For a while now, it has felt like we are on the brink of a massive tidal shift in consumer behavior when it comes to food shopping and consumption — and now it seems to finally be on the tipping point.
Today, your average consumers are more:
- Informed than they were only ten years ago
- Concerned about the ingredients and health benefits of food
- Conscious of the social/environmental impact associated with the food they consume
- More willing to vote with their dollars than ever before
Whether it is due to the millennials or a more collective awareness of the impact of our everyday choices, this tidal shift will impact our industry for years to come — so let's have a closer look by breaking it down into five larger, yet inter-connected trends.
Clean Labels & Transparency: Consumers Reading Labels Beyond The Calorie And Fat Count
Since May 2016, the Food and Drug Administration (FDA) has required packaged food to be equipped with a new label to "reflect new scientific information", e.g., labels on soda bottles warning consumers that the consumption of this drink can lead to obesity, diabetes, and tooth decay. The intention was to make it easier for the average shopper to make more informed and better choices when buying food.
Since then, not only are more medical professionals instructing their patients to carefully read the labels, but consumers have become more aware of what is actually in their food. According to a recent study, 75% of millennials prefer to get food labeled as "fresh" and 33% say their desire to “eat healthy” influences what they prepare for dinner. And while the term "clean labeling" isn't going to ring a bell in most households, the concept certainly is becoming a staple.
This results in consumers demanding more transparency across the entire food supply chain in exchange for the trust they place in the product or brand they buy/consume. Whether you are creating smart labels, like Hershey's did in 2018, or implementing a blockchain solution, your customers will want to know which exact ingredients are used and how/where they were sourced.
Consumers Demand Real Ingredients They Can Pronounce
Reading labels, being more informed, and wanting to make better food choices has real consequences on the food industry. Consumers demand real ingredients.
At IPPE, I had a very interesting conversation with a young gentleman whose company creates natural alternatives to synthetic preservatives, artificial food coloring or flavors, and other unnatural ingredients. He explained how consumers are now carefully reading labels and are demanding to see real ingredients they can recognize, pronounce, and feel good about.
An excellent example is vanilla. Vanilla flavoring is used in more than 18,000 products and the demand for it has skyrocketed. However, as early as the 19th century, the demand for the pricey flavoring exceeded the supply, and today only 1% of the vanilla flavor used globally is actually sourced from vanilla beans. Since 2015, prices have been skyrocketing due to the labor-intensive production and destructive cyclones, like the one that hit the prime supplier of vanilla in Madagascar in 2017 — yet the demand constantly increases as consumers are willing to pay the price.
To stay competitive, food producers will soon be required to voluntarily provide an immutable track record of their ingredients — without much effort on the consumer side. This could be a scannable QR code, a smart sensor, or a different Internet of Things enabled device.
Knowing The Product You Buy Is The Product You Paid For
Besides moving away from artificial or synthetic substances in food, consumers are concerned about the authenticity of the products they buy. In fact, food fraud results in losses of at least $65 billion a year worldwide.
One well known example is extra virgin olive oil (EVOO). Over the last decade, studies have shown that 60%-80% (depending on the study) of EVOO sold is, in fact, adulterated. The EVOO is cut with cheaper oils such as canola, colza, soybean, or other oils, or it is chemically colored, deodorized, and flavored as EVOO and thus sold as a lower quality olive oil. These studies, as well as investigations in Italy, have led to over 2 dozen arrests and 85 farm confiscations.
Olive oil isn't the only industry heavily affected by fraud. Sushi has also made headlines in recent years. Mislabeling is one of the biggest culprits in consumers not receiving what they ordered. According to a monitoring program involving UCLA and partners, confusion and limited terms allowed by the FDA have lead to sushi that is sold as red snapper but is actually red sea bream. This is especially scary for consumers who buy food for people with food allergies or sensitivities.
An Oceana study shows that the majority of white tuna being sold is really escolar, a fish that can cause serious digestive issues for some people. The study also showed that tilefish and king mackerel, two species of fish on the FDA's "Do Not Eat" list due to high levels of mercury, are being sold. Tilefish was labeled as either halibut or red snapper.
Because of this, it is not surprising that the tracking and traceability of authentic products is one of the most used applications of blockchain in the food industry.
Consumers See Through "Fake" Marketing Labeling
"Naturally Raised", "Vegetarian Fed", "Organic", "Free-Range", . . . the list of marketing terms used in the food industry to give the consumer an idyllic picture of a farm when buying chicken, eggs, or other food items seems endless.
The USDA sets the standards for what the labels on egg-cartons mean, like cage-free and organic. But there is a lot of confusion and frustration around what some consider to be too lenient guidelines. There is still no strict guideline as to what "natural" means, and the definition of "healthy" is being reevaulated. There are several humane labels outside of USDA regulation which consumers have become more educated on in recent years.
And consumers are catching on — partially because of readily available information and consistent and visual education campaigns from niche food producers (so-called "slow food" to use another over-used term).
[Image Credit: Pasture Bird, 2019]
Customers who buy high-value food items, such as pasture-raised birds, need to be able to verify those marketing claims. While America's most famous farmer, Joel Salatin, doesn't even ship his Polyface Farms pasture-raised birds to Michael Pollan, but requires his customers to pick them up at the farm to see how the birds were raised, most companies will choose not to go this route. Therefore, to be able to verify these marketing claims, these products must be traceable and trackable beyond the shadow of a doubt.
Shopping By Values
While it's great that strawberries are available year round, consumers are asking more than ever, "Where did they come from? At what cost? And what is the carbon footprint of strawberries from Chile?" These questions go far beyond wanting to know the country of origin. Rather, today's consumers are questioning if the food was ethically sourced, if the farmers were exploited, and if the product they buy has a large impact on the environment.
Take Fair Trade, for example: From cocoa and coffee to sugar and tea, farmers and workers in developing countries have been getting pennies for their product, and have shown little concern for the environmental future of the area. Consumers are now looking for the Fair Trade Certified label on products to know that the farmers are earning a living wage and are not destroying the environment at the same time. According to Fairtrade International, global fair-trade sales were almost 9 billion dollars in 2016 and the U.S. is the 3rd largest market behind the UK and Germany. With more companies getting certified every year and the demand increasing, this trend is here to stay.
There are some companies like Thrive Market (see below for a screenshot of their value catalog in their online shop), Grove Collaborative, and Zero Waste Store who have recognized this and let their customers shop based on values, e.g., locally sourced, made in the USA, recyclable packaging, family- or employee-owned business, and much more.
In my mind, there is no question that the trends I have outlined above will become common occurrences extremely soon. Also, the demand for better traceability, verifiable environmental and social impacts, and much more will only speed up in the next 12-18 months — to the point where they will become a requirement to even compete for a share of the consumer's wallet. Thankfully, blockchain and Internet-of-Things can eliminate these pain points by allowing all participants in the food supply chain, from the farmer to the consumer, to gain valuable insights.