I am writing this article after weeks of “Sheltering in Place”. I’ve learned how to use Zoom®, mastered (almost) keeping my kids quiet while talking on a conference call, and have been dreaming about the good old days when I could actually see people’s faces without a face mask while strolling through my local grocery store. It makes me wonder about how these crazy times will ultimately affect consumer’s food consumption patterns.
The US food system, and the US food consumer, is an intricate web that has been evolving over time, and will continue to evolve as we move into the 2020’s. To get a feel for where food trends and purchasing patterns may be headed, I thought it would be good to look at prior decades to see where we have been, as the future always builds on the past….
Moonwalking back to the 1980’s, we have the decade of decadence. Wall Street makes a splash, “Greed is Good”, mullets and big hair reign supreme, and consumers can still smoke inside a restaurant while listening to Madonna. Baby Boomers are raising their kids and experiencing a renaissance inside the home – trash compactors, crock pots, microwaves, dishwashers, and pasta makers at affordable prices – to help with their increasingly busy lifestyles. Food manufacturers and food scientists work overtime and respond with easy to prepare meals that are pre-packaged; pop tarts for breakfast begin the long and slow move away from breakfast cereal that prior generations grew up on, frozen food aisles see increased options, and artificial sweeteners find their way into fruit snacks and drinks as Coke® and Pepsi® ramp up their diet soda offerings to build on the success of “TAB®”. Grocery stores of this period are almost unrecognizable from today – center of the store is still a big part of sales, there are actual butchers at the butcher counter, store brand foods are low quality and have awful packaging, and when you ask for a clam-shell, you actually get the shell of a clam instead of plastic package for your grapes or strawberries… but winds of change are in the air.
As we move into the 1990’s, consumers take off Michael Jackson’s one glove, and do the Macarena. Baby Boomers are becoming grandparents as Generation X parents come on the scene―taking busy to a new level―and food manufacturers are there for them with easy to consume foods on the go (Lunchables® anyone??). Consumers seek out and pay up for convenient to eat foods. While the pace of life is picking up, consumers across the country are opening their eyes to a new world of flavors and dishes as The Food Network® begins in 1993, introducing celebrity chefs (Emeril
Lagasse) who bring spice into our lives, change our food preferences. Iceberg lettuce begins its per capita consumption decline as consumers switch to Caesar Salads (Romaine), and people now begin to refer to cooking as their “hobby.”
The expansion of flavor profiles coincides with the opening of our southern border for winter produce from Mexico, as NAFTA (1994) forever changes consumer’s expectations and options. With year round access to low cost produce, per capita consumption of vegetables such as peppers, eggplant, cucumbers, and tomatoes see a notable increase. In the fruit sector, we see consumers moving away from citrus and beginning the love affair with avocados. With the border opening and significant yield gains made across the grains and meat categories, the total cost of food spending as measured by % of GDP reaches an all-time low in the 1990’s, with food expenditures at below 10% of GDP.
If consumers can pull themselves away from their favorite reality TV show (Paris Hilton/Survivor), they are putting on their trucker hats, UGG® boots, and low rise jeans and heading to their big box store or frequenting their favorite restaurant to get a bite to eat. In the 2000’s, a shift in purchasing from traditional chain grocery stores is in full swing, as club stores and warehouse stores report a surge in sales, growing from $37 Billion in 1999 to $127 Billion in 2010. As consumers are buying gigantic size product for their pantries, consumers are also spending money for Food Away From Home (FAFH) at a record pace. Full Service restaurants do well, but limited service restaurants see a boost in the 2000’s as drive thru’s and new format Quick Serve Restaurants ramp up.
In contrast to the large pack sizes and nutritionally deficient snack foods of the 1990’s, a new movement is taking shape. With the release of “The Omnivore’s Dilemna” in 2006 by Michael Pollan, a spotlight is shown on the industrial production food system in America. The question begins to be asked – why are we so proud that our food is so cheap? Consumers start to talk about sustainability, “farm to table”, and discussion of healthy foods take center stage. Organic products that were once a novelty or only in specialty stores begin to go mainstream, with organic food sales growing 500% in the decade to $25 Billion (Organic Trade Association). Whole Foods® grocery chain, which started in 1984 with a single store in Austin, TX expands significantly in the 00’s, beginning the decade with 100 stores and ending the decade at 299 stores (Statista/Whole Foods).
Source: USDA ERS
Let’s take off our trucker hats, do the Gangnam style dance, video it, share it on YouTube® and post it on Instagram® for our friends, family, and strangers around the world to view. Gen X’es are bookended by two of the largest population groups; Boomers who are retired and spending money and Millennials who are entering the workforce and sometimes moving out of their parents’ homes. The 2010’s are a game changer – the internet, social media, and handheld personal devices have put all of the world’s information in every pants pocket in America. Yelp® has empowered every individual to become a food critic and Instagram has made everyone a food photographer. For the first time in history (2015), food expenditures outside the home exceeded food purchased for consumption at home. (USDA) Limited service restaurant sales lead the way, with chains like Chipotle®, Chick Fil-A®, and Shake Shack® creating a new term “fast-casual”, and contributing to the segments growth from $190 Billion in sales in 2009 to $271 Billion in sales by 2018 (USDA). Restaurants and food producers must take a new tack and move to online presence for marketing and every farm, restaurant, packer, shipper, and retailer must not only have a website, but it must be “mobile” friendly for smart phones.
A new category begins to establish itself as a real contender for food dollars…..food delivery and meal kits. Hello Fresh® (2011) and Blue Apron® (2012) are early entrants to the meal kit space, with Amazon®, Wal-Mart®, Target® and other traditional chain stores spending billions to keep up and earn their share of the consumer food spend. Food delivery and nearly ready to eat meal kits allow for quick preparation and easy-to-follow instructions so busy families can have the experience of making dinner without the shopping, prep, and risk of the meal not turning out well.
The 2020’s and Beyond
This walk down memory lane brings us to 2020. We know how we got here, but where are we going? Too bad we can’t just ask Siri® or Alexa® to predict the future, but the way things are going, that may be the reality in the not too distant future. Without help from our tech friends, there are some inferences we can make using trends that have been in the making for years, and trends that have been kicked into high speed by a global pandemic to start the decade.
First and foremost, I feel confident that we can count on a larger percentage of our food dollar being spent on products that are being delivered to our homes. Food delivery sales had been increasing as companies figured out the most efficient way to deliver food, and come up with a solution to deliver perishables, but was not the gamechanger that many had been touting. Enter COVID-19….due to “stay at home” and “shelter in place” (phrases now forever in our lexicon), consumers adopted food delivery options at a record pace…31% of households used an online grocery delivery service during March/April 2020, 1 in 4 online grocery orders came from new customers, and 39% of new customer orders came from those over 60 years of age (Supermarket News). COVID will eventually abate, but it will leave a residual legacy of consumers who used online delivery for the first time, liked it, and will continue to use this channel.
Second, food production, food manufacturing, and food distribution/sales will be done by a smaller number of operations. The events of early 2020 will sort out many of the small/less liquid operations that operated when 2020 started. Additionally, rising cost of land, sophisticated farming and processing equipment, increasing levels of government regulation around food safety and public safety, and cost of customer acquisition will lead to greater consolidation. Operations and management teams that can drive down cost, use government regulation as a competitive “moat”, and boost yield will grab a greater share of the food dollar as they grow sales, or acquire competitors.
Third, the US is the most racially diverse that it has ever been in its history, and will continue to be more diverse as we go forward. The largest driver of cultural diversity over the last 10 years has been the growth of the Hispanic population in the US. As shown in the chart below, while the US population has been rising at a rate of less than 1% since 2010 (grey line in the chart below), the Hispanic population in the US has been growing at an average rate of 2% (blue line in the chart below), and has accounted for 51% of the growth in population from 2010 to 2018, adding an average of 1 million people (USDA ERS). Hispanic culture, and cultures of other immigrants, continue to re-shape the American diet, bringing different spices, tropical fruits, cooking methods, and purchasing habits into the mainstream. Store shelves and restaurant options are diverse, and will continue to change as tastes across the US are influenced by foreign cuisine, and I would expect to see expansion of ethnic based grocery chains grow from their current average rate of 1.5% per year (IBIS Worldwide) as grocers focus on these markets. Chains such as Northgate Gonzalez Markets®, Seafood City®, and Sedano’s® have built a solid client base and have been expanding to provide the products desired by their respective clientele.
Source: USDA ERS
Finally, we must consider how the purchasing and consumption landscape will look as young adults growing up in the 2000’s and 2010’s (millennials and Generation Z) enter the work force, begin their families, and are the drivers for change in the market. How does the child of a millennial who grew up on locally raised, organic, hormone free, conflict free, sustainably certified chicken that was delivered as a pre-cooked ingredient in a meal kit with step by step instructions for dinner make their purchasing decisions and where do they shop? These consumers grew up with organic options and we will continue to see growth in this category as consumers demand it, and as retailers demand it to drive top line revenue growth. These consumers have grown up with shredded cheese, pre-cut celery, bagged salads, easy-peel tangerines, and nutrition bars. There is a generation of consumers in America right now that don’t know how to use a cheese grater, so what form of cheese are they going to buy? Convenience and value-add are a way of life and will only continue to grow. The move by retailers to offer ready to eat meals, expand the perimeter sections of their stores, and evolve to be a destination instead of a weekly chore is an extension of this value-add/convenience movement. Will we eventually move away from the grocery store format that we all know to a new version where all food is well on its way through the value add steps? Will our mobile friendly websites now need to be “wrist watch” friendly as cell phones become too bulky for consumers to use for search?
Only time will tell what new patterns await us in 2020, but if the first few months of the decade are any indicator, we are in for one wild ride! COVID-19 will have an impact, slightly altering some trends that were evolving (packaging and unlimited variety) and massively accelerating other trends (home delivery/online ordering). There are many food trends that will show up in the 2020’s, but I can tell you right now, the one I’m looking forward to the most is… seeing people in the grocery store without their masks.