2012 Food Industry Outlook: A Taste of Things To Come

It has never been tougher to build and sustain a successful food & beverage business than it is today.

Even with a (hopefully) recovering economy, doing business is challenged on the home front by regulatory changes, raw material pricing, corporate sustainability goals and changing consumer demands, among others. And on the global front by the difficulty (but seeming necessity) to set up foreign operations, safety and reliability of offshore suppliers, impact of currency fluctuations and competition for talent.

For consumers, convenience is by far the most important dynamic, and will continue to be so over the next five to 10 years, according to any number of prognosticators. Consumers are willing to pay more for convenience as their work habits and lifestyles change. The same can be said even for shoppers in developing nations. It's a tradeoff many are willing to make, especially as disposable income rises in many countries. It's all about time, and the consumer would rather buy time than prepare food.

Healthy eating is another critically important consumer driver, a trend that has considerable influence over company strategies. But while consumers want "healthy," they often don't buy healthy … or aren't willing to pay for healthy … or don't even know what healthy means and are easily confused.

Healthy means different things to different people. Two important demographics that likely will have a 2012 impact on food production and shopping are baby boomers and those of all ages who suspect food allergies.

Health for an aging/younger population
Living longer, fitter and still working, an aging population means grocery store shelves will contain foods that come with added health claims, predicts UK-based market research group Leatherhead Food Research (www.leatherheadfood.com). Expect to see more products with glucosamine for joint health and foods with added omega-3 for brain and heart health. Artery-cleaning products are also poised to make a breakthrough in the functional food market and seduce older consumers with promises of cardiovascular benefits.

At the same time, younger consumers with food intolerances will drive demand for gluten-free, nut-free or dairy-free foods in 2012. The crux of this market lies within the seemingly growing number of consumers who do not have a diagnosed food allergy but believe their general health improves with the omission of certain food ingredients such as wheat/gluten. This is an opportunity for both mainstream manufacturers to highlight additional product benefits as well as allowing the traditional ‘free from' brands to break the niche, they've traditionally operated in.

"Nutrition – especially when it comes to children – is becoming a major focus for the nation's nearly one million restaurants," says Joy Dubost, director of nutrition & healthy living for the National Restaurant Association.

Leatherhead also predicts 2012 will see more food & beverage manufacturers improving the health and wellness, in part to meet various nutritional guidelines. That will mean reducing salt, fat and sugar and enhancing (and promoting) the health benefits in their foods.

"2012 looks set to be one in which ongoing trends will be stretched to their full potential, particularly as consumer concerns about health and wellness have prevailed and continue to be high on the agenda," says Laura Kempster, senior market analyst at Leatherhead. "Coupled with this, the uncertain economic future continues to affect both industry and consumers with a ‘tightening of belts' attitude still very much affecting spending and investment."

Consumers have learned in recent years not all fats are bad for you, and, in fact, some are important to good health. Thanks to recent studies indicating that certain fats (monounsaturated and polyunsaturated fats) can lower disease risk, "good" fats as a component of food have left the nutritional doghouse. As a result, consumers who had embraced low-fat diets for years are returning to foods and beverages that feature the better-for-you fats.

"Increased consumer demand has prompted manufacturers to bring new foods and beverages to market touting healthy fats and oils content," says David Sprinkle of New York-based Packaged Facts (www.packagedfacts.com). "And these products have sold well enough, even in tough times, that they've emerged as relatively recession-proof compared to other food categories. Some may point out that many fats and oils, such as butter, margarine, and cooking oils, are household staples that consumers will always buy, but make no mistake, this newfound health perspective is driving sales."

Hartman Group (www.hartman-group.com), Bellevue, Wash., finds consumers increasingly understand wellness to be a "positive" proposition rather than a "perfunctory" one, a cultural shift from "health" toward "quality of life." Non-physical notions of well-being (mental, emotional and spiritual) are just as important as physical well-being for consumers, the market research firm notes in its "2011 Health and Wellness Deep Dive" report. Quality of life accommodates variation in individual desires, needs, lifestyles and goals and illuminates the role of indulgence and pleasure as essential components of wellness.

More nutraceuticals
Probiotics seem to bridge the gap between naturally healthy foods and those with ingredients added to support health -- nutraceuticals. The yogurt market, the original home to probiotics, is growing by double digits, and the beneficial bacteria are popping up in other dairy products, juice drinks, bars, chocolate, energy drinks, teas, even dog food.