Although changes to the food industry are expected, the speed at which they are happening are not. See how big brand Nestlé is paving the way.
Change can be scary. For business, change can be both liberating and deadly.
Disruption happens within every industry, but rarely does it happen overnight. Changes are normally subtle, slow, and methodical. However, as technology has advanced, so has the rate and speed of industry changes. What once took almost a decade to achieve now takes only a few years. This speed is, in part, driven by consumer desires and needs that are almost impossible to ignore thanks to growing online social platforms.
Food Industry Disruption
The food industry is certainly not immune to disruption, but changes rarely make the headlines. However, when a true disruption happens within the food industry, it can create ripples that far outstretch their boundaries, affecting everything from e-commerce to agriculture.
The latest disruption—spearheaded by some recent company changes at Nestlé—might create the sort of ripples that could lead to permanent changes within the food and agriculture industries.
But what has inspired this recent shift? Could it be the company identifying a customer need, or could it be to attract the attention of the up-and-coming Generation Z? How fast are these changes happening, and how do food and agriculture companies stay relevant?
No matter what the root cause might be, these changes could very well turn the entire agriculture industry on its head. Let’s dive into what you can expect to see, what it means for the industry, and how these changes could impact your food and beverage consumption in the very near future.
Nestlé’s Move Towards Transparency and Animal Welfare
Nestlé—the largest international food and beverage company with over 447 factories operating in 194 countries—announced in October that it would be leaving the Grocery Manufacturers Association (GMA) due to differences over nutrition labeling procedures. GMA is a massive lobbying group that also lost Campbell’s Soup Company recently, and the loss of Nestlé could very well throw the group into an unrecoverable tailspin.
But the reason behind Nestlé’s separation from this lobbying group is what makes it so newsworthy: Nestlé is making a move towards a more transparent and proactive approach to food manufacturing. The Swiss-based company has been making a slow progression away from traditional factory farming for egg production to a caged-free setting for their manufacturers and hopes to make the full transition by 2020. In Europe, they have already hit 40 percent of that goal.
Acquisition of Plant-Based Manufacturer
In related—and equally surprising—news, Nestlé recently acquired Sweet Earth Foods: a California plant-based food manufacturer. This shift from traditional manufacturing to a more animal-conscious one might seem strange but, according to experts, it’s expected.
Organic Authority remarked on the shift: “Changes at the company have come at the pressure of both consumer and shareholder.” Additionally, The New York Times reported that many of these changes are happening due to the consumer shift around food delivery where a growing number of consumers are purchasing their groceries online or through a meal kit subscription service.
This isn’t the only shift that is forcing the hand of Nestlé and other large-scale companies. Generational changes are also playing a major role in the rise of vegan and vegetarian-friendly foods and beverages.
Shifting Consumer Wants and Needs: Generation Z is Taking Over
Marketing often plays a large part in disruption, and modern-day marketing trends—primarily that of online social media, video marketing, and other content-heavy forms—have all but shaped the way that consumers interact with company brands.
The Feedback Economy
One could argue that brands are no longer able to influence their desired markets, but that consumers are now directly informing brands of what they want. Instead of companies inventing disruption, they are being told by their audience to meet a specific demand. Some may refer to this as the “feedback economy,” and this feedback and the changes it produces is picking up steam.
In some ways, this could very well be the case with the recent shift to a more green diet across the nation: particularly with millennials and Generation Z. In fact, meat and dairy substitutes have seen a massive increase over the past decade, and the plant-based, meat-substitute industry is expected to top $5.2 billion by 2020.
This trend is being championed by the youngest generations: those that are not only concerned about the quality of their food, but are also concerned with the environment and the lives of animals that supply their eggs, milk, and other animal byproducts.
“While Millennials drove the shift toward cleaner ingredients, less-processed foods, more farmers markets, farm-to-table dining, and even our addiction to almond milk, Gen Z wants more from its food supply,” noted Organic Authority in their recent piece on Generation Z’s food preferences. “It wants cruelty-free options—not just those that are ‘more humane’ versions of the same old meat, eggs, dairy, and seafood—they want foods that perform and taste as good as, if not better than, traditional animal-derived products.”
And there is data to back up these shifts in consumer preferences. According to research conducted by Barclays in the UK, Generation Z is consuming 57 percent more tofu and 550 percent more non-dairy milk than millennials.
Colleges Leading the Movement
Another interesting fact about the shifting preferences in food consumption is the methods being used by the companies that are shifting the industry. As Business Insider noted, college campuses are becoming a hotbed for testing new products on a young (and growing) audience.
Meatless burgers from Impossible Foods are well on their way to college cafeterias across the nation, and other companies are following suit. CEO of Ocean Hunger Foods, David Benzaquen, told Business Insider that food service companies (such as those that supply college cafeterias) were a “natural fit” for his company.
“Colleges and universities buy huge volumes of food, and young people show an open-mindedness when it comes to plant-based foods,” he stated.
Nestlé has caught wind of this new trend and could very well be the leader in the next big disruption within the food and agriculture industry. As the demand for vegan-friendly products rises, more companies will either have to join the movement or struggle to gain the support of future generations.
Rapid Consumer Changes Mean Rapid Shifts in Business
It’s reasonable to assume that future generations will have different needs than current generations. Companies can expect it and make adjustments accordingly. These most recent changes, however, are happening far faster than anticipated.
Irene Rosenfeld, CEO of the snack company Mondelez (owner of Oreo Cookies and Ritz Crackers), was asked how her company had managed to improve so drastically in its third quarter, even exceeding the expectations of Wall Street.
Rosenfeld responded that these shifts in consumer spending were beneficial and anticipated, leading to much of her company’s success, but her company, and others, should still keep their ear to the ground for changes.
However, with a solid bottom line plan, companies like Mondelez could survive rapid shifts as long as they continued to balance and focus equally on the top and bottom line. In a response, Rosenfeld stated: “I truly believe that the combination of a strong top line together with a strong bottom line is what makes for a sustainable business.”
It could be that a strong bottom line is what is helping Nestlé stay aloft in their rapidly changing market. It could also be that they simply got lucky with some successful futurecasting that helped them notice a trend before it passed them by. No matter what the motivation was, other companies will want to take note on how this shift towards transparency and animal welfare could work for them.
It won’t be long before Generation Z becomes the next big marketing focus, and their demands are hard to ignore. Millennials have already had their place at the table, and their changes have helped shape the food industry for some time. However, those changes were only the beginning of a much larger disruption directly on its heels.
Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She writes during the day and snuggles up with a book and her three cats and dog at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth.