It will not be easy for food retailers to beat the record figures they recorded in the corona year 2020, but in any case, the pandemic has amplified some trends that will determine the food sector this year and in the years to come. An analysis.
1. Health on number one with a bullet
The virus has boosted consumer health awareness. Obesity turned out to be a risk factor in infection and the importance of a well-functioning immune system became evident. The sale of fresh fruit and vegetables, healthy (dairy) drinks, organic products, alcohol-free products, food supplements and vitamins did benefit.
This is a long-term trend. For brands and retailers, the trick is to stay credible: false health claims can return like a boomerang. Foodmaker brings a clear message with the hashtag #vedgeversus virus, Delhaize makes clever use of the Nutri-Score, a manufacturer like Bonduelle sees the sale of pulses exploding.
2. Veganism is here to stay
Those legumes are excellent meat substitutes. As well as being healthy, they are also sustainable. The large ecological footprint of animal products motivates more and more consumers to eat more plant-based foods. For some, there is even the (somewhat dubious) argument that such a virus might not have broken out if everyone was vegan.
Veganism is a small but rapidly growing niche of interesting consumers: young, conscious, willing to spend money and change shops or brands. The trend is in many product categories – certainly not only in meat and dairy alternatives. No wonder that even large multinationals no longer ignore the hole in the market: Unilever and Nestlé, among others, are going full steam ahead, as are Delhaize and Albert Heijn.
3. The supermarket as a caterer
It is to be hoped that one day the restaurants will open their doors again, and then supermarkets will risk having to sacrifice some of the fine sales growth of 2020. But just as the catering industry has reinvented itself with takeaway (also a keeper), the catering function of the supermarket will only continue to gain in importance. Food retailers have seen the impressive growth figures of HelloFresh. Some launch restaurant services themselves, from a ghost kitchen for example, as Colruyt Group did.
Consumers demand variety, inspiration and convenience in various forms: ready to cook, ready to heat, or ready to eat (possibly on site). From handy meal kits with recipe ideas and ingredients over a healthy salad bar to prepared meals, fresh pizza or sushi. And it’s striking: most of the products on offer come under private label. Is the centre store with the industrial products of the large multinationals in danger of losing weight in the long run? That is food for thought, dear brand manufacturer.
4. Transparency is a prerequisite
Just as people are worried about ‘what’s in that vaccine’, so they want to know more than ever what they put in their mouths. There is an increasing supply of apps that inform consumers about allergens, ingredients, origin, method of cultivation, working conditions, etc. Manufacturers and retailers not only need to be transparent, they will also need to have their data in order.
Labels for animal-friendly products are emerging, fair trade continues to grow and retailers are putting local partners in the spotlight. Sometimes there is a threat of a revival of protectionism, such as in France with the ‘balance ton origine’ campaign that puts producers under pressure to use only French agricultural products. In any case, honesty is the best policy. Tony’s Chocolonely, for example, ‘strives’ for slave-free chocolate, but also readily admits that they are a long way from being there.
5. E-commerce goes through the roof
During the lockdowns, the logistic performance of the online grocery services was put to the test. The systems were not equipped for this explosive growth. But it is clear that the consumer is now ready for it. There are no more excuses. Ahold Delhaize has announced important investments, Carrefour is starting a pilot project to make e-commerce operations more efficient and profitable, Colruyt Group will take a new e-distribution centre into use this year.
Time is pressing, because new competitors advance: pure players, who come to the consumer’s doorstep and do not carry the heavy burden of an outdated retail real estate portfolio. They are counting on technology and increasing scale to become – one day – profitable. Picnic conquers the Netherlands and Germany with a distinctive approach. Ocado‘s business model is different: it sells its cutting-edge technology to traditional retailers, such as Marks & Spencer in the UK or Kroger in the US. Will new customers follow?
6. Loyalty goes digital
A small standard discount for anyone applying for a plastic loyalty card: that’s a thing of the past. Not really interesting for the shopper, and even less so for the retailer. The future belongs to the smart use of data, to personalised offers. And then apps are so handy. Delhaize and Lidl, among others, offer more advantages to customers who share more purchase data in the app.
That sometimes leads to resentment. Customers who don’t have a smartphone or don’t want to share data feel disadvantaged. Privacy is a delicate matter. But as long as retailers adhere to the GDPR guidelines, there is little to blame them for. A further breakthrough of apps and targeted loyalty actions therefore seems logical. Which, of course, leaves room for a “no frills” retailer who simply promises their customers low prices without digital marketing tricks. A kind of Aldi, so to speak.
7. Consolidation on the way?
In terms of mergers and acquisitions, 2020 was a quiet year. After all, there were other priorities. Will there be a catching up? Investors seem somewhat averse to the non-food retail sector because of the great economic uncertainty, but the food sector is an exception. After all, supermarket chains did particularly well last year and more than lived up to their ‘essential’ status.
Some major players also have cash on surplus to make takeovers and build economies of scale. In Europe, the market is still very fragmented at the end of the day. Carrefour has already announced that it wants to play a role in a further consolidation of the sector – think of the recent acquisition of Bio C’ Bon. Traditional food retailers may also show an interest in online players, buying digital know-how. There is huge synergy potential.
