, as well as transparency and social responsibility from brands.
- Changing Labor Models. “Staffing models will bow to popular pressure against low wages,” Technomic’s report states, and companies will learn that investing in people leads to low turnover and good PR. Technology will further revolutionize efficiencies in the workforce.
- Economic Costs. Regulation will continue to affect how companies do business, “adding layers of volatility to input costs.” Meanwhile, young and older generations are continuing to drive urbanization, which will affect not only distribution but also execution, design and profit per square foot.
- Supply Chain Shakeout. The demand for fresh foods and cleaner labels will continue to move the industry toward more organic, local and sustainable production. Specialty distributors will carve out a sizeable niche, forecasts Technomic, while consumers and the government will further push transparency.
The next 10 years will be a time of take-share competition vs. broad industry growth, and brands that want to grow “need to embrace big, experiential ideas in smaller, more efficient spaces.”
Among five exercises to help prepare for the food-industry upheaval, Technomic’s report urges companies to “act small to grow big,” embrace digital resources and big data and “pre-empt the demand for a health-focused food supply.”
It also forecasted growth for each segment of the industry between now and 2025, giving convenience stores a forecast of 3.5% annual growth due to an “increased focus on fresh prepared foods and emerging new formats.”
The c-store industry has the opportunity to evolve along with these seismic industry shifts, and many leaders are already strategizing around the trends Technomic highlights, including retailers creating new footprints for urban locations, fresh and healthy options and major investments in the workforce through competitive wages and appealing perks.
Click here to download the entire Food Industry Transformation: The Next Decade report.
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