2014 Food and Beverage Industry Outlook

We've developed a list of five issues we foresee as having an impact on the food and beverage industry in 2014.

By Kevin T. Higgins, Managing Editor, and Dave Fusaro, Editor in Chief

Share Print Related RSS
Page 3 of 3 1 | 2 | 3 Next » View on one page

And that appears to be the real crux of the matter: Letting people know if their foods contain GMOs and letting them decide if they want to buy them or not. It's hard to look any consumer in the eye and tell her she doesn't have the right to know what's in the food she buys.

While opponents would like a complete ban on GMO ingredients, labeling appears the only practical patch because genetic engineering at the seed level has become so pervasive. Estimates of genetically engineered crops in the U.S. in 2011, according to the Non-GMO Project:

  • Canola - 90%
  • Corn 88%
  • Soy 94%
  • Sugar Beets 95%

Legislative or regulatory efforts at labeling may become moot because the market and private enterprise already have instituted de facto labeling. The Non-GMO Project was established in 2005 and has a rigorous certification program. Many products already wear the group's "Non-GMO Project Verified" button and many more are in the certification pipeline.

"In more than 60 countries around the world, including Australia, Japan, and all of the countries in the European Union, there are significant restrictions or outright bans on the production and sale of GMOs," says the Non-GMO Project.

So between those facts and the pressures from natural retailers like Whole Foods, this issue is not going away, even if there aren't governmental regulations coming this year.

Is private label still ascendant?

Cheerleaders for private label products have touted growth in store brands since 1982, when the Private Label Manufacturers Assn. (PLMA) staged its first show in Rosemont, Ill. The 2008 financial crisis and an anemic economic recovery has meant good times in recent years for private label.

If recession is good for private label, economic collapse is even better. In Greece, supermarkets and hypermarkets doubled their private label sales over five years, according to a report by IRI, a Chicago-based market research firm. Store brands also are ascendant in Spain, another economic basket case, commanding 41.5 percent of the market. But overall growth across the continent may be maxing out. “There is some evidence that too much private label in any category can damage margins for all and reduce shopper traffic,” the IRI report cautions.

With its $4.95 billion bet last year on Ralcorp, ConAgra doesn’t think America is anywhere close to a private label ceiling. The conglomerate sees nothing but upside in specialty and store brands. Executives even suggest they will alter the innovation landscape with first-to-market changes in private label, rather than sticking with a fast-follower game plan.

Hundreds of tomato canneries populated Indiana and Ohio in the 1950s. Today, Hirzel Canning Co. in northwest Ohio and Red Gold Inc. in central Indiana are about the only canners still standing. Both are privately held, family-owned operations with three production facilities each. Both are survivors, but only one is thriving. What separates the two?

“Eighteen years ago, they decided to focus on private label,” president Steve Hirzel says, a bit wistfully about the competition over at Red Gold. Today, Red Gold dominates multiple segments of the canned tomato-based private label market, while Hirzel hopes for a rebound driven by its Dei Fratelli brand.

But Dei Fratelli isn’t Coke, or Cheerios, or one of the other iconic brand images created by food companies. Those brand owners invest billions every year to burnish images and quality reputations. Do they know something PLMA doesn’t? Perception, not rational considerations, often drives purchase decisions, and the perception of quality sustains brands like Dean, which commands a healthy premium for its standardized milk products – even as its clandestine private label milk is in the adjacent coolor.

PLMA has trumpeted the imminent triumph of private label for 30 years. While store brands command impressive shares in many categories, the growth curve is wavy and reflective of general economic conditions. For the 52 weeks ending July 14, IRI reported total store private label sales were flat, while branded goods registered a 0.43 percent gain.

Grocers derive an average margin of 35 percent from store brands and 25.9 percent from national brands, a study by the Food Marketing Institute concluded. Retailers would love to see continued growth in private label when the economy gets back on track, a trend that would defy the boom-bust cycles of the past 30 years. Regardless of how matters play out, one thing is certain: Any food processor with excess capacity -- that is, virtually every processor -- can produce both branded and private label products, depending on market demand.

Convenience remains king

Convenience, along with preservation, is the point of food processing. Making foods and beverages easier to consume has been a driving force in 21st Century product development, spawning thousands of innovations for microwavable entrees, single-serve packages and just-add-water beverages.

What makes convenience a challenging and dynamic opportunity is the shifting nature of the American population. Efforts to close the borders aside, diversity is on the rise, and today’s demographics will not be the same as tomorrow’s, creating an opportunity for more innovation.

Smaller household sizes, particularly the growth of single-person households, are an obvious change with big implications. The U.S. Census Bureau calculates the average household consists of 2.55 people, down from 3.67 when the first baby boomer was born. Dragging down the average is the boom in single-person households, which increased five-fold in that period and now constitutes 27 percent of all households. They’re not swinging singles, either: The head of one in 10 households is over the age of 75, a proportion destined to increase as those boomers enter their geriatric stage.

A convenience breakthrough in the past decade is not a consumable but a delivery mechanism: the Keurig single-serve coffee machine. Flavored coffee was the first application, and that has expanded to include tea, lemonade, cider, hot chocolate and a milk-frothing element for espresso. More intriguing is the anticipated launch this year of Keurig-delivered Campbell soups. The launch is in partnership with Green Mountain Coffee Roasters, the Vermont firm that paid $160 million in 2003 to acquire the 57 percent of Keurig it didn’t already own. Campbell plans to include packets of dry pasta and vegetable blends that users will place in an empty cup before water is injected into that little cup/pod containing the broth.

According to Campbell, the convenience items will appeal to Americans’ penchant for snacking. People are consuming fewer items at their breakfast, lunch and dinner occasions and opting instead to snack throughout the day. A study by NPD Group concludes 53 percent of Americans now snack two to three times daily.

The burgeoning older-America segment is another opportunity for convenience. Texture modifications to help seniors with chewing problems and swallowing dysfunctions will be a convenience opportunity in the coming years. Innovations for a changing population will remain a top priority for food processors.

Page 3 of 3 1 | 2 | 3 Next » View on one page
Share Print Reprints Permissions

What are your comments?

Join the discussion today. Login Here.

Comments

No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments