2019 Insights From Industry Analyst Phil Kafarakis, President of the Specialty Food Association
We’re looking into the proverbial crystal ball and seeing what the experts are predicting with regard to trends worth watching for 2019.
Industry analyst Phil Kafarakis, president of the Specialty Food Association, has made his forecast. His 2019 insights and variety of perspectives include the CEO revolving door, brand loyalty, financial engineering, new food retail concepts, disruption, and the future of Big Food.
Here are the 2019 insights that caught our attention:
1. Financial reengineering will be even more important than driving brand loyalty.
Venture capitalists and activist investors will drive even more complexity into core business processes looking for faster EPS (earnings per share) and quicker exits.
2. Leadership, talent and business as usual is not going to cut it!
The CEO Carousel will continue to go “round & round”. More big food brands will be retiring long-tenured leaders and looking for innovative new approaches to business transformation.
- Heavy promotional discounting and retailer incentives to move inventory is no longer acceptable in hitting quarterly EPS targets. Analysts are on to the many ways of shuffling inventory and attempting to hit aggressive revenue targets. Consumers have been conditioned to buy on deal and the “cherry picking” is going to continue to erode margins for food brands.
- Commodity input costs are going up, labor and benefit costs are spiraling out of control due to health care coverage pressures, attracting talent is getting harder particularly within supply-chain jobs and keeping pace with technology needs for security systems and data protection costs an arm and a leg – that’s all before investing in any type of innovation.
3. Traditional retailing totally accept technology and pop-ups gain momentum.
In the wake of Sears, leveraging consumer data to personalize merchandising, negotiating rents and examining brick & mortar locations is in high gear for food merchants. Online ordering and in-store pickup will only get more intense (December 2018’s exceptional holiday sales proved that out).
- Modernizing supply-chains for “just-in-time” inventories will only get more attention and funding from the corporate office.
- Taking the “physical store” to the consumer via a pop-up strategy will be a new approach that the food retail community will be piloting extensively.
4. If you’re in the food business and do not understand the Farm Bill, you’re in trouble as big farming operations are going to only get stronger (pricing power) and commodity raw materials pricing is going to be a serious concern given the subsidies and guaranties they will receive from the government (Farm Bill). Managing your raw material supplier and leveraging tools that will enable more accurate forecasting of raw materials will be a real concern.
- Add on to that uncertainly in input costs the tremendous unpredictably with current global trade challenges and you’ve got a P&L that will implode within minutes depending on your product category.
- Investments in areas like sustainable farming, animal welfare, hemp as an agricultural commodity and non-GMO related foods provide opportunities for innovation and competitive advantage.
5. The legislative environment is only going to get more complicated as labeling will continue to be a factor as product definitions are being finalized.
- The recent ruling on non-GMO foods and the ongoing battle over the definition of “milk” can provide opportunities for food brands that are looking to expand market share and experience accelerated growth in new product segments (particularly within the plant-based food segment).
6. Consumer behavior will only continue to be more fickle as the real truth is in understanding consumer “values and ethos” by demographic segment.
- Local food, charities, causes will carry the day and social media marketing is the most effective method in driving loyalty.
- A more willing acceptance to experiment will drive consumption in the new food categories outlined below. Human curiosity will allow marketers to create awareness of products that can solve health related issues.
7. And Now for the Food…
The biggest gains and most impactful areas to watch for consumer acceptance across all food channels are focused on health and wellness – particularly as we better understand low fat, high protein diets, allergies and digestive health. Here are the big four food categories to watch:
- “Lab-meat” will come to acceptance.
- “Plant-Based” everything will grow even more exponentially. Vegan will become a much more featured lifestyle across all food channels. Algae in multiple forms, more seeds, roots and herbs, and beans of every size, shape and flavor.
- “Alternative protein” products, particularly insects of multiple varieties, will begin to expand distribution within traditional U.S. grocery channels and away from supplements.
- “Fermented functional beverages” will continue to grow as digestive issues become an even better understood health disorder.
- Beverages will feature ingredients like: chaga mushroom, lion’s mane, cordyceps, drinking vinegars, and the traditional Slavic/Baltic drink kvas made from rye bread.
The Specialty Food Association annual predictions stretch far beyond consumer trends and affect the entire food service industry. How will these trends affect your business?
Christopher Pappas, Chief Executive Officer, The Chefs’ Warehouse:
“We expect the interest in clean ingredients to grow this year. Our category managers will continue to place an emphasis on procuring the highest quality ingredients from the best artisan producers from around the world.”
Linda Kavanagh, President, MaxEx PR and New England Culinary Group:
“Perceived healthy eating habits continue to change and while the foodservice industry does an adequate job of addressing some of these menu requests, the best part of today’s food culture and consumer awareness is not in the replacement of certain foods. It is in the demand for higher quality foods. The best example of this is with our red meat consumption. Red meat has made a tremendous resurgence on menus, but now as USDA Organic, 100% Grass Fed, Non-GMO, organic offerings.”
Shawn McCall, US Foods President, Metro New York:
“Culinary trends are moving faster than ever and when restaurant operators aren’t moving forward with the right trends at the right time, it’s easy to fall behind. At US Foods, we make it easy for our operators to stay on trend and take the right steps forward with confidence by bringing restaurants across the country an assortment of innovative, labor saving and versatile products. As part of our “Great Food. Made Easy.” strategy, we develop products that will ensure our restaurant operators stay on the leading edge of dining trends and diner interests.”
“It’s not a surprise to us to see these interesting trends in health and wellness driving a lot of innovation and excitement in the industry. We conduct significant product innovation in this area and will continue to do so as these trends evolve. For example, within the meatless protein arena, we recently launched several innovative meatless products to accompany our traditional black bean and veggie burger patty offerings.”
- Molly’s Kitchen® Meatless Breaded Boneless Wings (pictured above): “The wings are vegetarian and made from a form of protein derived from fungus that ensures the same meaty texture as the real thing. With the versatility, crunchy bite and flavor of traditional boneless wings – this is a meat alternative our customers like because it tastes great for vegetarians and non-vegetarians and alike.”
- Molly’s Kitchen Meatless Crumbles (pictured at top): “A meatless crumble that mimics ground beef in every way. This non-meat option is perfect for vegetarian crowds, plant-based diets or diners looking to limit their intake of red meat. As a menu alternative, it offers less fat and can be used in pastas, burgers, tacos, chili and more.”