Data scientists will certainly annotate the second quarter of 2020 with an asterisk due to the novel coronavirus pandemic. U.S. shopping behaviors and food choices are linked to household preparedness for extended sheltering-in, including closures at businesses, restaurants and other institutions, including schools, where meals are served. While pantry stocking and home-prepared meals have understandably been boosted during this period, consumers continue to vote with their dollars for products that have strong nutritional and environmental claims. Food tech plays an important role in this based on novel ingredients and manufacturing processes, including traceability. Food tech not only impacts how the U.S. food industry can tune in to customer preferences, but drives operational efficiencies and preparedness for other events with disruption risk.
Across a spectrum of 2020’s challenges, I believe the great interruption has steeled the connection between business planning and technology evaluation/adoption. The linkage was validated on Wells Fargo’s recent Food & Ag webinar on food manufacturing. An astute guest talked about how traditional testing is based on improving existing processes, for example, efficiency based on timeliness or manufacturing controls. The tougher-to-measure benefits of a corporate emphasis of innovation lies in enhancing ‘agility’ to respond and adapt.
Technology companies touting the benefits of food technology will do well to listen to the message here. In the wake of 2020 so-far, companies are primed for seeking the value-proposition for solutions that address their specific needs. This creates a competitive advantage for the players that embed innovation teams to track quickly evolving technologies versus those with a mindset of ‘if it’s not broke, don’t fix it.’ For example, data platforms with predictive capabilities that can stress-test supply chain susceptibility, track, and improve employee safety and manufacturing processes have been given a unique gift by this interruption which has exposed supply chain risks. There are more than a handful of these platforms out there now that have a track record with food and agriculture, and they are evolving rapidly.
It’s interesting, but not surprising, that certain pre-existing trends continue to have traction. Consumers are stocking up their pantries with products that protect and cleanse their homes and bodies, product categories that in Q1 2020 had their best quarterly growth in the last four years.1
Understandably, protective oriented health CPG items became front of mind for consumers during the pandemic. Rice, beans, potatoes, raisins, and shelf-stable packaged foods got a lift in purchases as consumers were funneled to channels to stock their pantries. Interestingly, this return to what appear to be traditional items (including dairy and meat), did not erode preference trends to alternative dairy and meat. Meat alternatives were already charting extraordinary growth pre-pandemic, and continue to do so, over a much smaller base. See chart below to see broad category weekly sales growth for broad categories of traditional vs. alternative dairy and meat.
From a technology perspective, demand for novel ingredients, recipes, manufacturing processes that respond to consumers’ desire for plant-based, or health perceptions appear to be strong. In support of this, according to Nielsen, products with nutritional and/or environmental claims posted a 6.0% growth in sales volume by dollars in the recent 52 weeks, versus 1.9% for 52 weeks one year ago. Again, this is meaningful for food tech as demand for functional foods, healthy alternatives, and sustainability certifications continue to gain momentum.
Despite financial disruptions, the investment community has also continued to validate technology developments in the food space. Several headliner food tech investments continued to close even during the uncertainty of the pandemic, across a gamet of food preservation, waste reduction, data analytics, and online purchasing/distribution options. The proliferation and explosive growth of e-commerce options for connecting demand with food supply is an obvious example of the power of technology to change the business environment.
Necessity is often credited as the “mother of invention”. In the case of the pandemic-related disruption, the fires of invention have truly been stoked, creating opportunities for investors and strategic players. It will be some time before we have enough hindsight to definitively understand what this interruption will mean for the U.S. food system, but in the short term, I believe it has exposed that not only an innovative mindset in the highly efficient and ever-improving U.S. food system, but a strategic focus on putting technology to work against current and potential interruptions. The take away for me is that food-tech takes many forms, but innovation remains imperative in all seasons.
- Nielsen – U.S. Retail Hot Buttons & U.S. Shopping Insights – Q1 2020 (released on May 12, 2020)