food industry forecast: key trends through 2020 crucial trends transforming the industry david...
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Food Industry Forecast: Key Trends Through 2020
Crucial Trends Transformingthe Industry
David HenkesTechnomic
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Technomic Is…
–Founded in 1966, Technomic is a fact-based consulting and research firm focused on the F&B channel
–Our mission: To be the first call you make for insights and intelligence
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Where We’ve Been
Consistent growth1
Few disruptions3
Predictable costs4
Chain-driven expansion2
Relatively “clear sailing”5
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What’s Next
A More Challenging Environment
An Industry Transformation
• Structure• Operating environment• Business practices
• Politically• Economically• Environmentally
• Healthfully• Competitively
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What Will Drive Change Within the Industry?
LocalizationConsumer Demands Transparency
Specialization/DeconsolidationPolarization
Technology/Big Data
1 2 3
4 5 6
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* Within 5–7 years
$13–$15 mandated minimum wage by 2020 Worker shortages Benefits, especially health care
Against a Backdrop of Rapidly Escalating Costs
Prices, availability, global demand Commodities/Inputs
Food (sourcing, traceability, labeling, nutrition) Labor (licensing, training)
Regulatory compliancecosts up minimum 50%*
Labor50–100% rise in costs*
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Infrastructure disrepair Intermodal rates (rail capacity issues) Severe driver shortages Congestion/delays
Against a Backdrop ofRapidly Escalating Costs
Utilities, especially heating/cooling Insurance Property damage Delays
Weather-related
User fees/special assessments/taxes
Transportation/Logisticscosts up 50–100%*
* Within 5–7 years
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Consumer Demands Intensifying
…but will remain highly value-oriented.
“Health-oriented”Want fresh, natural,
additive-free food
EthnicWant bold, authentic, adventurous meals
Polarized Different priorities on
value and service
UrbanWant convenient,
sophisticated experiences
Activist Demand transparent, local,
sustainable practices, often through regulation/
mandates
More consumers becoming increasingly…
1
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89%
Health & wellness
84%
Buying local
84%
No chemicals/ pesticides
82%
Clean labels
82%
Sustainably produced
79%
Humane animal treatment
79%
No hormones/ antibiotics
Consumers Require Operators to Meet Their New Demands
Operators agreeing that “________ will have a great or moderate influence on purchase decisions in the future.”
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“(Farm-to-counter) is not a passing fad.
It’s only going to get stronger.”
— National Restaurant Association
Rise of Local2
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“Local” Becoming a Major Factor That Consumers Equate With…
fresh
healthier
small business
food with a story
high quality
socially responsible clean
sustainable
natural
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Shift to “Local” Will Affect
Menus PurchasingOperations
SourcingDistributionMarketing
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Definition of Local Is Subjective, Multifaceted
Fresh and natural Family-owned producer Delivered direct by producer Artisan/craft Small-sized producer Within 150 miles
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Chains Seek Out Ways to Showcase Local Ingredients
S’mores “concrete”made with pie from
a local bakery
Crispy chicken and grilled watermelon wedge
from a local farm
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Short of Local, “Food With a Story”
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“When questions don’t appear to be answered or to be clearly addressed, the assumption is we are hiding something.”
— Linda Eathertonglobal food and nutrition practice, Ketchum
Transparency3
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Transparency Has Many Facets
“True” net cost
Unbundled cost
Living wages/health insurance
Fair trade
Diversity
Executive compensation
Ingredients,additives
Growing andprocessing methods
Origins
Sustainability
Environmentalimpact
Animal welfare
Conservation
PricesProducts Performance Planet
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Operations, Menus Under Scrutiny
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Transparency in Pricing Will Change Operator Behaviors
Today: inefficient
Today: 10 operators, 10 prices
Tomorrow: alternate channels introduce transparency
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Big Data Will Have Dramatic Impact
“We make decisions not based on what you bought today, but what you have bought over the last two years. You don’t have to know,
— Nishat Mehta, EVP of global partnerships, dunnhumby, exclusive marketer for Kroger
but we know.”
4
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Foodservice Also Will Benefit From Big Data
— Jeff WinemanEVP of new business development at Levy Restaurants, after losing a concession contract to the more data-savvy Aramark
“Food quality is still important, but it’s not No. 1
anymore. Now it’s data, it’s analytics.”
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Technology/Big Data Poised to Impact
Pricing Product assortment
Demand planning/
forecasting
Market reach and
effective-ness
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Online Options Expanding
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Polarization5
“The shrinking middle class is not going out as much because they can’t afford it. [Operators] have to address this group.”
— NPD Group
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Polarization Is a Growing Factor
Industry growth
Pricing and profitability
Policy
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Value-oriented Consumers Becoming Critical to Growth
— Wendy’s CEO Emil Brolick after disappointing third quarter sales
“If you look at the last 10 quarters in the industry, the price/value customer growth
has been stronger than the non-value customer.”
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At the Other End of the Spectrum
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Opportunities Will Lie in Affordable Quality
Price: $6.25
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Specialization Is on the Rise
Menus Operations
Number and type of
industry participants
Blurring of segments
Overall market
structure
6
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Single-item Specialists Will Flourish
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Traditional retail and innovative “foodservice alternatives” will take share by
diminishing restaurant advantages of enjoyable experience, quality and
convenience.
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Consumer Options Expand
Fresh meals/ kits Subscriptions
Personal chefs Food trucks
GrocerantsFresh
prepared foods
Next generation
vendingSnack boxes
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FINAL THOUGHTS
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Market Structure Changing
► Subscription/delivery services/food lockers (e.g., Amazon Fresh, Instacart, community-supported agriculture)
► Traditional retail FPF will grow dramatically
► “Grocerants”/food as theater (e.g., Eataly)
► 3–5K mini fresh stores (e.g., Little Waitrose, Rewe on the Go)
► Expanded, year-round “farmers” markets
Traditional retail and innovative “foodservice alternatives” will take share by diminishing restaurant advantages of enjoyable experience, quality and convenience.
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Market Structure Changing
Traditional retail and innovative “foodservice alternatives” will take share by diminishing restaurant advantages of enjoyable experience, quality and convenience.
► Fresh-delivered meal kits (e.g., Blue Apron) will grow to $3–$5B
► “Next generation” vending, kiosks, pop-up stores will be to $10–$20B
► Private dinners (e.g., Feastly, Airbnb)
► Private chefs for everyday meals and special occasions
► Personalized delivered foods (e.g., cereal, coffee)
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$393
$262
$245
$187
$210
Food Industry Sales Growth ($B)
2014–24Annual Growth
Ret
ail
Fo
od
serv
ice
1.5%
5.5%
3.0%
4.5%
3.5%
2014
$1,307
Traditional /1
Nontraditional /2
Top 500 chains
Independent restaurants /3
All other
1. Includes supermarkets, super centers and mass merchants2. Includes club stores, dollar stores, c-stores, fresh format, limited assortment, drug, online and other3. Includes small chains
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31% 26%
20% 24%
19% 18%
14% 16%
16% 16%
Food Industry Sales Growth ($B)
Re
tail
Fo
od
se
rvic
e
2014
$1,307
Traditional /1
Nontraditional /2
Top 500 chains
Independent restaurants /3
All other
$1,804
65 13
165 33
84 17
103 21
79 16
$497 100%
$2024% Share of Growth
1. Includes supermarkets, super centers and mass merchants2. Includes club stores, dollar stores, c-stores, fresh format, limited assortment, drug, online and other3. Includes small chains
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Conclusions
Business is fundamentally changing
1Change has major
implications
2
Supply chain will undergo a revamp
3Innovation, reach
and efficiency are critical
4
May need new “game plan”
5
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Questions