Last year was a turbulent time for the food and beverage (F&B) industry. As the pandemic nearly came to an end last summer, industry experts expected more employees to return to the office, more kids to go back to school, and for society to return to some sort of post-pandemic “normal.” However, as we all now know, the cases spiked, the variants varied, and life was once again turned upside down. People continued to work from home, schools closed (and opened and closed again), and demand for food and beverage products reached a fever pitch.
F&B sales not only matched pre-pandemic levels, they quickly outpaced them, while brands struggled to keep up due to rampant supply chain and worker shortages. To add fuel to the fire, prices ballooned thanks to historical levels of inflation. We predict that 2022 will be no less chaotic for the F&B industry, however, there are trends and strategies that brands can harness for the smoothest ride. Keep reading for a food and beverage industry overview, food and beverage industry trends, and to discover how consumer behavior is changing and the market research impact.
Food And Beverage Industry Overview
In 2021, at-home consumption held on strong as 45% of full-time U.S. employees worked from home either all or part-time according to a Gallup research poll.* Even with strong demand for F&B products at home, customers ventured out to stores, bars, and restaurants more this year than in 2020, but still less than in 2019. Demand, supply chain challenges, staff shortages, and an annual inflation rate that accelerated to 7% in the last month of 2021 rocked the industry especially hard late last year.
In the early part of 2022, prices are still high and shoppers, especially lower-income consumers, are feeling the pinch. As the year rolls on, F&B prices are likely to increase to account for higher commodity, production, packaging, transportation, and labor costs. Demand for breakfast and on-the-go foods will also stay high. Per an IRI report, “Consumption of breakfast, convenient meals, and self-care products remain elevated, while personal care and on-the-go foods recover.” To drive growth, brands will price their products effectively and consumers can expect fewer sales.
Food And Beverage Industry Trends
For 2022, the main food and beverage industry trends revolve around pricing and appealing to customers’ changing needs and lifestyle patterns.
Pricing
Food prices are estimated to rise 5% in the first half of 2022. As brands account for rising manufacturing and transportation costs, customers will have sticker shock at the grocery store, restaurants, bars, bakeries, and when they login to food delivery apps.
To maintain a healthy level of growth, F&B companies have to pass along their increased costs to shoppers. Kraft Heinz Co. recently said “It would raise prices across many of its products including Jell-O pudding and Grey Poupon mustard, with some items going up as much as 20%,” according to a memo viewed by The Wall Street Journal.
On-The-Go Lifestyles
Consumers will be more mobile this year, working both in and out of the home. With many workplaces offering fully remote, flexible, or hybrid work, shoppers’ daily agendas will be more varied than ever. Even full-time office workers aren’t immune to shifts, with businesses shutting down due to outbreaks, for days to weeks at a time. Variations like these mean that at-home consumption will remain steady and restaurant and fast food establishments will see a bump in sales.
On-the-go products will also be a shining star this year. From pre-packaged healthy snacks to portable protein shakes and vegan-friendly freezer meals, consumers want foods and beverages that match their flexible lifestyles.
Photo credit: FoodNavigator-USA
Convenience & Personalization
Beyond price hikes and flexible work schedules, we predict that F&B products will become more convenient and personal this year. F&B brands should invest in e-commerce tools that provide a better shopper experience with easy checkout and fast delivery speeds.
Direct to consumer (D2C) models will gain popularity in 2022, particularly among younger shoppers yearning for products that fulfill specific needs. Just look at Magic Spoon, a high-protein keto-friendly cereal that sells for $10 per box. Magic Spoon attracts shoppers with ingredients, packaging, and marketing that speaks directly to them. Moreover, customers can purchase cereal directly from the cereal maker with a variety of payment methods.
In addition, digital grocery, third-party delivery options, and retail media networks can help F&B brands make personalized offers to busy consumers with limited time to shop. Apps and in-store promotional offers tailored to meet shopper needs in real-time can increase impulse buys and F&B revenue.
Sustainability
The last trend we predict will impact the F&B industry this year is sustainability. Gen Z is a powerful force of this sector’s growth as they crave products that are recyclable, have less plastic, have more natural ingredients, and have minimal environmental footprints. Sustainable products command a price premium that leads to higher margins and profitability.
Even in the face of inflation, customers are willing to pay more for green products. The market share for sustainability-marketed products has risen each year for the past five years, from 13.7% in 2015 to 16.8% in 2020 as shown in IRI’s 2021 Sustainable Market Share Index™.
Consumer Behavior & The Market Research Impact
Market research (MR) is crucial for F&B brands to understand customer patterns/trends, personalize experiences, control quality, and enhance offerings. Market researchers often conduct experience, production, ingredient, and distribution research to add value and gain and retain market share.
By conducting continual market research, F&B brands can leverage insights and analytics to identify and act on opportunities before their competitors beat them to the punch. MR can help brands meet the needs of their customers in 2022 with the right mix of products and services. Experience research will be particularly important this year as pricing shifts make customers evaluate why they use the brands they use. To understand the customer experience, F&B brands can use journey mapping to uncover bottlenecks, pain points, or missed opportunities.
Wrap Up
As 2022 gets underway, there are still uncertainties about the pandemic and the economy at large. However, even with cases spiking across the nation consumers want to get out more, visiting restaurants, groceries stores, and bars at increasing rates. While at home-consumption will still be a strong driver of revenue for F&B, customer mobility will change the landscape a bit this year. Price hikes will continue to strain customers, however mid to high-income shoppers will be less sensitive to price changes, specifically regarding sustainable products. Customers will also crave products that are convenient, personalized, and flexible to suit their ever-changing lifestyles.
Hungry for more? Check out our recent blog, Why Customer Insights Are the Ultimate Driver for Food & Beverage Business Success.
*Gallup’s September 2021 monthly employment trends