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November 19, 2019

The US food industry in 2020 – the megatrends to watch

Our columnist Victor Martino predicts the six megatrends which will have a marked impact on the US food industry in 2020.

Our columnist Victor Martino predicts the six megatrends which will have a marked impact on the US food industry in 2020.

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How is technology having an impact on Consumer buying behavior?

As the world rapidly becomes more connected, it is important for brands to understand the impact that improved technology is having on consumer purchasing behaviors. To react effectively, brands must know how to engage with increasingly digitally savvy consumers. GlobalData’s latest Trend Tracker report provides an analysis of Digital Lifestyles – one of GlobalData's top consumer trends for 2022. The report includes an overview of how digital lifestyles are evolving, including the significant impact that the COVID-19 pandemic had on accelerating digitalization, and how this trend is emerging across different Consumer sectors. Key features included in the report:
  • A breakdown of the trend’s prominence across sectors
  • Insights into consumer online penetration, preferred electronic devices and engagement
  • The key drivers and challenges impacting the digital lifestyles trend
  • A spotlight on key innovations set to reshape the consumer landscape
  • Analysis of what’s next for digital innovations and how brands can leverage the trend
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This is the time of the year in the US when consumer food publications, consulting firms, food companies and others offer up their views on what the hot food trends for the coming year will be.

Their focus is primarily on particular foods, cuisines, ingredients and dietary trends.

In contrast, my focus – and this is my third annual column on the future-looking topic for just-food – is a bit different. What I try to do is outline six key megatrends that food and drink companies large and small should be on the lookout for and put a focus on for the coming year.

My goal is to be an early warning system of sorts and provide a partial roadmap for the industry for the year ahead, along with shining a light on what might be business development opportunities for CPG companies within these megatrends.

Additionally, my megatrends don’t expire at the end of the year. Rather, they’re long-term trends that will begin to pick up major steam in the year designated and will continue to remain important for some years to come, such as sustainability and omni-channel, two of the megatrends from my 2019 column that caught fire with consumers and in the industry this year and will continue to be key in 2020.

The year 2020 is going to be a big one for the US food industry, just like 2019 has been. The industry is undergoing a period of dynamism like never before in recent history and competition for packaged goods companies and brands has never, in my analysis based on nearly four decades of experience, been greater than it is today.

These are my six industry megatrends for 2020. Obviously there are more, but these six should command the attention of major food companies, emerging brands and start-ups alike. They encompass both the industry in which companies and brands do business as well as the larger consumer and stakeholder environments the industry must also take into consideration.

Alternative ‘meat’

No other category I can think of has received more focus and attention both inside and outside the industry than alternative meat or protein – faux meat for short. 

The leader of the category is plant-based meat, which has shaken up animal meat so far largely because of the efforts of two start-up companies, Beyond Meat and Impossible Foods. 

These two companies have in a mere couple years been able to place their plant-based ground beef and other products in nearly every retail grocery chain and restaurant operation in the US. And even more importantly, the products are selling.

This phenomenon has led nearly every major meat and big food company to launch its own brand of plant-based meat, along with blended versions, which is the latest iteration. Blended features plant-based and animal meat together in a single product.

The best evidence of just how major a development alternative meat became in 2019 is that Tyson Foods, which is synonymous with animal meat, this year announced it was no longer a “meat company” but instead is now a “protein company.” Faux meat as a category can’t get a bigger endorsement than that.

The alternative meat category will continue to grow into 2020. We might even see the first commercial introduction of lab-based or “cultivated” meat in 2020.

There will be more new product introductions by the likes of Beyond Meat and Impossible Foods, along with launches from Big Meat and Big Food.

Last month supermarket giant Kroger introduced the first store brand alternative meat products under its US$3bn+ Simple Truth brand. Look for other big grocery chains to follow Kroger’s lead. 

Most new categories in the US take a decade or more of proven success before retailers start cloning the products under their own brands. Not alternative meat. It’s going from zero to hero in only a few years.

Nearly all of the alternative meat or protein products have soy as the central ingredient. Look for other plant-based ingredients to begin emerging in faux meat in 2020. Jackfruit for example is an excellent meat analogue. I expect to see numerous new products introduced with it as the animal meat substitute. Cauliflower is also being used by many chefs to create faux meat products. It too could emerge as a major plant-based player in alternative meat starting next year.

Food waste

The issue of food waste has been heating up inside and outside the industry in a significant way for the last few years, reaching a high point this year.

About 40% of all food produced in the US goes to waste, which is an unsustainable practice.

The majority of the food waste happens in consumers’ homes. However, a significant percentage occurs throughout the food supply chain, from the farm, to food processing plants, to grocery stores.

This year a number of major food companies have made serious commitments to reducing food waste on their end of the supply chain. Additionally, a new realisation has evolved that food waste can be profitable, best exemplified by the emerging practice of edible upcycling, which turns food waste and processing by-products into branded packaged food and drink products.

Look for food waste, including new ways food companies and entrepreneurs can turn it into cash, to be one of the leading issues the industry and food companies will need to address in 2020.

State and local governments and other external stakeholders are putting a major focus on the issue and they expect the food industry to join forces with them to reduce the amount of food wasted in America. 

It’s a socio-political, ethical and business issue. It’s not only a problem. It’s also an opportunity for food companies and the industry as a whole.

The convergence of food and beauty

One of the biggest under the radar trends that emerged in the US in 2019 is what I call the convergence of food and beauty. 

It’s a two-part phenomenon: The growing use of food and beverage products for cosmetic needs along with the rapidly-increasing use of food as the primary ingredient in skin care and beauty products.

Everything from animal-derived collagen protein to celery, pomegranates, tumeric and green tea are being used as the main ingredients in skin care products. 

At the same time, food and beverage products – new age drinks, teas, bone broths, snack bars and more – are being created and primarily positioned as nutricosmetics or food and drink products that promote skin, hair and nail health.

This collision of food and beauty fits right into the natural products, clean label and wellness trends and movements in the US.

Eric Pierce, the vice president of business insights for New Hope Network’s NEXT, put it best to me earlier this year when I identified the trend on my Twitter feed. 

He commented on it, did some research, and said it definitely is a growing trend evidenced by exhibitors and data from the two Natural Expo West trade shows held in 2019.

“It’s all about obtaining beauty from within,” Pierce told me after looking into the phenomenon. “How we feel, how we live, how we look are becoming one,” he said.

Look for the convergence of food and beauty to grow significantly in 2020 with more new products featuring foods and food ingredients and more new food and drink brands and products specifically positioned for consumers’ cosmetic uses.

This phenomenon opens up an entire new market for food ingredient and branded food companies. Food is becoming more and more primary in American’s lives, evidenced by the strong consumer acceptance of these products, which are on the shelves of upscale and discount stores as well. 

Even dollar stores like Dollar General and Family Dollar have recently launched beauty products featuring food as the primary ingredient.

The consumer

The consumer, empowered by social media, Google, a proliferation of brands and products to choose from and retail channels to obtain them, including direct-to-consumer, has more control over the food industry in the US today than at any time in the past. 

The consumer, not as in the past the big brands via push marketing, is in the CPG catbird seat. This new reality will only continue to solidify. 

What this means for food companies and brands is that they must put renewed emphasis and a laser-like focus on understanding consumers and what matters most to them when it comes to food products, brands and the culture of the company behind them. Customer experience trumps trade marketing starting in 2020. 

Those companies that understand and invest in this will have their brands remain on grocery shelves. Those that don’t will find that in today’s world where supermarket shelf space is at a premium, that something (as in branded products getting discontinued) has got to go. 

The same with consumers. No longer do they have to buy the big brand at the grocery store. Instead they can go to Trader Joe’s, Costco or Aldi and buy those retailer’s unique and popular own-brands, or have the small brand that fits their desires delivered right to their front door.

The grocery retailer 

Grocery retailing is going through profound changes in the US. One of these major changes is the retailers are moving from being private-label grocers that clone a manufacturer’s product under their own label and sell it for less money to following the model best exemplified by Trader Joe’s, Costco, Aldi and Lidl.

To a lesser extent Whole Foods and big regional chains like Wegmans on the east coast and Raley’s in northern California are also becoming branded product developers just like CPG companies.

Kroger and Albertsons-Safeway are two chains moving in this direction, as is Walmart with its fairly new Sam’s Choice brand, which includes some unique premium and organic products developed specifically by the mega-retailer.

More grocery retailers will start becoming full-fledged product developers and brand creators in 2020. This might be the single biggest threat to CPG companies in the coming years because grocers own the in-store real estate, like the margins they make on store brands and increasingly see it as a major way to differentiate themselves with consumers.

They’ve learned that when asked in surveys shoppers give unique brands and products as the number one or two reason they shop regularly at Trader Joe’s.

The emerging brands’ reckoning

Since about 2014, and particularly over the last three years, venture capital firms have been investing shopping carts full of money into food and drink start-ups and emerging or challenger brand companies. 

It makes sense because the packaged goods industry is experiencing major change. Big no longer means better nor guarantees success, as we’re watching in real time the travails of Kraft Heinz.

But these venture firms have also been demanding little in terms of performance from these start-up and emerging brand companies. It’s been a very cordial relationship. 

But I’m starting to see a new realisation, I call it a “new reckoning” from numerous venture capitalists invested in CPG companies. This new reckoning is that the time has come to be a bit more focused on performance and return on their investments.

As 2020 hits the calendar, expect to see investors wanting tighter metrics from the CPG companies they’re invested in. Expect to see more primacy placed on performance beyond how many stores the start-up has got into in two years, which is a common metric used in press releases by the companies and their investors. 

The problem, though, is in today’s slotting fee-focused “churn-and-burn” new product environment new products often get taken off the shelf to make room for the next new thing in less than a year unless they perform extremely well. Getting on the shelf isn’t very difficult. Staying on the shelf is a major achievement.

There’s been a lot of shake out in start-up and emerging brand categories this year. For example, you won’t find insect-based snacks, a big investment category a few years ago, on very many supermarket chain shelves in the US.

This reckoning is part-and-parcel with how increasingly competitive the packaged foods business is becoming.

The famous quote from management guru and former Intel CEO Andy Grove – “only the paranoid survive” – isn’t all that far fetched applied to the food industry in America today.

Competition is only going to increase in 2020. Stay tuned.

just-food columnist Victor Martino is a California-based strategic marketing and business development consultant, analyst, entrepreneur and writer, specialising in the food and grocery industry. He is available for consultation at: victormartino415@gmail.com and https://twitter.com/VictorMartino01.

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Free Report
img

How is technology having an impact on Consumer buying behavior?

As the world rapidly becomes more connected, it is important for brands to understand the impact that improved technology is having on consumer purchasing behaviors. To react effectively, brands must know how to engage with increasingly digitally savvy consumers. GlobalData’s latest Trend Tracker report provides an analysis of Digital Lifestyles – one of GlobalData's top consumer trends for 2022. The report includes an overview of how digital lifestyles are evolving, including the significant impact that the COVID-19 pandemic had on accelerating digitalization, and how this trend is emerging across different Consumer sectors. Key features included in the report:
  • A breakdown of the trend’s prominence across sectors
  • Insights into consumer online penetration, preferred electronic devices and engagement
  • The key drivers and challenges impacting the digital lifestyles trend
  • A spotlight on key innovations set to reshape the consumer landscape
  • Analysis of what’s next for digital innovations and how brands can leverage the trend
Download this report to keep in touch with the more digital consumer.
by GlobalData
Enter your details here to receive your free Report.

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