Positive Outlook For Fresh Food Despite A Negative Year

Originally printed in the July 2021 issue of Produce Business.

By Giuseppe Parlato, Research Analyst

Global sales of fresh food products have grown continuously in recent years, driven by increased demand for healthier, unprocessed products. In 2020, the impact of the COVID-19 pandemic and its consequent restrictions on consumer movements led to negative volume growth. Although a greater degree of home seclusion led to increased domestic consumption, this was more than offset by the reduction of sales in the out-of-home space.

But despite the negative circumstances, the concept that healthy eating habits have a positive impact on health has been embraced. A psychological legacy of the pandemic will be an increasing number of consumers seeking fresh food to sustain a healthy lifestyle, which will create opportunities for the industry.

With many economies across the world forced to close entirely or operate under restrictions, 2020 marked a difficult setback for sales of fresh food to foodservice operations. On the one hand, lockdown measures and the closure of foodservice drove negative growth across the world. However, these measures also led to a massive shift in meal occasions that caused retail sales to surge. Restrictions on opening times and the number of guests allowed continue to act as a constraint for foodservice players today, while retail sales continue to rise as meals that were previously consumed outside the home are now bought for domestic consumption.

Source: Euromonitor International, Fresh Food 21ed; Fresh Food includes: Eggs, Fish and Seafood, Fruits, Meat, Nuts, Pulses, Starchy Roots, Sugar and Sweetener, Vegetables.

This increase in domestic consumption is a key driver for the industry. In fact, while restrictions may end, the economic and psychological effects of the pandemic will likely have a longer-lasting impact. Less disposable income will lead to less eating out and more home cooking, and the demand for fresh products to embrace a healthier lifestyle will accelerate. Consumers are also looking for fresh products due to environmental concerns. Plant-based alternatives have received a boost due to concerns over human reliance on animal protein, and fresh products, such as pulses — widely used in the sector as a meat-replacement ingredient — benefit from this. These trends are set to stay in the upcoming years, which will benefit the entire industry as demand increases.

Another consequence of the pandemic that will shape industry performance is the demand for locally-sourced products, which has accelerated throughout the COVID-19 outbreak due to food security considerations. Consumers and industry stakeholders faced liabilities in supply chains, making locally-sourced products not only necessary but also a convenient way to meet demand while supporting the local economy. This trend is expected to be a key motivator of consumer demand, with the potential to affect the entire food sector.

While this opportunity directly benefits fresh products, it is also gaining significant ground with packaged, processed products that highlight the use of local ingredients in their marketing. In recent years, packaging claims highlighting the use of local ingredients — especially if combined with claims such as ‘natural’ and ‘organic’ — have benefitted local players across different markets. Growing competition from private label lines and smaller players — historically characterized by a better value-for-money image — is expected to boost premiumisation as these claims lead to higher price points. Local players have an advantage over multinational companies in this respect, using their local market knowledge and value-chains to address consumer desire for local products.

The shift from out-of-home to home consumption led to greater use of modern grocery retailers’ facilities, but 2020 also accelerated the penetration of the e-commerce channel. Many suppliers have already pivoted to direct-to-consumer and subscription models after their sales to foodservice were reduced as a result of the restrictions, and more players are exploring this space to stand out from the crowd.

Despite the disruption caused by the COVID-19 pandemic, fresh food products are set to increase in demand, and industry stakeholders must be ready to capture the opportunities that are arising. Increased domestic consumption and home cooking amid health concerns and economic limitations, growing demand for locally-sourced products in both fresh and packaged/processed food, and the rising popularity of e-commerce to reach consumers, are key factors with potential to shape the future for the industry.

Euromonitor International is the world’s leading independent provider of strategic market research. We create data and analysis on thousands of products and services around the world. Our network of in-country analysts provides the depth of local business information required in today’s international business environment.