5 Things You Need to Know About the Future of Food
A new survey from Deloitte reveals fresh insight into fresh food consumers and how manufacturers and retailers can grow the category.
A majority of these shoppers have increased their spending on fresh food over the past two years, with more than 60% of consumers spending up to 30% of their average monthly grocery budget on this category.
Deloitte’s “Future of Fresh” study, which surveyed 2,000 consumers and 153 fresh food industry executives, shows that over the past two years, two-thirds of consumers increased spending on the fresh food category.
With two out of three consumers reporting more fresh food purchases, retailers are increasing the space allotted to fresh food in their stores to meet the rise in consumer demand. Despite these trends, however, total fresh food sales continue to be outpaced in growth compared with overall food sales, creating untapped potential for retailers and manufacturers.
“Despite the prominence given to fresh foods in stores, growth rates are not living up to their potential,” said Barb Renner, vice chairman and U.S. consumer products leader at New York-based Deloitte. “Retailers should better understand and centralize management of the fresh food category to help address the issue from not only the consumer demand side, but also the manufacturing and retail side.”
The five most important findings for grocers to take away from the study are:
- Seeking Healthier Options: 80% of consumers reported actively seeking healthier versions of the food they purchase, and 77% avoid preservatives and chemicals in their food.
- Price Point is Key: When considering fresh food purchases, a vast majority of customers (92%) cited cost as one of the most important considerations in their purchasing decisions.
- Challenges Persist for Retailers: Despite increased spending on fresh food, total fresh food sales continue to be outpaced in growth compared with overall food sales. Retailers cited spoilage (32%), storage (24%), product pricing (16%) and shelf life (15%) as key challenges to managing fresh foods.
- Sustainability a Priority: When purchasing perishables, 58% of consumers actively consider sustainability aspects such as local sourcing, recyclable packaging and water neutrality.
- Lack of Advanced Technologies Spoils Growth: Technology can be a key enabler, but only 38% of organizations have partly or fully implemented AI-based warehouse management to monitor fresh food stocks, with just 3% using in-store technologies that allow for consumers to access product information using a smartphone.
When assessing companies on the criteria of percentage of revenue from fresh food in relation to the annual budget for technology and supporting processes, Deloitte identified four types of organizations: Leaders, Learners, Aspirers and Testers.
(Coming in December, "Ingredients for Growth: a Progressive Grocer Special Report on the Future of Food." Request a copy here.)
Leaders are achieving higher fresh food sales with smaller teams and greater investment in technology and supporting processes. Leaders are more than three times as likely to have a centralized staff for fresh food (20%) than Learners (6%) and tend to have smaller teams, with 71% having fewer than 20 people managing their fresh food categories. Leaders also tend to have a slower growth in fresh food staff, with only a 27% annual increase, compared with 53% for Learners. Leaders also show more caution when growing their budgets, with a 57% annual increase, compared with 79% for Learners.
When it comes to managing fresh foods, manufacturers cited the following challenges: quality control of raw materials on the factory floor (25%), processing (20%), and procurement of raw materials (13%). For retailers, key challenges are spoilage (32%), product pricing (16%), and shelf life (15%). Storage is also a key concern for both manufacturers (20%) and retailers (24%).
Technology can be a key enabler, but most organizations are in the nascent stages of implementing more advanced technologies. For example, only 38% have partly or fully implemented artificial-intelligence-based warehouse management to monitor fresh food stocks, with 3% using in-store technologies that allow consumers to access product information using a smartphone. Further, only 9% are using big data and analytics to identify actionable insights and trends, and just 4% are using blockchain to track the movement of fresh food throughout the supply chain.
Across all organizations, the most common barriers to technology implementation include the extent of time required to implement technology (78%) and a lack of skilled workers (28%).
“Retailers and manufacturers have ample opportunity to stimulate consumer demand by targeting ‘Followers’ as well as ‘Forwards’ and highlighting [the] value proposition of fresh food through communication on sourcing, safety and healthy eating,” said Stephen Rogers, executive director of Deloitte Insights Consumer Industry Center. “As companies create additional demand, they should look to implement technologies and analytics that help to deliver on the fresh promise and improve their costs.”