Originally printed in the January 2021 issue of Produce Business.
By Raul Fernandez, President, Breakthrough Solutions
The year 2020 has been unprecedented in many ways and has been extremely challenging for fresh produce suppliers, retailers, and shoppers.
The rollout of COVID-19 vaccines brings us all hope for a return to normal in the coming year. We at Breakthrough Solutions believe there is, actually, a new and better normal ahead. With that focus, we want to share our predictions of seven key trends for 2021. Our insights are drawn from a Summer 2020 Breakthrough Solutions National Consumer Survey on online shopping behavior, desires, experiences and from a variety of other trend research sources.
Looking ahead, the following summarizes the top consumer trends for produce suppliers in the coming year. Each one can provide opportunities for those that take advantage of these trends:
1. Online shopping – The fresh produce industry must act now to ensure the digital future doesn’t result in a return to a commoditized past and lower sales
Online grocery is here to stay and growing rapidly. Online sales in 2020 are expected to grow by more than 90% over 2019 and could reach more than 20% of total grocery sales by 2025. To understand the growth, consider it was only 3.4% in 2019. While the online sector is growing, the digital shift has the potential to put fresh produce brands, revenue, and profitability at risk. As consumers are now shopping in an omnichannel world, shopping for fresh produce online is a very different experience and decision process than pushing a cart through the produce department.
Our online survey found that more than 50% of shoppers purchase less fresh produce online than during in-store visits. What is worrisome is that shoppers are also significantly less likely to try new products online. Shoppers feel they have fewer fresh produce selection options available when shopping online vs. shopping in-store. With shoppers rapidly taking an omnichannel approach, adding online to their weekly buying habits, there is a need for brands and categories to stay top-of-mind with consumers.
2. Produce packaging will play a new and bigger role
Food safety concerns arising from COVID-19 created strong consumer demand for packaged produce this year, but despite that, consumers have not abandoned their concern for sustainability. These concerns, combined with the evolving need for packaging that can handle the supply chain and brand communication demands of online grocery, are forcing produce companies to rethink the role of packaging.
Creating new packaging in 2020 has provided additional branding opportunities for communicating directly with consumers— particularly in online channels. Distinctive packaging can strengthen a produce supplier’s presence online. Meanwhile, the impact of packaging can include branding, messaging, recipes, reasons to repurchase, and cross-selling of new or other products on the package.
3. The locally grown produce movement starts to come of age
Innovations in digital platforms connecting farmers to consumers are helping supply catch up with rapidly growing demand for locally grown produce.
These innovations are allowing new local suppliers to become increasingly cost-competitive, provide year-round supply, and even capture shelf space and consumer attention in stores. At the same time, demand for local continues to rise, with millennials looking to support local farmers. The pandemic has provided a strong boost and interest from consumers to spend within their communities.
Traditional produce suppliers will come under increased competitive pressure as local, greenhouse, and hydroponic farms become more cost-competitive through year-round operations and develop new strategic partnerships with retailers and foodservice suppliers.
4. Family dining is in the house
The pandemic shifted spending for food prepared at home from close to 50% pre-COVID to a high of 66% in April 2020 and remained elevated at 54% as of August, per the USDA. But in addition to an increase in spending, 2020 introduced a rise in home cooking — trying new recipes, eating fresh produce as a healthy choice, and trying new produce varieties and value-added products. The increase in family cooking and eating together will continue in 2021.
There are multiple opportunities to achieve a new and better normal this year.
Two key trends are driving an increase in meals at home. A recent study from the National Restaurant Association shares that nearly 17% of U.S. restaurants have closed either permanently or long-term amid the coronavirus pandemic. Also, the continued shift to work from home has increased eating occasions at home. In combination, consumers will continue to get most of their fruit and vegetables at home for the foreseeable future.
5. Focus on Food as Medicine
Eating fresh produce has always been considered an essential part of a healthy diet. For many years, consumers have also been increasing their consumption of produce rich in healthy attributes. This explains why products such as citrus, leafy greens, and berries increased sales faster than other produce items in 2020.
6. Food supply chain disruption pivots into the birth of new strategic partnerships
With the explosion of online shopping from home, retailers rapidly diversified how consumers could order and receive food to protect their market share and diversify risk. Shoppers now have to choose from many different ways to purchase fresh produce from retailers: Inside the retail store, online with pick-up at the store, delivered to a box, or delivered at home or office. This has created an omnichannel approach to selling and buying with no clear winner yet.
Understanding this new omnichannel shopper will be critical as Millennials and Gen Z shoppers are establishing long-term behavior patterns, channel, and product preferences that will drive how we sell and shop for years to come. Pursuing strategic partnerships to help lock in contracts for distribution through omnichannel alternatives can help remove variability from supply and demand planning for fresh produce companies.
7. The search for fresh and new
There is hope in the pandemic as vaccines are coming, but it will be a long winter for many until they are widely available. There will be an eagerness for newness, freshness, and authenticity in new foods/recipes to try at home for those who are already tired of Zoom calls, Netflix, and Mom’s recipes. Consumers are fatigued about so many areas of the current isolation as protection lifestyle. This will open the door for those companies that can combine fresh fruit and vegetable offerings with new, tasty, and healthy ways to prepare them — and communicate that information in an engaging way to their target audience.
Weston, FL-based Breakthrough Solutions provides personalized, practical solutions that enable fresh produce companies to achieve results beyond what they had thought possible. Our mission is to generate the financial results that enable our clients to prosper and reinvest in their business, communities, and environment.
Many Pre-Pandemic Trends Will Return
Very often, a crisis causes an investment that leads to a leap ahead. We see this clearly with things such as the Pfizer-BioNTech and Moderna COVID vaccines, which came about through an immense investment in messenger RNA technology. It is certain that this technology will be used in other ways and, quite possibly the world will be permanently changed as a result. It is worth noting that the companies are already working on using this technology to do trials to apply the technology to fight cancer, the common flu and numerous other illnesses. The crisis will have led to investments that will change the world.
One can imagine similar possibilities with restaurant delivery services and grocery delivery services. Surely many consumers who had never used much of either of these alternatives have grown used to ordering online, and we can expect that dealing with COVID likely represents a leap ahead in this space.
Still, we didn’t just do things during the pandemic because we wanted to; we did things because they were legally required, deemed prudent to minimize chances of getting COVID or in line with life/work changes such as not going into the office. With vaccines starting to flow, Israel has reported that just one shot of the Pfizer vaccine curbs infection by 50% after just 14 days, so one can anticipate that there will be a desire to return to normalcy and this return will drive a lot of food-related behavior as well.
In other words, before the pandemic, we ate out as much as we did, not just out of enjoyment, but because our lives demanded it. High school students were staying late for play rehearsal or team practice for sports. Young men and women were going out on dates, business people were traveling on sales calls, and families went on vacation. Grabbing something to eat while doing all these things was as much necessity as a function of desire. That necessity will not change in the future because we had a year in quarantine!
Now, of course, some of the new normalcy may be impacted by the experience of the pandemic — thought perhaps in ways difficult to predict. Some suggest, quite plausibly, that companies accustomed to avoiding travel expense may urge their employees to do more meetings on Zoom — and that might happen. However, it is also entirely possible that people traveling less on business might choose to travel more personally.
One has to be careful not to surmise that all changes during the pandemic are permanent. Sure, lots of restaurants have closed and more will close, but post-pandemic, one can assume the law of supply and demand has not been repealed. If people start traveling away from home, going into the office, etc., one can expect new restaurants to start opening in all those vacant spots.
So, some projections:
1) Online shopping will decline from its current levels once it is considered safe to run into a supermarket after everyone has been vaccinated. Products of variable quality, such as produce, will see larger declines than non-variable items such as paper towels or canned soup.
2) After months of getting everything delivered in some kind of package, there will be extra interest in bulk, beautifully displayed fresh produce. Demos, and the ability to taste and try, completely unavailable on line, will be valued.
3) After months confined to home, a global interest in quality will emerge and, in terms of fresh produce, the interest will focus on where and how one can get the very best fruits and vegetables. So the challenge for local operations is exactly that: Can they be the most flavorful, best quality, etc.?
4) People are sick of being confined to eating in their home and will flock to restaurants. Just as the Roaring 20’s followed the great flu pandemic following World War I, people will want to get out, celebrate, and engage with the world. Plus this effect also applies to school, travel etc., so the long term trend of the past 100 years in which a higher and higher percentage of the food dollar is spent on food away from home will resume and accelerate.
5) Having emerged from a global pandemic, people will grow less concerned with urgent things for health. Indulgence will reign, and the produce industry will have to fight to refocus consumers.
6) Retailers and restaurants urgently jumped into partnerships with companies such as Instacart and Delivery Dudes during the pandemic, but the economics are tough. The retailers often pay a fee, and consumers feel the obligation to tip, plus these services charged a delivery fee. Sometimes the price charged is also different from what one would pay in store. The direction ahead is likely to be retailers and foodservice operators seeking ways to avoid these expensive partnerships.
7) Consumers will continue to be intrigued by new and interesting things. But trying things a family has never tried and only seen a picture of online is too much of a gamble for many. As the pandemic recedes, the opportunity will open for sampling, which is the risk-free way of trying new produce items.
The truth is that with the exception of a few panicked weeks at the start of the pandemic, produce has not seen the big sales gains that many grocery items have. It has not really been studied yet, but the perishability of produce, the variable quality of produce, and the desire for indulgence when people are trapped in their homes… all probably contributes.
We don’t know the schedule for when the vaccine rollout will give people back a sense of security and less vulnerability, but it will surely come, and, when it does, produce will benefit from having people in stores and restaurants again, and be, once again, challenged by long term trends reducing cooking. The challenge will be to have better and more consistent products and to make sure that the foodservice industry sees fresh as a competitive advantage.