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Top consumer trends influencing the food and beverage industry

NOV. 25, 2020

Key Highlights

  • There are nearly 1.7 million people employed in food and beverage manufacturing in the United States alone
  • The global food and beverage market is expected to grow from $5.9 trillion in 2019 to $7.5 trillion in 2023
  • The plant-based food market is expected to grow at a compound annual growth rate of 11.9% from 2020 to 2027, reaching $74.2 billion by 2027

 

Consumer trends impacting food & beverage industry operations

The food and beverage industry is expansive. It encompasses a wide variety of unique operations, including manufacturers, grocers, distributors, restaurants and bars, caterers, food transportation services and similar businesses. According to the Bureau of Labor Statistics, there are nearly 1.7 million people employed in food and beverage manufacturing in the United States alone.1 What’s more, the global food and beverage market is expected to grow from $5.9 trillion in 2019 to $7.5 trillion in 2023.2

Given the breadth and fast-paced nature of this industry, it can be difficult for food and beverage operations to stay abreast of consumer trends affecting the space. However, because the industry is heavily influenced by consumer behaviors (e.g., increased demands for food transparency, online shopping options, and organic food choices), businesses that fail to educate themselves on relevant challenges and opportunities may trail their competitors. This article will examine some of these consumer trends in more detail.

Food transparency

More than ever before, consumers of today want to know where their food comes from and what’s in it. This trend is known as food transparency, and it’s particularly important to a growing number of shoppers. In fact, according to a 2020 report from the Food Industry Association (FMI) and Label Insight, transparency is important or extremely important to 81% of shoppers, both online and in the store. This is up from 69% in 2018.3

Specifically, when it comes to food transparency, consumers want food manufacturers to provide the following information on product packaging:

    • A complete list of ingredients
    • A description of ingredients written in plain English
    • A list of certifications (e.g., United States Department of Agriculture Organic)
    • In-depth nutritional information
    • Details regarding product sourcing

This increased demand for food transparency may be partially due to a change in consumer eating habits. The FMI and Label Insight report found that, in 2020, 64% of shoppers followed a diet or health-related eating program, up from 49% in 2018. Additionally, more consumers are concerned about food allergies, intolerances and sensitivities (55% of shoppers in 2020 compared to 44% in 2018).4

But beyond labeling and health information, consumers increasingly expect food manufacturers to provide transparency around environmental and social issues as well. One global survey from Norwegian company DNV (Det Norske Veritas) found that consumers want more transparency around5:

    • Sustainable packaging (67.8%)
    • Greenhouse gas emissions during production (50.6%)
    • Water consumption (40.9%)
    • Food waste (61.3%)
    • Working conditions in fields and factories (56.3%)

To keep pace with transparency demands, brands will need to continue to listen to consumer preferences and evaluate the level of product information they provide online and at the point of purchase. Businesses that commit to food transparency will probably build a greater sense of brand loyalty and trust with their consumers, helping them maintain or even grow their market share.

The continued rise of plant-based products

In addition to being cognizant of nutritional information and where their food comes from, consumers are increasingly interested in healthier food alternatives. One such alternative is plant-based foods, which continue to grow in popularity and variety. In fact, sales of plant-based foods grew 29% from 2017 through 2019.6 According to recent market research, the plant-based food market is expected to grow at a compound annual growth rate of 11.9% from 2020 to 2027, reaching $74.2 billion by 2027.7

These days, plant-based foods are not only widely accepted by consumers, but they’ve also reached the mainstream. It’s not uncommon to find plant-based alternatives at the grocery store, in restaurants or even at fast-food chains.

This increased interest in plant-based eating can potentially be attributed to its benefits. For instance, plant-based diets may lower an individual’s blood pressure, promote heart health, help individuals lose weight, improve cholesterol or even reduce the risk of certain cancers.8 Additionally, plant-based eating has sustainability benefits, as plant products require fewer natural resources to create and are less taxing on the environment.9 As consumers become more aware of their impact on the environment and climate change, plant-based foods can provide an accessible way for individuals to make an impact.

It’s not just vegetarians driving plant-based product growth. According to the Plant Based Foods Association, just 2% of Americans classify themselves as vegan, while 30% of shoppers say they actively try to eat more plant-based foods.10 This creates a unique dynamic where consumers lack a defined diet and may eat both animal meat and plant-based alternatives on a regular basis. As a result, manufacturers may be challenged to create plant-based products that taste as close to what they’re imitating as possible.

Additionally, affordability may pose a threat to plant-based product growth. At the food service and retail level, plant-based burgers are often more expensive to make than those made from animals. If ingredients don’t become more cost-effective, the growth of plant-based products may stagnate. Still, despite potential hurdles, manufacturers are well-positioned to capitalize on the plant-based product trend, particularly if they can simultaneously manage food transparency demands.

At-home meals

Over the last decade or so, there has been a shift in the way Americans consume food. Gradually, fewer consumers are eating at restaurants, opting instead to eat their meals from home — especially during the COVID-19 pandemic. Today, around 82% of the meals Americans eat are prepared at home.11 At the same time, restaurant sales are some of the lowest they’ve been since the Great Recession.12

There are a couple of potential reasons for this change in consumer behavior. For one, eating out is expensive. In general, restaurant meals cost nearly three times more than home-cooked ones. Prices are likely to continue to rise as labor and rent cost increase for restaurant owners.12

Additionally, consumers have become more health-conscious. In a 2018 Peapod survey, 51% of respondents cited health as a reason why they eat in more often.13 While it’s possible to eat a healthy meal at a restaurant, consumers have much more control over the ingredients if they source them on their own.

Furthermore, meal kits — a once-stagnant industry — have become an incredibly popular and easy way for consumers to cook at home. According to a report from Grand View Research, Inc., the meal kit delivery service market could reach nearly $20 billion by 2027.14 This recent growth is largely due to COVID-19, which too has greatly pushed more consumers to eat at home.

One survey from Acosta found that daily 15, approximately:

    • 44% of respondents were eating breakfast at home (33% pre-COVID-19)
    • 31% of respondents were eating lunch at home (18% pre-COVID-19)
    • 33% of respondents were eating dinner at home (21% pre-COVID-19)

That same survey also found that, post-COVID-19, most diners anticipate they will continue to eat out less or not at all.

How this trend will impact restaurants in the long term is currently unknown. However, it may be good news for grocery retailers and meal kit providers who supply consumers with the ingredients and services they need to cook at home.

Online grocery shopping

COVID-19 has undoubtedly changed a lot about the way people consume and acquire their food. For one, people are spending more time at home, often unable or unwilling to go out to restaurants. Furthermore, people want a safe way to purchase food without having to spend time in crowded grocery stores. That’s where online grocery shopping comes in, and it’s a food & beverage consumer trend that doesn’t seem to be going away.

Before the pandemic hit, weekly household trips to the grocery store remained high at 2.7 trips per week. However, in early 2020, the onset of the COVID-19 pandemic greatly accelerated the move to online grocery shopping. During that time, 14.5% of all grocery shopping was done online.16

Furthermore, according to the Coresight Research U.S. Online Grocery Survey 2020, online grocery sales grew 22% in 2019 and — propelled by the COVID-19 pandemic — could surge to 40% in 2020.17 It’s not just utilization and sales that are on the rise, as general adoption of online shopping has seen significant growth.

Online grocery shoppers are buying a larger selection of items from more retailers. In the Coresight Research survey, customers indicated they were purchasing an average of five grocery categories online, compared with 4.4 in the previous year.17 This could indicate that shoppers are moving away from occasional, one-off purchases and are instead using e-commerce as a replacement to in-person grocery shopping trips.

Convenience foods

It’s no shock that consumers are busy, always looking to strike a better balance between work and life. As a result, shoppers want convenient and fresh food options that can keep up with their fast-paced lifestyle.

Whether it be a rotisserie chicken, bagged salad mix, or cut fruit, more foods are being prepared in advance so consumers can easily grab them and go. The fresh, prepared foods market generates $25 billion in sales annually and meets a growing need for busy consumers — the need to get healthier and fresher foods on their table as quickly as possible.18

Gone are the days when grocery stores could get by just selling ingredients. There’s an expectation that grocery stores will also have convenient, ready-to-go meal options available. Of all the grocery departments, it’s the deli that has stepped up to meet the demand for quick and easy foods.

Deli counters no longer offer simply cold cuts, and many have expanded their offerings to include fully prepared sandwiches, pasta salads, vegetable side dishes, and similar options for consumers seeking a quick meal.

Outside of the deli, healthy, high-protein snacks and energy-boosting foods and drinks are also important to consumers. According to a recent analysis by Innova Market Insights, snacks featuring claims of high protein had a compound annual growth rate of 16.8% between 2015 and 2019. Additionally, the use of energy and alertness claims rose 13.7% during that same time period.19

This is all to say that consumers want food that matches their on-the-go lifestyle. In turn, expect supermarkets to expand their offerings to include more easy, ready-made meal options.

The impact of Generation Z on consumer trends in food & beverage

In addition to managing the consumer trends of today, those in the food and beverage industry will have to consider what shoppers of the future will look like. And the future may be closer than they realize.

Generation Z (Gen Z for short), which includes anyone born between 1997 and 2012, currently accounts for 25% of the U.S. population.20 Notably, for those in the food and beverage business, this generation has significant buying power, accounting for an estimated $143 billion in direct spending in the United States alone.21

As such, to market effectively to these individuals, food and beverage operations must understand the habits and needs of Gen Z consumers22 who are:

    • Independent and self-sufficient: A large portion of Gen Z individuals live in households with two working parents. This requires them to be more autonomous and, as a result, makes them more comfortable in the kitchen. Around 26% of Gen Z individuals make most of their own food, and another 71% want to learn to cook.
    • Less focused on healthy eating: As such, they are more likely than millennials to seek out more indulgent food options.
    • Connected and social media-savvy: Gen Z makes up around 75% of Instagram’s total usership, and they use this platform to share their food experiences and inform their eating decisions.18
    • Partial to brands they can trust: They put a strong emphasis on things like traceability, authenticity, sustainability, and socially responsible manufacturing.23
    • Flexible when it comes to mealtime: Many don’t eat on a set schedule, and there’s a greater emphasis on in-between meals. In fact, Gen Z is 53 times more likely to consume snacks as meals annually.
    • More willing to try out and pay higher prices for unique, unfamiliar foods: Given the popularity of foodie culture, many Gen Z individuals see cheap eating as a social stigma.

To cater to this new generation of consumers, food manufacturers will need to create food options that are both easy to prepare and flavorful. For many businesses, reaching this socially minded, foodie generation will require new and innovative marketing and product development strategies.

 

Key Takeaways

1. The food and beverage industry encompasses a wide variety of unique operations, including manufacturers, grocers, distributors, restaurants and bars, caterers, food transportation services, and similar businesses
2. Given the breadth and fast-paced nature of this industry, it can be difficult for food and beverage operations to stay abreast of trends affecting the space
3. Because the industry is heavily influenced by consumer behaviors (e.g., increased demands for food transparency, online shopping options, and organic food choices), businesses that fail to educate themselves on these trends may trail their competitors

Sources