As leader of the U.S. consumer products corporate strategy and growth practice in Deloitte consulting’s Chicago office, Nanda is intimately involved in market research projects designed to track shifting consumer expectations and purchase preferences, particularly among young adults. Trends, not fads, are Nanda’s focus, and current trends will require distinct changes by Big Food to remain relevant.
Taste, price and convenience remain as drivers of purchase decisions, but other factors are of growing importance. They include transparency, social impact, safety and health & wellness, though in a broader and sometimes overlapping sense than the industry understands health & wellness and safety. For a growing population of consumers, these new drivers are must-haves, not nice-to-haves.
Although most executives at major food companies discount it, a product’s social impact influences purchase decisions. A recent Deloitte report prepared for the Grocery Manufacturers Association and FMI, the supermarket trade group, notes that 32 percent of consumers plan to make more socially responsible food purchases, almost double the percentage from 2012. Among millennials, intent has become action in 10.3 percent of food choices, almost three times the rate for other age groups. It’s also a growing factor for families with children (7.5%) and households with incomes above $75,000 (6.9%).
Speaking about emerging purchase drivers is made more difficult by shopper distrust of the food industry, particularly large corporations. “It’s not going to be easy to reclaim trust, but we are forgiving consumers,” says Nanda. “Food executives recognize that consumer communication is important but is something that they have to do better. As one executive said, ‘We don’t tell our story well to consumers.’”
Re-engagement will require reorienting food manufacturers’ traditional top-down communication to a dialogue with shoppers. It also will require realigning product attributes with consensus expectations, such as fewer ingredients and no preservatives. Those shifts demand a more nuanced approach than large companies typically have taken, Nanda concedes, but other industries have made comparable changes. He points to automotive manufacturers, who are migrating from makers of cars to providers of transportation services.
“For as long as most food company executives can remember, the name of the game was scale,” he adds. “Consumers now are more heterogeneous and fragmented, and that requires a different way of engaging with them, particularly digitally.”
Adults in the 20-29 age group are driving many of today’s trends. Deloitte began tracking their expectations as well as those of older Americans in 2010. Although seven in ten young adults pay close attention to a product’s nutritional content and prefer products with fewer ingredients, they actually are less concerned about those aspects than older adults. But they exhibit some preferences that actually favor processed foods: 20-somethings are the least likely to buy fresh foods or prepare meals from scratch. Almost half consider food shopping a time-consuming chore, making them prime candidates for alternative distribution channels.
Almost three quarters of young adults are interested in chopped vegetables and other products that make meal preparation easier, and almost half (45%) are interested in pre-made and low-preparation foods that can be delivered to their homes, half again the interest level of older age groups. One third is willing to pay a 15 percent premium for delivery of fresh items, almost double the rate for older adults. Not coincidentally, meal-kit services like Blue Apron and Hello Fresh are experiencing strong growth, as is delivery service of restaurant meals, up 33 percent since 2012, according to NPF Group.
“Meal kit consumers have more expendable income and primarily live in major metro areas,” notes Darren Seifer, an analyst at NPD. “There is definitely a market for these services; it’s just not nearly as big as foodservice delivery.”
Half of young adults are interested in on-line ordering and store pickup, compared to one third of older age groups. One retailer offering that service is Whole Foods, which is branching out to home delivery via instacart in markets throughout California and major cities such as New York, Chicago and Miami.