Food Producers Need To Focus On Technology, Health And Sustainability

It is becoming more difficult to be a successful food company. Despite industry-wide revenue growth, major players are seeing their sales shrink, their production costs rise and competition from small brands intensify.

The global pandemic has exacerbated the impacts of changing consumption trends and made it more urgent to tackle some of these issues.

Once, it was beneficial to be big, to have an integrated supply chain and costly capital equipment as a defensive barrier against smaller competitors, those small competitors are now using digital tools, novel routes to market, and other innovations to undermine those defensive barriers, respond to consumer demands and take market share from established incumbents.

There are six key megatrends that will shape the industry for the next 30 years, new research by Lux Research claims. Companies must recognise and adapt to these trends to survive and thrive, the group says. These are:

·        Food for health – beyond satiety and nutrition, foods need to satisfy an expanding list of expectations

·        Increasing sustainability – corporate statements will not suffice; truly doing more with less must be the aim from packaging to production and distribution

·        Incorporating ubiquitous sensing – as sensors get smaller, cheaper, and more powerful, their inclusion in all processes becomes imperative

·        Mastering the role of the microbiome – from production methods to diagnostics, mastering this realm will be make-or-break for food companies

·        Adapting to new industry structures – growth will come from uncomfortable places like new channels and markets; meanwhile, competitive landscapes get more complex

·        Understanding the future of consumption habits – COVID-19 has accelerated some changes, but others were already set to fundamentally alter consumption patterns.

“Food companies will need to adjust and adapt to the six trends in order to truly thrive,” states Thomas Hayes, Analyst at Lux Research and report co-author. “Consumers are increasingly demanding, aligning spending habits with health and sustainability. Food companies will need to take some big risks to truly thrive and stay competitive in the long run.”

People are demanding more than convenience and enjoyment in their food choices, focusing more on increasing cognitive function, athletic performance, and the overall health of both themselves and the environment. Lux predicts that nearly all products sold will pivot to make health-related claims, with the aim of reducing dependence on medical intervention. Products will also need to pivot to be more sustainable in terms of reducing food waste, working toward decarbonization efforts, and providing sustainable packaging.

More food companies are incorporating ubiquitous sensing as sensors become smaller, cheaper, and more capable, Lux says. They can monitor food quality, food safety, and even consumer health. “The global pandemic is generating renewed urgency around virus sensing and self-monitoring and has also changed the consumption habits of consumers,” explains Hayes. “Understanding how consumption is changing, including the shift to fresh foods and plant-based proteins, and how allergens are impacting people’s lives, will be key to future success.”

Food companies is also having to adapt to new industry structures. Subscription and delivery options, personalization, food safety and traceability, and the incorporation of digital tools to drive faster, cheaper food innovation will all be crucial to allow major food companies to compete with their smaller, more agile competitors. Lux says food companies will also have to understand the role they can play in agricultural production and addressing consumer health needs.

Food companies will play a bigger role in future, Lux says, pushing into agricultural production, establishing new channels, and developing consumer health-related businesses. And while technology will be a crucial part of the puzzle, companies should “never lead with tech; lead with the problem to be solved and work backward. Adopting tech for its own sake is a slippery slope toward wasted pilot budgets and an organizational resistance to experimentation; find problems and solve them with tech instead.”

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