Food and Beverage Industry Trends 2020

Food and Beverage Industry Trends 2020

This post was written by Paul Gray, a partner marketing lead at Shopify Plus.

Turning up the heat on food makers and sellers

Restaurants, grocers, and boutique food and beverage companies have all felt the impacts of COVID-19. Wholesale channels suffered, as the demand from restaurants, bars, cafes, and other out-of-home dining businesses cratered. This led to issues in supply chains and distribution, but interestingly it did not see a major decrease in consumer demand.

Instead, consumers were looking at how they could continue to enjoy prepared, packaged or fresh foods from their own homes. Google search data shows that queries for “take out” are up 285% since the beginning of March, and queries related to cooking, like “dinner ideas for 2” are up 30%. This has presented a unique opportunity for food and beverage retailers able to adapt. Indeed, once consumers had stocked up on basics such as toilet paper, food quickly rose to the highest purchase intent category. This was problematic, as much of food purchasing had been through retail.

Getting online fast

Food businesses had to hustle to get their product to consumers, and only a limited number of them already had an online presence. A research report from Digital Commerce 360 Internet Retailer showed that in 2019, leading Food and consumer packaged goods (CPG) makers such as Nestle, PepsiCo, and Mars generated less than 10% of total revenues through direct-to-consumer offerings.

In many cases, food makers and retailers had no online commerce at all. Lindt was celebrating its 175th anniversary when COVID-19 forced the closure of its 56 stores in Canada, right before Easter, their second-biggest sales period of the year. Although the company had been exploring ecommerce, at the time, it had no online shopping capabilities.

“Going into this was a major hit. Easter is our second-largest season, and although we had planned to launch ecommerce in 2021, we suddenly had to get online—fast," says Kairen Wu, Vice President of Marketing at Lindt Canada.

Lindt worked with the Shopify Plus team to move fast, getting their online store up and running in just five days and finding a way to get seasonal Easter chocolate to their loyal customers. 

Serving up new business models

Direct-to-consumer works well for food makers, providing a simple and cost-effective way to create an online store, conduct marketing, and build an audience of shoppers. The challenge lies in scaling with growth, finding ways to reach new shoppers, and getting them to make a purchase.

Consumers are looking locally, searching for stores that can meet their needs quickly. They’re more open to buying from new places because their usual stores are closed. A study from Ipsos revealed that in one week in April, more than 25% of consumers tried a new brand or product due to the unavailability of their usual brand.

With the impact of COVID-19, many larger food makers are testing new business models. British healthy fast food chain Leon was founded in 2005 and has since grown to more than 70 restaurants and over a thousand team members across the UK, Europe, and the U.S.

As Leon saw restaurants and small food stores being shuttered, they launched Feed Britain, an initiative that lets shoppers buy produce or ready-made meals for home delivery. Leon launched in two weeks, and is using their online store as a foundation for future growth.

“It’s a credit to the Shopify platform for being so easy to set up an ecommerce site on. I’m not sure we could have done it in that time without Shopify. We want to carry on this principle of being able to give customers direct access to food from the restaurant supply chain and, therefore, restaurant-quality food. And, you know, I think the idea of being able to take the restaurants into people's houses is one which is going to delight customers beyond the crisis,” says Hugo Engel, Digital Executive of Leon Restaurants.

Expediting direct to consumer

The concept of selling direct to consumer (DTC) is not new, and has been most prevalent in industries such as fashion, beauty, and lifestyle. In our current climate, it’s become more difficult for emerging food brands to get their products into grocery stores. Even larger companies are looking at new ways to bring their products to shoppers.

For over 150 years, Heinz has been a globally trusted producer of delicious foods, including the iconic baked “Beanz”. As the impact of COVID-19 became clear, the team at Heinz UK decided to get cooking and launch their very first direct-to-consumer channel.

Working closely with ecommerce consultants Good Growth, Heinz set an ambitious goal of launching from scratch within three weeks. Shopify Plus emerged as the clear frontrunner to enable this offering, providing a secure, scalable, GDPR-compliant platform that could be developed and deployed quickly. Heinz to Home launched in April, at first offering a limited selection of beans, soup,and spaghetti hoops. To demonstrate its support for the community, Heinz worked with the U.K.’s Blue Light Card program to enable free and speedy delivery for frontline workers.

The response was incredible, with the company celebrated in trade and consumer media. Heinz listened carefully to their customers, asking what other products they would like to buy directly, and since launch, have now added sauces and baby foods.

Sarah Znideric, Client Success Director for Good Growth points out that the shift by global brand owners such as Kraft Heinz into direct sales to their consumers has been unfolding for some time. “While retail partnerships are key routes to market for brand owners and will remain so for the foreseeable future, expect to see more brands engaging shoppers directly as the value of the shopper insight from these activities becomes clear,” she says.

“We clearly see this channel as an amazing insight platform for the future where we can get closer to our consumers by testing new concepts, getting the data, learning from our consumers and leveraging those learnings for the rest of our business,” says Jean-Phillipe Nier, Head of Ecommerce UK&I at Kraft-Heinz.

Catering to new and existing customers via omnichannel

According to a study from Accosta, more than half of respondents reported buying groceries online, with 33% of those making their first ever online grocery purchases. Google has seen “food delivery” queries spike over 100%. Grocers have seen pressure to increase staffing at warehouses and local stores in order to keep up with the spike in demand. Local delivery companies such as Uber Eats, Doordash, and Instacart are on a hiring spree to meet demand, and established food suppliers are exploring new ways to meet consumer appetites.

The future belongs to brands taking an omnichannel approach built on personalization, flexibility, and speed. For more than 35 years, The Chefs’ Warehouse has been supplying the highest quality ingredients to the finest restaurants, hotels, caterers, and gourmet stores in North America. As COVID-19 forced the closures of its customers, The Chef’s Warehouse had to adapt quickly.

The company already served the majority of the U.S. via regional hubs, sourcing local produce and leveraging its own delivery network to bring food to clients. But it had limited experience with consumer-facing services.

“As consumers were being confined to their homes, we looked at how we [could] make our range of meat, seafood, and specialty products available for home delivery. With Shopify Plus, we launched our online store, Shop Like a Chef in a matter of days. We really hustled, and we have big plans to expand our offering, but I didn’t want to let perfect get in the way of fast,” says Tom McCurley, Chief Information Officer of The Chefs’ Warehouse.

The Chefs’ Warehouse will be donating 10% of retail sales profits to their frontline furloughed employees and other impacted members of the foodservice industry, who are financially suffering while all restaurants around the country are mostly closed. The company plans to continue its consumer offering alongside its B2B business, expanding the range of products, exploring new options for curbside and restaurant pick up, and growing a community of loyal consumer shoppers.

Savoring the next normal

Boutique food makers, multinational brands, restaurants and food retailers are setting the foundation for new direct-to-consumer and digital models, combining online and offline, attracting new customers, and finding new ways to serve existing customers.

“We had fantastic feedback from our customers, many of them telling us that we helped save Easter. In this crisis, every day can seem to run into the next. But our customers told us that we gave them a way to come together and celebrate, and feel a bit special and closer to normal. We’re now working with the team at Shopify Plus to build on this foundation,” says Wu of Lindt Canada.

Even when the response to COVID-19 sees a reopening of retail, it’s clear that consumer behavior will have changed permanently. Shoppers that never bought online before will have experienced the convenience of choosing and ordering their items for delivery or pickup. Retailers will have learned how to serve up outstanding new customer experiences and will help drive the industry forward to new growth.