In December we shared our insights for you to focus on during 2021. We reflect on conversations with producers, processors, retailers and consumers to create our trends for the upcoming year. There is a lot happening and it is changing fast. For these reasons it is more important than ever to consider the impact of these trends on your food and beverage business. Over the next few weeks we will take a detailed look at each trend and how it can impact your business this year.
Our trends for 2021 are:
- The value of food has changed
- Buy local and buy Canadian is important
- E-commerce will continue to grow
- Service level is key to success
- Changing priorities of retailers
- Consumers working at home influence the basket
- Millennials are shopping in food stores
- Increased options for protein
- Sustainability will be back
We have turned the page on the calendar to a new year and already some people have decided it might be as challenging as the previous one. Given the ongoing battle against the pandemic and unrest in our largest trading partner, we will continue to face challenges. We will find solutions and continue to produce food and beverage for consumers.
As difficult as 2020 was for many people, one positive to emerge was the consumer’s perception of the value of food has changed. When people experienced stores with no product and read stories about employees in the food industry going to work in a pandemic, many paused to think about food. I would guess many had taken it for granted in the past.
As a person who has worked in this industry for many years it has always been a frustration for me that consumers placed more value in a phone or clothes, than they did for food. Food is essential to life and we have been more focused on de-valuing it than getting the right price. My message is not to arbitrarily increase prices but to get the right price.
There are a few reasons for the value of food changing.
First, for many producers and processors the cost of producing food and beverage has increased. Input costs are rising, packaging costs are increasing and there are examples everywhere illustrating the processing costs are increasing. Efficiencies are not there in production due to physical distancing and other limitations from the pandemic and some companies have had to increase pay to maintain their workforce.
Second, supply and demand is a determining factor in food and beverage. With supply limited and demand higher it is natural in our economy for prices to increase. Processing facilities cannot produce as much and consumers have shifted from food service to retail so there are increased sales across the store. In one Nielsen presentation they made the statement it was close to Christmas sales every week. We also see disruptions in supply from around the world. We know many countries are struggling with the pandemic. Lead times are usually longer on imported product so the holes on the shelf might not be right away but they are showing up.
Third, consumers are thinking about food. As I mentioned earlier the empty shelves and stories of people risking their own health to produce food have had an impact on people. It is impossible to quantify this but the awareness around food has changed. Consumers want to know and they need the assurance our food supply system will be there for them.
Given these changes producers and processors do have an opportunity.
You have an opportunity to ensure you understand your cost of goods and achieve a fair price for your product. Customers and consumers want your products so make sure you know your numbers and negotiate a fair price. This is not a license to just take an increase or charge too much. Use the facts and stay close to market pricing. You can also check Statistics Canada for inflation and the Dalhousie Food Analytics Lab for their forecasts. These can be helpful tools to ensure you are close to the market.
Given an increased focus on what we are doing in the food industry it is also the time to improve relationships with customers and consumers. Share your story and the benefits of your products. People are more interested now than they were this time last year. Grow your online community and enhance consumer’s relationship with your brand.
There will be challenges in 2021, as there were in 2020, the successful producers and processors will focus on the opportunities and benefit from an improved perception of the value of food from consumers and customers.
If you have any questions about where the value of food is going you can always call me at (902) 489-2900 or send me an email peter@skufood.com.
Peter