By Ken Cottrill, Co-Founder and Research Principal
Supermarket shelves are barometers of consumer demand for food, and they are pointing to a sunny future for fresh foods and an uncertain outlook for processed product.
In this shifting competitive climate, blockchain technology will help the industry to reshape supply chains to meet customers’ changing demands.
A recent Wall Street Journal article maintains that the shift “started several years ago, but its impact on big food makers is intensifying now because of added pressure from retailers.” Supermarkets are allocating more shelf space to fresh food, prepared hot meals and local product, exacerbating “a drumbeat of bad news” for packaged-goods companies, said the Journal.
A Nielsen consumer analyst characterized the plight of packaged goods as “death by a thousand cuts.”
The realignment is forcing many established brands to rethink their market strategies. For example, Unilever announced recently that it is looking to exit the margarine business as part of an overhaul of its food and beverage operations.
The rise of fresh food offerings reflects a general shift towards healthier consumables containing less sugar and fat, and buyers’ concern over ethical issues and environmental sustainability.
As a result, more shoppers want to know how and where their food purchases are made, and what’s in them. This is particularly important for specific categories such as organic and gluten-free, which are experiencing substantial growth.
Market research company Euromonitor estimates that the global markets for free-form (products known for not containing allergens) and organic foods grew by around 7% in 2016 to reach $36 billion and $32 billion respectively.
“Growth in organic and free-form food sales has boomed in 2016 as consumers are reading labels more carefully than ever, seeking natural ingredients and looking for foods that represent a ‘guilt-free’ purchase,” said the company.
Blockchains have a key role to play in supporting these markets. The technology is being developed and tested in three critical areas of the food supply chain.
Such applications will increase in importance as the market for fresh foods continues to evolve. Online giant Amazon provides an indication of where the market is headed. In March of this year it launched the AmazonFresh Pickup service, which allows customers to place an order online and pick it up in just 15 minutes from a drive-in kiosk.
Chain Business Insights is monitoring the evolution of the food supply chain as well as the role of blockchain technology in the emerging competitive environment. We plan to publish an eBook and a Research Brief on the topic this summer.