The packaged food industry is undergoing a rapid evolution. Industry giants are re-engineering household-name products to meet modern preferences and diversifying into healthier, fresher, and more sustainable offerings. The following four key trends are fundamentally driving food industry disruption.
1. Shifting Consumer Preferences
With food trends coming and going so quickly, the market favors the most nimble, responsive, and transparent players. In an industry once dominated by giants focused on scale and efficiency, agility is now a key differentiator. As a result, small- and medium-sized companies are becoming more competitive, and larger companies are tapping into resources such as incubators, startups, and contract manufacturers to stay ahead of the curve.
Contract manufacturers are helping companies of all sizes develop products outside their category and capitalize on trends. In addition, contract manufacturers are giving consumer packaged goods (CPG) companies access to new factory processes and designs. For example, some companies are redeveloping popular products according to consumer preferences, such as gluten-free options, which require new manufacturing facilities that prevent cross-contamination in production.
2. Health-Conscious, Planet-Coscious
Increasingly, consumers are looking for food that functions. For example, given that health and wellness are a priority for consumers, products delivering specific health benefits are thriving in the marketplace. A recent Harvard Health article summarizes an example of this trend: food’s ability to impact mood. The current consumer trend suggests removing inflammation-producing, highly processed foods from the diet for products that promise to boost gut and brain health.
Consumers are seeking products that are not only health-conscious, but planet-conscious as well. In response, CPGs are testing alternative crops and aligning with manufacturers that offer clean label or organic goods. “Clean” labeling and sustainability will continue to be among the greatest drivers of change in the food industry, as they not only influence buying decisions, but give rise to new brand differentiation opportunities.
3. Power in Technology
Data analytics has had a profound impression on the packaged food industry and provides a major advantage for CPG companies. In order to adapt to changing realities in the industry, companies harness data analytics to provide predictive insights into consumer preferences and better tailor their portfolios to compete in the marketplace.
In addition, CPGs are taking a more transparent and trend-driven approach to their social media strategies. Not only are they able to analyze social media content to distinguish emerging trends and inform future product development, but they are also tapping into social media influencers to build valuable third-party trust in their products.
4. Regulatory Changes
Ongoing changes to trade policies are also impacting the packaged food industry. In particular, the U.S. food industry is monitoring developments in the U.S.-Mexico-Canada Agreement, tariffs on China, and EU policies. New requirements are taking effect throughout the supply chain, including responsible sourcing, disclosure, clean labeling, and safe delivery. Companies must rethink their supply chain and develop new procurement policies, inspections, factory design, and production flows based on regulatory direction.
Though significant changes are shaking up the packaged foods industry, they are creating new opportunities for CPG companies across the spectrum. While smaller brands are newly positioned to drive growth, larger companies are able to address safety and regulatory compliance and invest in technology. It makes for an interesting dynamic that is poised to drive strategic industry alliances in the near future.
Some key disruptors will continue to influence short- and long-term food strategy. For example, socially-conscious and sustainable food ecosystems will remain a priority for consumers, as well as consumer desires for health and wellness. Additionally, the strategic use of social media will be vital as companies become more sophisticated in using online influencers and engage in exciting two-way dialogues with consumers.
Finally, contract manufacturing can continue to help companies not only improve efficiency in manufacturing, but also delve into consumer intelligence and develop new products.
A company’s ability to respond to these industry disruptors, and remain agile in its approach, will help its ability to defend and acquire market share.