January 23, 2018

Understanding the New Food Marketplace

By: Mark Baum, Chief Collaboration Officer and Senior Vice President, Industry Relations, Food Marketing Institute

Terms never spoken just a few years ago are now entering the lexicon of those involved with the food industry: Urban agriculture. Vertical farming. Lab-grown meat. Plant based protein. Food-as-a-service.

Statistics and forecasts about the future offer multiple explanations for this new vocabulary and emerging trends.

Population & Agriculture

The global population will grow from 7.3 billion in 2015 to 9.7 billion in 2050. Six out of seven people will consume 3,000 calories each day. Today, agriculture is responsible for 20 percent of the world’s greenhouse gas emissions, and 80 percent of antibiotics in the United States are used for farm animals.

These facts and forecasts may, in some cases, not appear to have much to do with each other. Yet, they all point to major changes ahead for food retailers.

Three New Realities

Change is happening at such a rapid pace that the food industry is likely to transform more in the next decade than it has over the past 50 years, and technology will play a critical role. The industry will evolve in three important ways:

First, the marketplace is shifting quickly. Every day consumers have new platforms, new retailing models and new brands that disrupt the traditional food marketplace, giving consumers more choice than they’ve ever had before.

While, at this moment, the 10 most established U.S. grocery retailers retain 50 percent of the food market, swifter and more innovative competitors are finding ways to improve on the elements of the food experience consumers “love” and eliminate the elements they “hate.”

Second, consumer demands and tastes are changing quickly, sometimes faster than retailers can manage. Global sales of “healthy food products” reached $1 trillion in 2017. Shoppers insist on transparency; they want to know how their foods are produced and sold. A recent survey found that 73 percent of consumers said they would gladly switch brands they have long been loyal to in order to serve a “higher social purpose.”

Finally, the world’s well-established food production processes are being transformed. Fueled by natural economic pressures, the battle to reduce scarcity and the challenge of climate change, food producers must rethink how they can supply the demands of a growing global and urban population.

Solutions

Fortunately, advanced technologies are providing solutions. Drones, robotics and artificial intelligence are now being added to the mix. Precision agriculture using digital tools and data analytics can improve yields, cut costs and increase crop resilience.

A new FMI point of view publication The Future of Food: New Realities for the Industry by Kurt Salmon, part of Accenture Strategy, suggests that all these challenges ahead for food retailing can be met. It offers five significant calls to action:

  • Innovate business models that will emphasize service-centric value.
  • Pivot to digital platforms in every corner of the industry.
  • Eliminate all forms of customer pain.
  • Create a new business ecosystem that reinforces partnerships.
  • Modernize every single business operation.

Steve Pinder, Managing Director at Kurt Salmon, part of Accenture Strategy, who led the report development says, “To battle scarcity, the food production system needs to be reinvented with a focus on lessening waste and expanding our food base. Applying technology to production efficiency can help immensely.”

The food industry must prepare today for the future with an exhaustive reexamination of all its previous assumptions and a reconstruction of its current business models. Download the report and learn more at www.FMI.org/TotalStoreCollaboration.

Steve Pinder, Managing Director, Kurt Salmon, part of Accenture Strategy will present at FMI Midwinter Executive Conference on Monday, January 29, 2018, in the keynote session, “The Battle for the Food Marketplace: A View from Silicon Valley.”