15 trends and themes for 2019

The food industry is more in flux than ever. This presents opportunities, but above all, the challenges for producers seem to be increasing significantly. Many food companies are in a “perfect storm” and are looking for growth, profitability and continuity. What are the key trends and themes to capitalize on in 2019?

The food landscape is undeniably changing. A number of trends are evident, such as the demand for ever healthier food or the digitization of factories. Due to market changes, manufacturers must adjust or reinvent their business model. This is a necessity because things are squeaking and creaking at many food companies, mainly due to a shortage of staff. What are the key developments and how can food companies anticipate them? The important trends and themes at a glance:

1. Retail is increasingly differentiating itself with Private Label

The increasing need for retailers to differentiate themselves and respond to changing consumer needs is leading to further growth of private brands. Private label is entering a new phase because the quality equals or exceeds that of A-brands (“premium claims”). This is a big challenge for A-brand producers, but also for private label producers. Retailers continuously demand new or modified products, leading to additional complexity, “smaller” items and a (too) large assortment if “old” products are not also parted with. An efficient NPI process, portfolio management and in-factory rapid changeover are therefore essential. For example, a producer of rusks has a clear assortment policy on this point to avoid complexity: a new product in = another product out.

2. Emergence of labels

More and more (organic) labels are entering the market, such as Beter Leven or ASC, and their sales share is growing rapidly. Meanwhile, one in every seven euros spent on food in the supermarket goes to products with such a label. For producers, this can lead to a sharp increase in the number of raw materials that must also be separated and traced throughout the chain. Without changes in the production process, this also leads to additional cleaning and loss of raw materials.

3. Shortage of production personnel

Almost all food companies face a shortage of production personnel, especially in the factory. As a result, it is no longer an exception that when one or two operators or team leaders are ill, production lines must be shut down. Finding and retaining staff – and thus the role of HR and line management – is therefore becoming increasingly important. Here it can help that a company has an inspiring “purpose” that makes (young) people want to work at the company. The challenge is to recruit not on experience but on competencies and to train employees internally.

4. Automation and robotization

Automation and robotization can increase productivity and solve part of the labor shortage, but food companies are still somewhat hesitant about the possibilities offered by robotization. According to ABN AMRO research, the food sector has a low robot density and is clearly behind in the robotization battle. Yet some companies are leading the way. For example, vegetable cutter Heemskerk will invest €30 to €35 million in the robotization and automation of production and in the purchase of business premises. The Rijnsburg-based family business is expanding to meet the growing demand for healthy food.

5. Prevention Agreement

Obesity is one of the biggest and most complex problems in our society – not only in the Netherlands but throughout Europe and (North) America. The government and industry are trying to do something about this, including through the National Prevention Agreement. The NFLI’s signature commits the food industry to concrete measures to sell fewer calories. This could affect the products and processes of food companies, even if there is criticism that the measures do not go far enough. For example, Dutch soft drink manufacturers have set new targets for reducing calories in beverages. A 25% reduction must be achieved by 2020 compared to 2012, and a 30% reduction by 2025.

6. Plastic packaging

Plastic in our environment – and in our food – is becoming an increasing problem. More and more food companies are aware of this and are looking for alternative packaging or packaging that is recyclable. For example, Nestlé promises an increase in the amount of recycled plastic packaging in the European Union following Nestlé’s “global packaging ambition. Other food multinationals have also said they want to produce their plastic packaging completely recyclable by 2025.

7. Online growth

The Dutch are European champions of online shopping. In 2017, 29% of Dutch people ordered groceries at least once via the Internet. Compared to the UK in particular, the Netherlands has been catching up over the past two years, and there seems to be a Picnic effect: when Picnic becomes active in a new municipality, many people want to try out the service. The company now has some 50,000 customers on its waiting list. Online may still be limited at 3.5-4% of total supermarket sales, but this percentage is growing rapidly, and in addition to the rise of Web supermarkets, parties such as Ahold and Jumbo are also fully committed to online growth.

8. Out of Home

In addition to the online channel, sales through the out-of-home channel continue to grow strongly. Consumption in the office and on the go is a growth market for food manufacturers. This means making clear channel choices, adjusting their assortment accordingly and providing customers without a hospitality background – such as tank shops – with support and advice on product presentation, product information and insight into consumer trends. The challenge is to have a good picture of this very diverse channel, because specific submarkets are growing fast while others are shrinking again.

9. Social media

Social media has a big influence on what people eat and buy. Nutrition has become image and Instagram is therefore full of pictures of smoothie bowls, salads of all colors and vegan burgers. In addition, there are now dozens of food bloggers and biovloggers who have a major influence on what their thousands of followers do or do not eat. For producers, an important source of information to keep an eye on. In addition, social media are an easy platform for consumers to share their dissatisfaction with quality or misleading labels. Producers therefore do well to monitor social media and handle complaints with a good web care team. In doing so, it is advisable not to delete complaints and to respond quickly and immediately.

10. Again

The weather is becoming more extreme and thus increasingly affecting sales or the availability of sufficient resources. Consider, for example, the long and hot summer in 2018 that had positive effects on ice cream and soft drink sales, but also resulted in low water levels that allowed barges to carry far fewer commodities. This requires food companies to pay attention to supply chain risk management.

11. Innovation by start-ups

Most of the innovation comes from start-ups and medium-sized (family) companies that are challenging the big corporations and establishment, especially in the areas of healthy food and meat substitutes. Startups are very important for innovation and in the future they will play a bigger role because they are better able to respond to consumers’ need for healthy products. Start-ups abroad are not sitting still either. For example, American company Beyond Meat, which develops vegetarian burgers, is going public and aims to raise $100 million with a listing on the Nasdaq to finance further growth in Europe and Asia.

12. Corporate Venturing

Start-ups challenge big companies, but multinationals and start-ups also need each other. Many large companies struggle with innovation and get no further than product improvements or modifications. Multinationals are therefore trying to partner with or buy out small startups. Cosun, for example, has acquired the Wageningen startup GreenProtein and plans to invest more in startups to become more innovative: the cooperative is stepping in as an investor in the Icos Capital Fund, giving it access to a large network of young, innovative startups.

13. Personalized Nutrition

Personalized tailored nutrition is coming out of the starting blocks. It is not only for athletes, the elderly or overweight people, but also for people who want to eat more consciously and healthily. It is a theme that more and more food companies are concretely addressing. For example, organic supermarket Bio-Planet gives people personalized nutritional advice based on their purchases, and Nestlé in Japan is investing in home kits that allow people to take blood samples and DNA to offer personalized nutritional advice. US start-up Habit also offers a home kit to collect DNA data. Consumers then receive personalized reports, weekly recipes and ingredients are delivered to their homes via AmazonFresh.

14. Technology

Perhaps the greatest force behind many changes is technological development. In many areas, technology is changing the entire food chain, from agribusiness to consumers. Think of Lely’s milking robots, or drones that inspect crops from the air. Albert Heijn and Refresco are using blockchain to make the orange juice chain transparent, and consumers are using apps to monitor their health. Industry 4.0 is also taking place in food, such as the use of sensors and data analytics in logistics and manufacturing processes. The question is how fast these developments are all going. However, food companies would do well not to wait for the technological developments or to address them purely individually, but to anticipate them in cooperation with knowledge partners and suppliers.

15. Trust and transparency

Despite – or because of – all the trends and developments, confidence in the quality and safety of our food remains crucial. Consumers increasingly want to know where ingredients come from and how food is made. Technology can help create transparent chains but is no substitute for honest behavior and producers taking responsibility. Collaboration in the chain with the right partners is becoming increasingly important, such as Tony Chocolonely, Albert Heijn and Barry Callebaut taking a big step together to make sustainable chocolate the norm by 2025. Is blockchain going to be the great enabler for transparency here?

In conclusion, Strategy 2.0

What do all these trends and themes mean for the business model of food producers? There is no standard answer to that. We do see that many food companies are in a “perfect storm” and are looking for growth, profitability and continuity. At the same time, many food companies are primarily concerned with day-to-day operations and short-term challenges. There is little time and attention to long-term and strategic questions. Food companies therefore need, above all, a new “strategy process 2.0” to respond flexibly to both short-term events and long-term developments!