Getting online will continue to be an imperative

It may be hard to imagine or even remember, but as little as 12 months ago, some of the biggest food and beverage makers still had no direct-to-consumer (DTC) ecommerce channels. Brands that traditionally dominated supermarket shelves didn’t want to risk alienating chain store clients by starting to sell directly to consumers online. It’s estimated that when the pandemic started, only about half of companies in the food and beverage industry had an ecommerce presence.

As for those that had already made the leap to retail, in some cases their online stores felt like an afterthought at best. Take consumer packaged goods (CPG) makers such as Nestle, PepsiCo, and Mars, for example: In 2019, only 10% of their revenue came from DTC offerings.

But the pandemic altered what was once seen as the recipe for success in the food and beverage retail industry. Substitutions had to be made—and fast. Big brands and artisan food makers alike launched online stores almost overnight; supermarkets and restaurants introduced new delivery models, and existing food and drink ecommerce platforms struggled to keep up with an increase in demand amid supply chain disruptions.

The result was that in 2020, food and beverage became the largest online CPG segment (44%), overtaking health and beauty (38%). Total online sales of food and beverage—including groceries and takeout food—jumped 125% from the previous year, to $106 billion, according to research from the Food Industry Association (FMI) and NielsenIQ.

“This is an incredible acceleration of the online food and beverage space. It shattered all of our projections,” Elizabeth Buchanan, head of consumer intelligence for North America at NielsenIQ said during a virtual presentation for FMI. “COVID-19 [brought] more digitally engaged food shoppers into the mix.”

Today, this growth is holding strong. In 2021 and moving into 2022, DTC ecommerce will continue to be a critical sales tool for businesses in the food and beverage industry.

Appetites will increase for “functional food” and health products

Most spent the heady days of the pandemic stress-baking loaves of sourdough, whipping up dalgona coffees, and hoarding takeout food containers. But after a year of eating their feelings, consumers are starting to recognize the impact that both mental and physical wellbeing has on their immunity. That’s why experts predict that one of the biggest trends in the food and beverage industry in 2021 will be a focus on “preventative eating” or “proactive eating.”

In a 2020 survey conducted by FMCG Gurus—a market research company specializing in food—80% of consumers worldwide indicated they were planning to eat and drink more healthily in 2021 as a direct result of COVID-19. Already, 58% of North American consumers say they regularly research different ways to improve their health. Meanwhile, six out of 10 consumers surveyed by Innova indicated they were looking for products to support their immune health, with one in three saying these concerns increased in 2020.

“It’s a trend that’s deeply connected to COVID and that’s growing exponentially right now,” says Mike Arresta, managing director of food and beverage marketing consultancy Impact Business Development Consulting.

New and innovative superfoods marketed to boost immunity will be one of the top food and beverage industry trends in 2021, whether it comes in the form of mushroom coffee, algae capsules, no- or low-alcohol beverages, or bone broth. However, Food & Beverage Insider also predicts that this approach to health will be holistic, with customers seeking out food and ingredients that can help with mental clarity and stress relief, such as adaptogens, CBD, and I-theanine.

We’re really excited to see the functional food trend continue,” says Mike Quinones, senior vice-president of growth and marketing at Laird Superfood, which has operated in the space since 2015. “As more brands enter the space, it just increases awareness for all.”

For online brands that are looking to launch in-store, an increased emphasis on health can also be used to their advantage by positioning products as a premium “better-for-you” alternative in a food category, as CPG strategy expert Wilson Hung explains in his newsletter on “how online-first brands can get a niche product into nationwide grocery distribution.”

Learn more: New consumer behaviors reshape future of retail

The climate crisis will drive demand for plant-based products

We could have easily included meat-free products in the “functional foods” section above, but demand for the latest generation of plant-based products isn’t just due to health goals—it’s also driven by concerns about the climate crisis.

According to Nielsen data, meat alternative sales were up 129% compared to the first nine months of 2019, making it one of the five categories with the greatest sales amid the pandemic. Not just designed for vegetarians and vegans, these products also appeal to socially conscious consumers and flexitarians, making them one of the biggest ecommerce food trends.

This is a trend that’s been pushed by millennials, and it’s going to last,” predicts Arresta.

The industry—which is already worth billions—is projected to increase to $85 billion by 2030. In mid-2020, frontrunner brands Impossible Foods and Beyond Meat both launched DTC websites, demonstrating the role that ecommerce in the food and beverage industry will play in this category.

Customers will be more cost-conscious

As a result, they’ll be more open to trying new brands and different methods of shopping.

According to FMCG Gurus, even before the recession, customers were looking for ways to cut everyday costs, with more than half looking for ways to reduce their grocery bills. As a result, 52% of global consumers have become less brand conscious when it comes to buying food.

Increasingly, brands will no longer be able to rely on heritage and reputation to maintain and grow consumer share. Instead, brands will need to be seen to be responsive to the needs of consumers and helping them make their money go further,” reads the report.

A study from Ipsos revealed that in one week in April 2020, more than 25% of consumers tried a new brand or product due to the unavailability of their usual brand. Later in the year, Google reported that 71% of people are now “always on the lookout for new brands and products.

Not only are consumers willing to try new brands—they’re also willing to try new methods of shopping, particularly when it comes to food and drink. According to new research from Lumina Intelligence, 18%, or roughly one in five, of consumers changed their primary method of grocery shopping to shopping online in 2020.

Will this hold strong as one of the biggest digital trends in the food and beverage industry when stores reopen and lockdowns end? Experts think so. Research from Digital Commerce 360 indicates that 31% of American shoppers will likely continue to use grocery pickup or delivery even after the pandemic is over.

Consumers will continue to look for greater transparency and connection to brands

Consumers may have tighter budgets in 2021, but that doesn’t mean they’re willing to cut corners when it comes to their health or personal values systems. Instead, they’re carefully reading the labels to find out not just what goes into their food, but where and how it’s made.

This comes at a time when FMCG Gurus’ research indicates that over a quarter of North American customers don’t trust claims made by food brands, while 35% of global consumers say that brands are not transparent when communicating practices and policies.

In addition to seeking to establish trust and transparency, online shoppers in 2021 are looking to support local businesses and actively searching for stores that offer same-day delivery or click-and-collect pickup.

Customers are looking to support brands that they connect with on an emotional basis,” says Eli Weiss, director of customer experience at OLIPOP.

Weiss says that OLIPOP has found that when customers develop a deep relationship with their brand, it helps to drive sales. Weiss cites the case of a recent OLIPOP new flavor launch, in which existing customers were sent an SMS announcement. It resulted in $30,000 of revenue in just 30 minutes.

“This is a testament to the value of exclusivity and authentic community building via the many platforms available to brands,” says Weiss.

Yes, budgets will be a major factor in online purchases, but consumers will also be willing to pay extra for what they determine to be quality products. Arresta says one key example is organic food products.

“People think the average consumer doesn’t have the resources to buy organic because of the pandemic,” he says. “But it’s not true; the organic industry has been growing.”

New recipes for engagement and sales may prove more popular than familiar favorites

In surveys, consumers report that they anticipate they’ll continue to recreate big nights out in the comfort of their homes—even post-pandemic. According to GlobalWebIndex’s The Future of Food Report, around 44% of global consumers anticipate they’ll make fewer trips to food service channels such as restaurants after the pandemic. Already, online food delivery is overtaking restaurant dining as a weekly activity.

For this same reason, packaged meals, ready-to-eat meals, and meal kits—particularly if they’re healthy—have a strong future.

Consumers may be eager for life to return to what it once was, but the truth is that how we buy and sell goods has been fundamentally changed. When lockdowns end and restrictions are lifted, some of the habits that were acquired in the midst of the pandemic won’t just disappear. That includes online shopping. The Statista Digital Market Outlook estimates that by 2025, revenue from the ecommerce food and beverage industry in the United States alone will rise to $35.7 billion—making up 15% to 20% of the industry’s overall sales.

After experiencing the ease of ordering food and having it delivered to their door, shoppers that didn’t previously shop online are now converts for life. And retailers, who may have once been concerned about damaging clients relationships by selling direct to consumers have learned that there’s power in offering omnichannel shopping experiences.

Projecting trends isn’t a sure science, but one thing is certain: the online and retail food and beverage industries have changed for good—and there’s never been a better time to have a foothold in the sector.