It was just a couple of years ago that e-commerce took the grocery landscape by storm, forever changing the future of the industry.

Refrigerated and frozen food manufacturers altered production processes in order to fulfill multiple SKUs. Grocers revamped business plans to incorporate delivery and pickup services. And, meal delivery service providers made their subscription-based products available on retail shelves.

Then, last year, Amazon, Seattle, Wash., acquired Whole Foods Market, Austin, Texas, making the transaction 2017’s No. 1 most read food news story among Millennials, GenXers and Baby Boomers/Matures alike, according to an “Annual Food News Study,” produced by Hunter Public Relations, New York.

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But, it doesn’t take a Gray’s Sports Almanac to predict where the cold food and beverage industry is headed.

Shop in the store of tomorrow…today

It’s difficult to imagine the grocery landscape of tomorrow. Will automation and robotics rule the world? Will drones replace fleet? Will consumers be able to make purchases with a blink of an eye? Great Scott!

Whatever the future has in store for the cold food and beverage industry, one thing is certain—online shopping will not replace brick-and-mortar stores.

That’s because many of today’s grocers and e-commerce providers are working together to coexist, allowing consumers to shop however, wherever and whenever they want.

For example, Kroger, Cincinnati, Ohio, and online supermarket Ocado, UK, formed an exclusive U.S. partnership agreement that provides Kroger customers with online ordering, automated fulfillment and home delivery capabilities. 

Kroger also merged with Home Chef, a Chicago-based meal kit delivery service, to accelerate the availability of meal kits beyond the e-commerce channel.

Campbell Soup Co., Camden, N.J., announced a strategic partnership and $10 million investment in Chef’d, an El Segundo, Calif.-based e-commerce meal marketplace, to help grow Campbell’s e-commerce capabilities. 

Chef’d also partnered with Smithfield Foods, Smithfield, Va., to make its subscription-based, ready-to-cook meal kits available at grocery stores nationwide.

HelloFresh, New York, partnered with Ahold Delhaize to make its subscription-based meal kits available in 581 Giant Food (Landover) and Stop & Shop stores.

Danone, Paris, and Lazada Group, Singapore, signed a strategic regional partnership to create a superior online shopping experience for key product categories in Southeast Asia, Indonesia, Malaysia, Singapore and Thailand.

While online grocery sales will grow 13% as compared to 1.3% for in-store sales, from a compound annual growth rate (CAGR) perspective, according to Brick Meets Click, Barrington, Ill., and additional research indicates that in as few as 5-7 years, 70% of consumers will be grocery shopping online, says the “Digitally Engaged Food Shopper” study, produced by the Food Marketing Institute (FMI), Arlington, Va., and Nielsen, Chicago, other experts and market trend research firms persist—e-commerce isn’t taking over the retail industry.

Adoption of online grocery shopping is moving at a slower pace than other consumer categories, but only 10% of U.S. consumers are now regularly buying groceries, according to a study released by The NPD Group, Chicago. Nearly all online grocery shoppers (99%) still shop in brick-and-mortar grocery stores.

And, a new breed of retail stores and in-person experiences will begin to replace outgoing retailers, complete with image-based search functions, augmented reality and customized shopping abilities, among other trends, outlined by Absolunet, Canada.

Furthermore, the vast majority (83%) regularly visited between 4-9 chain stores within a year’s time to purchase groceries. Of the 1,321 households studied in the report, which was released by a team of business school researchers led by Washington University, St. Louis, Mo., only 12 stayed loyal to just one store. More than half (51.1%) went to the average of 5-7 different stores. And, 88 households, or six of every 100, went to 10 or more.

This is heavy.

Cross-industry collaboration creates new ways of doing business

Regenerative agriculture, greenhouse gas reduction, recyclable packaging, wastewater management and state-of-the-art food processing equipment are all key buzzwords in many of today’s cold food and beverage processors’ corporate responsibility reports.

However, it’s the cross-industry acquisitions and new product development that are redefining the cold food and beverage market. And, not just any acquisitions—online retailers buying organic brick-and-mortar grocery stores, snack manufacturers and cereal makers scooping up frozen food processors and quick-serve restaurants (QSRs) buying other QSRs.

It’s these “unconventional” acquisitions that place processors in other parts of the retail space, expanding their logistics network and indefinitely changing the future of the cold food and beverage industry.

For example, Utz Quality Foods, LLC, a Hanover, Pa.-based salty snack manufacturer, acquired Inventure Foods, Inc., Phoenix, Ariz.

Albertsons Cos., Boise, Idaho, acquired Plated, a New York-based meal kit service provider. 

Post Holdings, Inc., St. Louis, acquired Bob Evans Farms, Inc., New Albany, Ohio.

Arby’s Restaurant Group, Inc., Atlanta, acquired Buffalo Wild Wings, Inc., Minneapolis.

And, Dean Foods Co., Dallas, Texas, acquired Uncle Matt’s Organic, an organic juice processor based in Clermont, Fla.

2017 offered more of the steady merger and acquisition activity that has characterized the market for the last several years, according to a report released by A.T. Kearney, Chicago.

Likewise, the food market will experience rapid evolution in 2018, according to sector experts at MSL, Seattle, Wash., with a broad array of technological innovations making it easier to acquire and consume foods and beverages tailored to today’s consumer’s specific food needs, speeds and philosophies.

Trends such as retail experimentation are already ringing true.

For example, Walmart, Bentonville, Ark., developed Eden, an intelligent food system designed to improve the quality and flow of fresh groceries from farm to shelf.

Loblaw Cos. Ltd., Canada, unveiled a 53-foot, fully electric Class 8 truck, capable of making commercial grocery deliveries with zero-carbon emissions.

And, General Mills, Minneapolis, developed Cinnamon Toast Crunch Bites, a frozen take on its Cinnamon Toast Crunch cereal in bite-sized snack format. (For more on this, visit the Best New Retail Products section).

Incubator programs help small food brands fly into the future

Forget the DeLorean. Today’s industry leaders are developing incubators to help sculpt the future of tomorrow’s food supply.

For instance, Tyson Foods, Springdale, Ark., announced an agreement to work with two business incubators, Plug and Play, Sunnyvale, Calif., and 1871, Chicago, to combine Tyson’s expertise with the energy, innovation and entrepreneurialism of startup culture.

The Kraft Heinz Co., Pittsburgh, Pa., launched Springboard, a platform dedicated to nurturing, scaling and accelerating growth of disruptive U.S. brands within the food and beverage space.

Chobani, LLC, Norwich, N.Y., launched the Chobani Food Incubator program, which since last year, has helped small food brands like Snow Monkey, Santa Monica, Calif., and Grainful, Ithaca, N.Y., break into the food industry.

Packaging paves way for innovation

Product positioning, marketing, the economy, taste trends, business and consumer spending and the direction of the consumer packaged goods (CPG) sector all impact the future of packaging trends, according to insights released by L.E.K. Consulting, Boston, Mass. But, brand owners anticipate more demand for new packaging formats and expect proliferations of new “sub-brands.”

For instance, private label brand owners expect to offer an average of 38 total SKUs for their primary brand by 2023 and name brand owners expect to have an average of 57 SKUs for their primary brand by 2023. That’s compared to 23 private label and 46 name brand SKUs today.

Nearly half of brand managers say that over the next five years, they’ll expand their “price-pack architecture” offerings. Think new refrigerator-friendly sizes of ketchup bottles and snack-size packages of certain foods.

About 40% of brand owners say they’ve made changes toward sustainable packaging over the past two years, and the majority plan to move a portion of their packaging volume toward sustainable packaging options over the next five years.

Millennials shape the future

Millennials are considered to be one of the first demographic groups to actually be labeled a trend. Millennial shoppers also generally purchase a larger share of prepared foods than other generations, according to a study from Economic Research Service (ERS), Washington, D.C. On average, Millennials devoted 13.6% of their at-home food expenditures to these three categories, including pasta, sugar and candies, compared with 12.4% by Gen X’ers, 11.5% by Baby Boomers and 11.2% by Traditionalists. Millennial households also devote the smallest share of their at-home food expenditures to grains, poultry and red meats.

Some noticeable patterns appear when examining at-home expenditure shares by income. As income rises, expenditure shares for fruits, vegetables and red meats, among categories, for all four generational groups increase, while shares for poultry decrease as incomes rise.

Millennial households generally allot the lowest shares of their at-home food budgets to red meats and poultry. On average, expenditure shares for red meats and poultry decrease with each younger generation.

Like purchases of poultry, grain and pasta purchases exhibit a negative relationship with income; as households become richer, they buy less grains, which are often shelf stable and cheaper, and shift toward purchasing more perishable foods like red meats and fresh fruits and vegetables.

Millennial households devote more of their at-home food spending to prepared foods, such as frozen entrées and instant breakfasts, than the other three generational groups.

But, a report presented by Maritz Motivation Solutions, Fenton, Mo., shows that Millennials aren’t really the target audience. In fact, the secret to effectively leveraging the younger generation of consumers lies in targeting the HENRYs (High Earners Not Rich Yet).

HENRYs, also known as Gen Z, have never experienced life without the internet, and make about 4.5 routine grocery trips a month, according to “The Why? Behind The Buy” study, produced by Acosta, Jacksonville, Fla.

Meanwhile, 60% of Millennial shoppers use mobile apps for grocery coupons or discounts, significantly higher than any other generation

Millennials and other diners have also inspired restaurateurs to expand into more diverse areas such as salads, new-wave Asian (including fusion noodles, stir-fry and sushi) and boundary-pushing global cuisines.

“The mix-and-match, ‘built-it-for-me’ trend in fast casual has diversified to all sectors of the restaurant industry, from fast food to fine dining, as well as non-commercial venues. Yet, while most obvious on restaurant menus, this trend is bigger than just foodservice. Among prominent food retailers such as Kroger and Meijer, meal kits are a trending example of how even grocery chains are working the do-it-yourself trend in fresh foods,” says David Sprinkle, research director for Packaged Facts, Rockville, Md., whose report, “Millennial Menus: Culinary Trend Tracking Series,” showcases how the impact goes beyond the limited “white, wheat or rye” custom options of yesteryear.

Roads? Where this industry is going, it doesn’t need roads.

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