By Jeff Vedders
Although the food industry does not draw the same attention or press as biotechnology, nanotechnology, and even high-end electronics, it is still an important target for many communities. If you are targeting food companies, there are a few trends you may want to keep in mind that are greatly impacting food businesses.
One of the biggest trends impacting food manufacturers today is the trend towards healthier products. By now, everyone is familiar with the low-carb diet fad represented primarily by Atkins. Consumer demand has been so great that many food companies have responded with the development of low-carb products. These products include everything from low-carb candy to low-carb snacks to even low-carb cola. This trend towards healthier foods is not a new idea. In fact, food companies first began to address the health craze back in the early 1990s with low-fat foods. Low-carb foods are a natural evolution of this trend. According to Standard and Poor’s, ten years ago, less than one percent of a food company’s portfolio was geared towards healthier foods. Today, the proportion is around 5%, with many companies moving towards 10%. Producers of nuts and eggs saw dramatic sales increases in late 2003, while pasta and bread manufacturers reported significant declines in sales. The trend towards healthier eating is likely to continue as the population ages. However, are unhealthy foods likely to go away any time soon? Of course not. According to Burt Flickinger, a consultant with the Strategic Resources Group in New York, “Americans are work-stressed, time-stressed, and they’re eating out more. Sugar and fat is tasty and it gives immediate gratification.”
Another trend greatly impacting the food industry is the need for convenience foods. Today’s lifestyles are so hectic that it is essential that meals are easy and quick to prepare. Part of this is due to the trend towards more women in the workplace as well as single-parent families and families with two breadwinners. In response to this trend, ready-made and convenience foods are one of the fastest growing product areas in the industry.
As the minority segments of the U.S. population continue to grow, ethnic foods are also fast becoming a high growth area for the food industry. The Hispanic and Asian populations are the fastest growing minority segments in the U.S. The purchasing power of Hispanics alone is predicted to grow at twice the rate of the overall population over the next decade. In response to the growth in minority segments, food companies have increased their selection of ethnic foods, especially Mexican foods.
The other major trend impacting the food industry is Wal-Mart. According to Standard and Poor’s, Wal-Mart is now the largest food retailer in the United States with over 13% total market share. Wal-Mart offers manufacturers the largest distribution channels anywhere. For PepsiCo, Wal-Mart business represents 10% of the company’s global net revenues. Kraft, General Mills, Kellogg, and Hershey all have over 10% of their total sales through Wal-Mart. Wal-Mart is now in a position where they can dictate requirements to manufacturers. For instance, Wal-Mart is now requiring its largest vendors to utilize radio frequency identification (RFID). RFID technology is basically the use of microchips and antennas in plastic product tags. It is much more advanced than current barcode technology as it doesn’t require a direct line of sight. In addition, RFID tags can store additional data including when and where the product was made.
Sources:
Standard and Poor’s Industry Surveys, “Foods & Nonalcoholic Beverages,” Richard Joy, June 10, 2004.
“Low-carb bubble about to burst?” Parija Bhatnager, March 22, 2004, money.cnn.com