As we get ready to turn the calendar to a new year in a few weeks we wanted to share our perspective on where our industry is going in 2024. At SKUFood we focus on trends that will be beneficial to producers and processors in the industry. There are a number of consumer-focused trend reports which are valuable too.
We always appreciate your opinions so let us know what you think. We do our best to compile these from what we see and hear in our industry.
1. The conversation about food inflation will continue
As we reach the end of 2023, food inflation seems to have peaked in many categories, but it is still above many other sectors. Food and beverage are purchases consumers make every week. The noise and retail prices will impact buying decisions at the shelf. Consumers will continue to trade down and perhaps shift to private label. You need to give them a compelling reason to buy if you are not a value-based brand.
Unfortunately, the politicians continue to focus their attention on the retailers as the cause of food inflation. This will result in retailers putting pressure on suppliers for a lower or stable cost of goods. Suppliers need to be ready to be challenged about their cost (again). If a cost increase was tough last year, it might be even tougher next year. If processors haven’t embarked on a continuous improvement journey to reduce costs, this is the time to get started.
2. Consider the options for the right channel
You have choices where to focus your sales efforts. Middle class consumers have already begun to shift their shopping habits, embracing discount banners and dollar stores as real alternatives for grocery purchases.
The food service segment - particularly independent restaurants - will continue their slow recovery coming out of Covid, as operators and their menus contend with food cost inflation. Chains will continue to dominate the food service landscape in Canada. While the restaurant segment remains an opportunity for many suppliers, the overall share of consumer total food spend away from home has just returned to pre-pandemic levels.
3. Focus on the shelf
Consumers make the decision to buy at the shelf. Put efforts into making sure you are in stock and your value proposition is communicated in a sea of sameness. With the continued explosion of small brands, many of them locally sourced, suppliers need to pay even more attention to packaging that stands out on the shelf. If you have not done it recently, consider putting your packaging through an audit to judge its effectiveness. If you are facing regulatory changes to packaging, turn this into an opportunity to make a statement that will lead to sales.
Pay particular attention to how your shelf merchandising is performing and who is accountable. With the increased use of direct store distribution (DSD), distributors and brokers are playing a bigger role for many processors. You need to ensure you have set proper performance expectations and getting results. Make sure you and everyone on your team understands sales targets and whether you are meeting or exceeding them.
4. Focus on value within your category
We have seen a lot of changes in pricing, package sizes and even product formulation. Take the time to ensure your product delivers value in the category of 2024, not what it looked like 2 years ago. Track promotion programs and other offers to ensure you are competitive but also investing the right amount. You might even be spending too much.
5. Support the underdog
We know there is not enough competition in Canadian food retail. The solution is not a large discounter from another country and it’s unlikely that you will see any new entrants emerge in 2024. A new entrant would most likely just lead to more pressure on suppliers’ pricing. If you are selling to smaller independent chains or stores, make sure you support them and do your part to help them compete. Obviously, you need to support all of your customers, but more home-grown competition will improve the retail landscape.
6. Sustainability must be on your to do list
We see sustainability in three buckets:
a) Reducing food waste
b) Packaging solutions
c) Reducing your environmental footprint
Retailers are all over this because consumers and regulators are demanding it. This has been on the radar long enough; you should be able to show progress and illustrate how it is part of your value proposition.
7. Get laser focused on your target market consumer
Consumers have changed a lot in the last few years. You should have an accurate description of who is the most likely consumer to buy your product. This will ensure you get the best return on investment from your promotion plans. When you are focused on this you can tell your customer who will be picking up the product in their store, and most likely to be a critical repeat buyer.
8. Your product needs to be more than local
No doubt, consumers want to know where their food comes from and retailers are putting these products in stores. The “Local Sourcing” trend, which was accelerated during Covid, continues to grow among all leading retailers and food service distributors. The wide array of local brands and skus put even more pressure on suppliers in crowded categories to communicate why they are different and better.
Ask yourself these questions:
How does being local make this a great product?
Why your target consumer is willing to pay the premium for your product?
The answers will be the story you need to tell.
9. Out of sight, out of mind is not a good place to be
Most people are back at trade shows, consumer shows, retailer meetings and other events. Determine what is the right exposure for your business and make the most of the opportunities. Plan for trade shows and make the most of the in person time you get with your customers.
10. Artificial intelligence is impacting our industry
There are many examples of artificial intelligence (ai) impacting our industry in the packing and processing environment. With the accessibility of applications such as Chat GTP, ai will now become entrenched in the sales and marketing functions. Understand the options and how they can have a positive impact on your business. Do your homework because the rules seem to be following the development, so it is not always the ultimate solution in isolation.
Put our trends to work in your business
As you look forward in your business consider where you need to focus your efforts and resources. Chances are you can’t do it all so prioritize and determine where you will get the best payback.
This year we created the trends and got some valuable insights from Susan Sipos, Norm Purdy and Al Archibald. We have the opportunity to work together on different projects and the improvements they provided are appreciated.
FCC peer groups are a great opportunity for food processors to learn from each other and share their knowledge. People from across the country come together online to talk about what is happening in our industry. I have had the privilege of facilitating peer groups for FCC the last few years. I have met some incredible food entrepreneurs. If you are interested and would like more information check out the FCC link below or give me a call.
Every week we share a media report about the food industry. This week we have included a Government of Canada media release to keep you informed about the news from Ottawa. To be honest it isn’t much ‘new’ news but it does help us understand where they are focused.
Believe it or not the Competition Bureau is still advocating more competition from international chains. Not sure why they do not understand the impact on suppliers, but they seem to have tunnel vision. The industry code of conduct is still a dream that might turn into a nightmare. They had all of the players at the table but now Loblaw and Walmart are back peddling.