Best practices to thrive in 2019.
By Jeffery Wacker
It’s no surprise that the food & beverage industry has been impacted by the rise of e-commerce and changing consumer preferences. Looking back, Amazon’s 2017 acquisition of Whole Foods was just the beginning of grocery disruption.
While the need for food remains the same, the type of food and how it is provided to the consumer continues to evolve. As consumer awareness continues to grow, preferences are shifting from shelf-stable food to more organic and perishable items. In fact, according to the Organic Trade Association’s 2018 Organic Industry Survey, the U.S. organic sales reached a record of $49.4 billion 2017, up 6.4 percent from the previous year, and we expect to see this trend continue in the foreseeable future.
E-commerce platforms have enhanced online ordering capabilities and food delivery services, providing consumers with expanded choices and greater convenience. This evolution has led to targeted inventory management, increased competition and consolidation in the food supplier industry, as retailers adapt to shifting consumer preferences.
As food producers, distributers and retailers look to successfully navigate the changing landscape, here are some trends to look out for and best practices for companies to thrive in this new age of consumerism.
Meet the Evolving Consumer Demand
Changing consumer food preferences from shelf-stable food to fresh produce and in-store prepared meals continues to impact traditional inventory models for grocery stores and supermarkets. To stay relevant, stores are increasing prepared food and locally produced items, and many are also incorporating private label house brands. As these private labels gain share of consumer spending at all price points, and in some cases, challenge certain established brands for category leadership, stores are devoting less shelf space to traditional non-perishable food items and brands.
As retailers shift investment in grocery products, it’s important to assess the impact that a change in inventory supply may have on financing options, as stores no longer need to back stock large quantities of longer shelf-stable food.
Invest in Technology
Not only do consumers want fresh food, but they also prefer a variety of options when they shop. As a result, food suppliers and retailers aiming to capture this growing market need to efficiently offer a variety of brands and products.
By investing in an integrated technology and e-commerce platform that tracks sales and optimizes inventory and product flow, stores can effectively manage SKU proliferation. Using this technology to understand consumer buying patterns and preferences, stores can experiment with brands and product offerings to meet the micro-preferences of consumers and tailor items towards regional and ethnic demographics and mitigate product waste and unnecessary expense.
Smart Strategy Management
This past year, we saw consolidations at the supermarket level as a result of increased competition and tight margins, and we fully expect to see further consolidation in the food supplier industry in 2019. To compete with mega retailers, regional supermarkets have been forced to acquire or partner with neighboring stores to improve scale and reduce costs. At the same time, many smaller chains are incorporating a model that allows for niche differentiation ?based on local market dynamics.
As food suppliers contemplate consolidation or store closing, whether through bankruptcy or restructuring, it’s important to engage with a lender who has industry knowledge and can provide the financing needed to help retailers emerge leaner and more profitable.
Over the last few years, we have seen a rapid evolution in the food and beverage industry and fully anticipate further disruption in 2019 as food suppliers continue to adapt to the changing landscape. Whether a supplier is large or small, engaging with a financial partner that understands the company’s long-term goals and how best to provide financial solutions to meet those goals is key to success when navigating this increasingly competitive industry.
Jeffery Wacker is head of asset based lending originations at TD Bank. His career includes 20 years of leveraged finance, asset-based lending and private equity experience in North America and Europe. Wacker can be reached at firstname.lastname@example.org.