Nothing about the past few years has been predictable, but the challenges they’ve revealed will continue to haunt the food and beverage industry in 2023. Here are five focus areas for the industry this year.
The impacts of inflation on grocery spending
Fingers crossed that the worst of inflation is behind us, but its impacts will continue to be felt, and new ones may emerge depending on what happens in the macro economy.
So far, demand for food and beverage products has remained high, even after price increases. But, in the past few months, we’ve seen more evidence that consumers are changing their spending patterns, including purchasing products less often than they used to or switching to a different brand to save money. They’ve also noticed shrinkflation, which they’re responding to in a variety of ways.
As of today, the unemployment rate is at 3.5%, and low unemployment has likely contributed to the resilience of consumer spending so far. But, with the Fed widely expected to continue raising interest rates, economists anticipate that the unemployment rate will rise. This will put even more pressure on consumers’ budgets, impacting grocery spending in a more substantial way than what we’ve seen till now.
Which leads to our second focus area…
Value beyond price
After several years of a shift toward increasing premiumization, 2023 will be the year of value. But that doesn’t mean consumers have given up on the types of attributes that they were looking for with premiumization – they just want premium products that are also affordable. To succeed with consumers this year, food and beverage brands will need to provide value beyond price.
The idea of “Redefining value” is Innova Market Insights’ top trend for 2023. “As the cost-of-living crisis continues, brands can achieve success through actions that combine economic benefits with clear health and sustainability goals,” Innova noted.
Holistic thinking around digital transformation
A few years ago, the industry was just getting started with its digital transformation. Now, many companies are saying, “Ok, we’ve taken the first step. What’s next?”
One of the challenges is that digitalization can mean many things in the food and beverage industry, from big data and predictive maintenance, to artificial intelligence and machine learning, to production line automation and robotics. In addition, it’s often seen as purely an IT initiative, rather than an overarching business strategy.
As companies mature in their digital transformation journeys, we’ll start to see a more holistic approach. Digital transformation will be a critical business strategy that touches every process in the plant.
Appealing to Gen Z workers
To say that the pandemic changed what work looks like is a vast understatement. The digital transformation accelerated significantly, and seemingly everything that could go remote, did. But there’s a shift that may prove to be even more significant to the structure of the workplace long-term: Gen Z.
A labor shortage has plagued manufacturing for years, but it seems like only recently that many food and beverage companies have started to understand that the old ways of working just won’t cut it anymore. To compete for top talent, they need to change how they operate to appeal to a new generation of workers, who place more value than previous generations on things like flexibility, work-life balance, mental health support, diversity, and company culture.
A new approach to plant-based meat alternatives
After a period of rocket-fueled growth, sales of plant-based meat alternatives flatlined and then started to decline. There’s been a lot of speculation about why, much of which boils down to a classic case of overpromising and under-delivering.
- The “addressable market” isn’t as big as predicted, and it may already be saturated.
- Plant-based meat alternatives are expensive, which makes them an even tougher sell when inflation is high.
- Perceptions of the health and environmental benefits have changed.
To turn the ship around, plant-based meat companies need a new approach. Appealing to the consumers who eat meat but are looking to reduce their consumption seems like a good place to start. Personal health and environmental impact are the top two reasons people choose to eat less meat, so plant-based meat companies will need to ensure that they’re delivering on those two promises.