4 Trends Impacting Packaged Foods

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4 Trends Impacting Packaged Foods

By Megan Collins - 09/06/2019
4 Trends Impacting Packaged Foods
Seismic changes in the packaged food industry are creating new opportunities for companies of all sizes

While the consumer packaged food (CPG) industry is booming, it’s also rapidly changing. Industry giants are re-engineering household-name products to meet modern preferences and diversifying into healthier, fresher and less package-intensive offerings. Amid the disruption, four trends are rapidly reshaping the industry:

1. Fickle Consumer Tastes

Because consumer preferences are changing so quickly, the market is favoring the most nimble and responsive players. In an industry once dominated by giants, agility is now king. As a result, small- and medium-sized companies are becoming more competitive, and larger companies are tapping into resources like contract manufacturing or investing in incubators and startups to stay ahead of the curve.

Contract manufacturers are helping companies of all sizes develop products outside their categories and capitalize on trends. In addition, contract manufacturers are giving CPG companies access to new factory processes and designs. For example, some companies are redeveloping popular products according to consumer preferences, such as gluten-free snack options, which require facilities that prevent cross-contamination when producing gluten-free goods.

2. Healthy, Socially Conscious Foods

Health and wellness continues to rank high in importance among consumers. A Harvard Health article summarizes some of the drivers of this trend, including food’s ability to impact mood. Currently, the consumer trend is toward giving up inflammation-producing, highly processed foods for products that promise to boost gut and brain health, among other benefits.

Consumers are also favoring foods that are sourced and developed in a way that’s eco-friendly and socially responsible. In response, CPGs are testing alternative crops and aligning with manufacturers that offer clean-label or organic goods. The trend toward social responsibility and sustainability has been emerging for years and will likely continue to be one of the greatest influences on the food industry. 

3. Regulatory Changes

Ongoing changes to trade policies are also impacting the packaged food industry. In particular, the U.S. food industry is watching developments in the United States-Mexico-Canada Agreement (USMCA), tariffs on China, and European Union policies. New requirements are taking effect throughout the supply chain, including requirements for responsible sourcing, disclosure, clear labeling and safe delivery. Often, companies are forced to rethink their supply chains and develop new procurement policies, inspections, factory design and production flows.

4. Data Analytics and Social Media

It’s impossible to discuss industry disruption without mentioning the profound impacts of technological advancements. In the CPG industry, this means developing greater proficiencies in data analytics and social media. Data analytics can provide predictive insights into consumer preferences, helping companies of all sizes adapt to changing realities in the market.

In addition, CPGs have become savvier in their social media strategies. Not only are they able to analyze social media content to distinguish emerging trends and inform future product development, they’re also tapping into social media influencers to advertise and market products. For many companies, online influencers are proving less expensive and often more influential than traditional forms of advertising.

The New Players

While seismic changes seem to be shaking up the packaged food industry, these changes are creating new opportunities for companies of all sizes. Some trends will continue to influence short- and long-term food strategy. For example, the successful use of social media is continuing to grow as companies become more sophisticated in using online influencers and engaging in exciting two-way dialogues with consumers.

In addition, contract manufacturing will continue to grow, helping companies not only to improve efficiency in manufacturing but also to delve into consumer intelligence and develop new products. Finally, the importance of social responsibility and sustainability, as well as consumer desires for health and wellness, will continue to grow, and a company’s ability to respond to these trends will ultimately determine its ability to defend and acquire market share.

About the Author

Megan Collins

Megan Collins

Megan Collins is an SVP and market executive for the Midwest Middle Market Specialties Team at Bank of America Merrill Lynch. Read More