Top 10 Food Industry TrendsGrocery retail has never been more cutthroat. With razor-thin profit margins and new pricing pressure from Amazon, Lidl, and ALDI, U.S. food retailers must adapt quickly in order to remain competitive and appeal to shifting consumer preferences.

Based on the latest studies by the market research firm Packaged Facts, here are 10 retail trends that are reshaping the food industry.

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TOP 10 FOOD INDUSTRY TRENDS

1. Deep-Discount Battle Heats Up

Even though the U.S. job market has improved since the recession, many consumers are still looking to pinch their pennies where they can— and value grocery stores are booming.• Supercenters (such as Walmart) draw 177 million U.S. adults as

monthly shoppers (more than traditional supermarkets).• Wholesale clubs (such as Costco) attract 91 million.• Dollar stores bring in 53 million.• Discount/limited-assortment grocery chains like ALDI kick in 42 million.

The German chain Lidl plans to open 100 stores per year in the U.S. Known for its competitive prices and private-label brands, Lidl operates in 27 countries and is Europe’s largest discount grocery chain. It features smaller stores with just six aisles that allow people to get in and out quickly.

Lidl’s competitor ALDI is already on the defensive, and Walmart is testing a low-price strategy to undercut these retailers. Both Target and Walmart have also begun investing in smaller grocery retail formats.

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The Future of Food Retailing: Value Grocery Shopping in the U.S. explains key trends and opportunities for supercenters, wholesale clubs, dollar stores, and discount/limited assortment chains.

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TOP 10 FOOD INDUSTRY TRENDS

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To get more in-depth information about how Amazon is shaping grocery trends, read the newly published Packaged Facts report U.S. Grocery Market Focus: The Amazon Food Shopper.

2. Amazon Helps Transform Grocery Retail

As Amazon leverages its acquisition of Whole Foods Market, its every move will be closely watched by competitors large and small. In 2018 and 2019, Amazon’s online food and beverage sales are expected to grow 70%, according to Packaged Facts. Even with average growth between 2021 and 2025, Amazon’s food and beverage sales would surpass $30 billion.

While Amazon is not expected to dominate the food and beverage market, it will help move prices downward in an industry where margins are already notoriously thin, according to David Sprinkle, research director, Packaged Facts.

“This will, in turn, likely result in additional industry mergers and alliances geared toward managing costs, as other retailers seek to stay in the game with a competitor long known to absorb heavy losses over time in its quest for market share,” Sprinkle explains.

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TOP 10 FOOD INDUSTRY TRENDS

3. Online Grocery Sales Surge Higher

Online grocery sales will hit $41.7 billion by 2022, growing at an astonishing compound annual growth rate of 27.1%, according to recent estimates. Online grocery sales still represent a relatively small portion of overall food and beverage sales in the U.S., and marketers have a long runway for growth.

The increased use of smartphones, enhanced website and app interfaces, and crowd-sourced business models are all helping to fuel growth.

Industry players are working feverishly to secure a competitive advantage in this quickly shifting market. Amazon has leveraged its Amazon Prime Membership to entice customers to buy groceries online, and with its acquisition of Whole Foods Market, it can quickly add grocery pickup points for online orders across the nation.

Walmart is working to expand its curbside grocery pickup service to nearly half of its stores by the end of 2018. However, a key challenge going forward for both these retailing giants is improving customer trust in perishable selection and delivery. Other marketers to watch include Kroger, Albertsons, Peapod, Fresh Direct, and Instacart.

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Online Grocery Shopping in the U.S. provides in-depth analysis of the online sale of groceries based on a proprietary national consumer survey and interviews with grocery experts.

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TOP 10 FOOD INDUSTRY TRENDS

4. Meal Kits Disrupt the Food Industry

Meal kit delivery services have skyrocketed in popularity, reaching $5 billion in sales, as consumers seek greater convenience and fresh, home-cooked foods.

Although Blue Apron’s IPO was generally considered a bust, Packaged Facts expects strong growth for meal kit delivery services overall. Meal kits have real staying power:• Three-quarters of U.S. adults have heard of meal kit delivery services.• 25% of U.S. adults have signed up for at least one free trial.• Nearly 90% of subscribers would recommend fresh meal kits to their

friends.

The number of companies in this space continues to expand rapidly, but no single provider controls the market. According to June 2017 consumer survey data, the top five players in the market include Blue Apron, Freshology, Green Chef, HelloFresh, and Home Bistro.

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Get ahead of the latest developments by reading Packaged Facts’ newest edition of Meal Kit Delivery Services in the U.S.

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TOP 10 FOOD INDUSTRY TRENDS

5. Non-GMO and Organic Foods Move Beyond the Natural Channel

It’s no secret that the natural and organic foods market segment is experiencing strong, steady growth:• The natural and organic foods market segment is worth nearly $70

billion.• From 2012 to 2016, U.S. retail sales for natural and organic foods rose

at a CAGR of 7%.• By 2021, growth is expected to hit double digits.

A variety of mainstream grocers have already taken a bite out of the market for natural, non-GMO, and organic products. Now consumers can purchase natural and organic foods in most supermarkets and mass retailers — from Costco to Walmart — and the competitive landscape has expanded into a broader battle for market share.

While the demand for natural and organic foods is increasing, food retailers will face a number of significant challenges in the coming years, including heavy discounting, industry mergers, and increased competition from ALDI, Lidl, and Amazon.

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For a comprehensive assessment of the organic foods market, see the report Whole Foods, Trader Joe’s, and Natural Channel Grocery Shopping. The upcoming study The Organic and Clean Label Consumer is another insightful resource on the topic.

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TOP 10 FOOD INDUSTRY TRENDS

6. Fresh Produce Market Grows Gradually

Consumption of fresh produce grew about 1.3% between 2011 and 2016. Packaged Facts predicts modest annual gains over the next several years. Increasing disposable income and food marketing strategies that emphasize health and taste will help drive market growth.

Certain demographic groups can be targeted to increase sales, such as parents of young children who are seeking healthy foods to prevent childhood obesity. Flexitarians — people who eat a semi-vegetarian, plant-based diet — are also more likely to consume more fruits and vegetables.

Baby boomers are another key demographic; with more age-related medical concerns, baby boomers often prioritize healthy eating more than other age groups.

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Check out the new study Fresh Produce: U.S. Market Trends and Opportunities for forecasts and key trends driving consumer purchases for fresh fruits and vegetables.

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TOP 10 FOOD INDUSTRY TRENDS

7. Ready-to-Drink Beverages Enter New “Golden Era”

The beverage industry is hungry for innovation, and exciting changes are on the horizon.

“Ideas are flowing like perhaps they haven’t in decades, if not a century. Indeed, until recently, the beverage industry had remained untouched by radical transformation. That is not the case any longer,” said David Sprinkle, research director at Packaged Facts.

A number of factors are driving innovation. Consumers are looking for better-for-you beverages with cleaner labels. In addition, unique ingredients and technologies offer new possibilities to manufacturers. On top of that, millennials have also become a dominant consumer group, and they are known for being open to new flavors and products.

The ready-to-drink beverage industry is an especially important segment of food retailing. Single-serve beverages are much easier to reformulate than foods and tend to be highly profitable. Plus, packaged beverages help drive foot traffic in convenience stores.

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For more information on this dynamic industry, read the report Ready-to-Drink Beverages: Culinary Trend Tracking Series, which features cutting-edge trends in coffee & tea, dairy & dairy alternatives, energy & sports drinks, enhanced bottled water, juices, soda, meal replacement beverages, and specialty health beverages.

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TOP 10 FOOD INDUSTRY TRENDS

8. Probiotics Capture Interest of Millennials

A 2017 national consumer survey found approximately 25% of U.S. adults seek out foods and beverages with high amounts of probiotics and prebiotics.

Prebiotics and probiotics are thought to support a healthy gut and “microbiome,” potentially boosting immune health and alleviating a variety of ailments. Probiotics are live microorganisms that take up residence in the intestines, while prebiotics are the dietary fiber that feeds them.

Although many health claims for probiotics have not been clinically proven, there’s no sign of a slowdown in the probiotics market anytime soon.

Probiotics are often found in yogurt, kefir, and kombucha. Companies are also adding probiotic strains to just about every packaged product you can think of, including juices, cheese, meal shakes, cereal, snack bars, spreads, chocolate, and chips.

Compared to gen Xers or baby boomers, millennials have higher interest in functional foods with health-promoting properties. In addition, probiotics are catching on with consumers who shop in natural food stores.

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Probiotics and Prebiotics: Food and Beverage New Product Trends covers the current and future potential for probiotics in the packaged food and beverage industry.

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TOP 10 FOOD INDUSTRY TRENDS

9. Fats and Oils No Longer Taboo

Fat-free foods were all the rage in the 1990s and early 2000s, but consumer perceptions of fats and oils have shifted since then. Fat is no longer viewed as a complete nutritional no-no. While artificial trans fats top the list of “bad fats” to avoid, certain types of fats such as Omega-3s and monosaturated fats have been shown to have positive health benefits.

In addition, many consumers — especially millennials and gen Z shoppers — are more concerned about choosing non-GMO, organic, clean-label products than avoiding high-fat ingredients. In fact, butter sales have reached their highest levels in decades, and there’s an increasing interest in full-fat milk and yogurt, in addition to specialty oils derived from coconuts, avocados, and walnuts.

In response to these shifts, some processed food manufacturers are incorporating more plant-based oils and full-flavor butter into salty snacks and cookies.

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Food Formulation Trends: Oils and Fats explores consumer attitudes and behaviors with respect to fats and oils. This report is designed for food and beverage manufacturers and marketers, retailers, ingredient and agricultural product companies, and advertising agencies.

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TOP 10 FOOD INDUSTRY TRENDS

10. Meat and Poultry Demand Remains Strong

A growing number of celebrities — from Jennifer Lopez and Alec Baldwin to Ellen DeGeneres and Alicia Silverstone — have publicly embraced veganism, but most Americans aren’t ready to jump on the bandwagon quite yet.

According to a Packaged Facts national consumer survey, 70% of respondents said they still prefer to get their protein from animal sources. U.S. retail sales of meat and poultry are expected to rise to a whopping $100 billion by 2019.

Even though a large portion of Americans still view meat as an important part of a well-balanced diet, consumers are increasingly focused on quality over quantity. Premium products such as local, organic, grass-fed, and cage-free meats are a key trend driving retail sales. Other issues of concern include animal welfare, environmental sustainability, and nutritional value.

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Meat & Poultry: U.S. Retail Market Trends & Opportunities covers market size, growth, trends, and consumer psychographics for meat, poultry, and meat substitutes.

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TOP 10 FOOD INDUSTRY TRENDS

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