Posted onJune 24, 2016
CHICAGO – Today’s major foodservice and retail food brands, along with their suppliers, face increasing challenges in recognizing and responding to ever-more-diverse consumer expectations, according to a new report from Technomic. The rapid change in consumer habits coincides with the equally fast-paced technology changes that businesses must embrace, leading to upheaval in the food industry that will affect every aspect of the business, according to Technomic’s report, “Food Industry Transformation: The Next Decade.”
By analyzing these complex challenges to visualize the coming decade in the growing food industry, Technomic experts forecast myriad ways that the industry will shift over the next decade – and offers a roadmap for industry players to navigate that future.
To grow their share of industry sales, food providers need to continually reimagine, reinvent, and reallocate resources to align their offerings with the evolving technology-enabled supply chain and the changing needs of consumers,” said Technomic Executive Vice President Bob Goldin.
- Traditional retailers, such as supermarkets and supercenters, will lose 10 points of market share to nontraditional retail channels by 2025.
- Significant expansion will be seen for fresh prepared foods at supermarkets, a segment expected to grow at 7.5% annually.
- The entire supply chain will need to be re-tooled to respond to consumer and regulatory demands for foods that are good for people and the planet. The winning products of 2025 will include not only those that can legitimately be labeled as “natural” or “local,” but also those with “clean” labels, fewer ingredients, less processing and a favorable carbon footprint.
Changes in food industry can work to Wisconsin’s long-term advantage
The announced closing of the Oscar Mayer plant in Madison has unleashed no small amount of finger-pointing over who should have known what and when, but the harsh truth of the matter is there was very little any local or state politician could have done to prevent it.
The challenge now is how to respond to trends much bigger than Wisconsin to continue as a state that innovates around food.
Whether it was safe processed meat (an early Oscar Mayer market edge), the advent of a national dairy market, breakthrough canning techniques for vegetables, or the science-enabled growth of the cranberry industry, Wisconsin has historically set a pace for food production and processing.
As time has rolled on, consumer tastes and buying traits changed — to the point that America’s eating habits don’t resemble what things were like when the century-old Oscar Mayer plant was in its heyday.
Whether the terms of art are field to fork, farm to table, organic, buyer cooperatives, locally grown, slow food, urban gardens, or simply “buy fresh,” these are trends that dictate whether an aging processed food plant is consistent with the needs and whims of 21st century consumers. The rise in dining out alone is a defining trend, with the average U.S. household spending 41% of its food bill outside the home
Consolidation in the upper end of the food industry is another factor. Kraft Heinz, which owns the Madison plant, was determined to cut costs and improve efficiencies within the combined company. The just-announced acquisition of Roundy’s by Kroger is a timely example of consolidation in the grocery business.
Meanwhile, innovation is changing the food industry at every level. Recent events produced by the Wisconsin Technology Council in Appleton and Madison focused on how technology is changing food and grocery delivery (Eat Street, Chefs for Seniors, and GrocerKey are Wisconsin examples), buyer rewards programs (Fetch Rewards), organic products (Organic Valley is a national example), and grocery stores themselves, which are increasingly driven by tech, service, and variety.
“Consumer behavior is changing dramatically,” said Jeremy Neren, co-founder and CEO of GrocerKey. “The question is, ‘How do you meet the consumer demand at every channel?’”
The answer is probably not through attempting to maintain an eight-story meatpacking plant, but in leveraging Wisconsin’s historic strengths in food processing and manufacturing to better reflect changing times and consumer channels.
Some hold out hope the Oscar Mayer plant will be sold for a similar purpose. The more likely solution is demolition of the existing plant, remediation of the site, and incubating a phoenix to rise from the ashes.
Think about the assets of the site itself: It’s close to the Dane County Regional Airport, the interstate highway system, bus lines, railroad lines, and existing municipal services. There is a ready source of skilled labor living within miles of the plant — Oscar Mayer employees themselves — and even more at the main Madison College campus.
The food industry of the past was monolithic, like the Oscar Mayer facility itself. The food industry of the future is far more diverse and likely to involve small- to mid-sized companies pursuing multiple consumer channels. That could lead to a cluster of food-related companies on the Oscar Mayer site, with business models that range from research to production to packaging and transportation.
The site is also conducive to other manufacturing uses, especially with key transportation lines already in place or nearby. It may not resemble a classic research park, such as University Research Park on Madison’s west side, but some lessons can be drawn from that 30-year-old experience.
The task facing city of Madison, Dane County, and state of Wisconsin leaders is not to beat up one another over the loss of Oscar Mayer, but to think of creative ways to make use of an excellent location and a unique tradition of food production, processing, and innovation. Look forward, not back.