Food Trends in the 21st Century

By Dr. Jean Kinsey, Retail Food Industry Center
University of Minnesota

I come home at 6:30 p.m. tired, hungry and (half of the year) cold. I live in Minnesota. I want warm slippers and hot food and I want it now.  At least half of American consumers feel this way almost every day.  I don’t really care if the frozen entrée in the freezer cost $1.59 or $3.89 or whether it was made by ConAgra, headquartered in the U.S. or Nestle, headquartered  in Switzerland. I just want it to be fast, tasty, and healthy.  So I pop a frozen entrée in the microwave oven, throw together a salad made from bagged lettuce, add a piece of bread or a vegetable and Viola - there’s dinner in 15 minutes. It’s convenient!

Convenience, Consumers, Contracts, Consolidation, Computers and Category Management are 6 C’s that tell the story of food trends in the 21st century. The quest for convenience has been a long-term trend that drives food choices by consumers and subsequently, food manufacturers. The standard explanations for this trend are huge increases in the number of women in the workforce, rising household incomes, and a lack of cooking skills.  Women with careers find their identity and self-esteem in activities other than cooking, and time constraints related to labor force participation and the pace of modern life lead them and their partners to spend less time in the kitchen. Convenient food is found in fast food (quick service) places, restaurants and in “home meal replacement” foods offered at supermarkets. Take-out food from supermarkets, restaurants, and drive through windows provide the convenience for consumers.

Packaging also plays a big part in convenience. Foods that can be cooked and eaten in their packages and then the package tossed, eliminates not only food preparation but cleanup chores. Foods that are designed and packaged to be eaten with one hand, while walking, driving, or running a computer fill a need for modern lifestyles. After all, you don’t want food that drips on your clothes or showers crumbs all over your keyboard.  (The perfect natural food that meets all these criteria is a banana—not a Minnesota grown product.)

Consumers need for convenient food, as well as food that tastes good and is healthy, drives the food supply system in the 21st century. We have moved from a supply (producer) driven to a demand (consumer) driven system of producing and distributing food. Though many argue about whether consumer choices are driven by their innate  needs or induced by advertisers, consumers will not continue to purchase and use products that do not satisfy their tastes and  lifestyles.

Consumer preferences are translated to the food supply chain primarily by retailers (supermarkets and restaurants) and also by food manufacturers; they are the gatekeepers of consumer preferences. They interpret consumer choices to producers (farmers) and in many cases contract with farmers to deliver exactly what they need in order to provide their consumers/customers with the most desired products. 

Commodity markets are diminishing, and differentiated raw product markets have come to dominate. If a retailer or manufacturer is to stake his/her brand reputation on the food they sell, they must protect its integrity and quality. Therefore they take an active role in designing, ordering, and procuring raw product that meets their criteria. This leads to the next two C’s, computers and consolidation.

With retailers in the driver’s seat in the food supply chain, they learned that they could compete for consumers’ dollars with either low prices (the Wal-Mart model) or unique niche offerings and service. Retail stores (both supermarkets and restaurants) that choose to compete in the low price market tend to become consolidated. This happened first with supermarkets and later with restaurants, especially mid-priced family style restaurant chains.

Supermarkets realized in about 1992 that they were being outperformed by (a then nonfood retailer) Wal-Mart. In order to stay in business and compete on price, food retailers tried to cooperate and copy the Wal-Mart model of computerized distribution and inventory control. Those that succeeded merged and re-merged until the percent of sales captured by the top four food retailers in the U.S. went from 16 percent in 1992 to more than 34 percent by 2000. A necessary component of their success was the adoption of computerized systems for tracking consumer sales, inventory flows, and product turnover. Computers, e-commerce and Internet technology is extremely important for the efficient and competitive modern retail store, but it is not sufficient to guarantee good management practices, good labor relations, and loyal customers.

However, having and effectively using computerized technology led to category management. To me, that means that my favorite flavor of oatmeal disappeared from my grocer’s shelf, as did the McLean burger. Slow moving items cost retailers too much to keep on the shelf, and computerized inventory information enables them to more readily identify slow moving items and eliminate them from the store or the menu. My benefit as a consumer is that they can lower the average prices of food, but the disadvantage is that my choices have diminished.

Many grocery stores have merged with large chains and/or grown larger individually. The average store size now is between 30,000 and 40,000 square feet, while the superstores like Target and Wal-Mart are about 150,000 square feet. These size stores generally compete for customers on low prices. They can sell at low prices because they are efficiently managed and they order in sufficient volume to command lower prices from suppliers. They may also share sales information with manufacturers who manage the flow of goods to the store in a way that the store rarely runs out of product or has excess inventory.  

The other model for retail food stores is to compete on variety, service, boutique presentations, and ambiance. Stores in this niche do not try to compete on price; they draw between one-third and one-half of food shoppers in any given market area. Like many consumers, I shop in both of these types of stores. When I want to stock up on laundry soap, paper products, soda pop and cereal, I go to a big inexpensive store. When I want gourmet food, party food, or deli food, I go to my favorite up-scale neighborhood grocer.

But while there seems to be a movement towards two main categories of retail food stores, consumers are more diverse than ever.

There are many types of consumers; they often appear to be inconsistent in their choice of store or place to eat depending on the occasion, their mood, or their finances at any given time. More money is being spent on trying to forecast consumers’ purchases and woo them into being loyal customers.

The impact of all these trends on farmers is a gradual loss of independence. Successful farmers who respond to the demands of the market listen to their buyers to find out what to plant or how to treat their animals. In order to produce efficiently and sell to the major food manufacturers, farmers need to consolidate, form partnerships, or sign contracts to deliver specific commodity characteristics at specific times. They trade individual freedom for profitability; those unwilling or unable to do so face either very small markets, lower prices or both. Those trying to meet the demand in more lucrative niches in the food chain are farmers producing with organic methods, using non-genetically modified seeds, treating animals in “friendly” ways, or adding value to raw product before they sell it.

Just as consumers are more diversified, a farm is not a farm anymore. The era of differentiated products places consumer preferences above strict efficiency and high yields in production. As in any other business, technology, flexibility, market information, and foresight will be key to the success of farms in the 21st Century.