3 Food Macro-Trends in 2018

A decade ago the innovators of food were the brand managers sitting in their large food company offices. They would dig into their data trying to get a grasp on a new consumer insight that would unlock a new consumer need or desire. After trolling through dry pages of market research and spending the occasional Friday afternoon visiting a store or two, a brand person would make some guesses about what new product would fill the void in the heart of the consumers. These brand managers did their best to anticipate what would make the consumer stop, reach out and pick up their latest product as the consumer made their four second glances along the grocery aisle, screaming children dangling from the cart. After spotting the latest consumer need, the brand manager would marshal the significant resources of their enormous organization and focus them on delivering their new product to market, and after just two or three or maybe four more years, their hot new product would be launched to market.

It’s true that innovation in the big leagues is something to behold!

Looking at Trends in the Food Industry

It’s the beginning of a new year — the perfect time to take stock of what trends are becoming clearer in the food industry. There is a temptation to jump into the discussion without a whole lot of thought, and talk about this new beverage, that new plant based yummy thing, or a new natural ingredient. It’s true that after reviewing almost a thousand new company applicants for SOSV’s Food-X accelerator every year, those trends are jumping up and down waving enormous flags and demanding a mention in this article.

I’m going to resist. Why? Because there are bigger and arguably more important trends worthy of shoving themselves to the front of the discussion line.

So what trends am I expecting for 2018 and beyond?

The first is that I believe many of the larger food companies will be going through significant turmoil in 2018 as they try to determine how to realign themselves and the categories they serve behind shifting consumer demands. This means trying to determine what consumer disruptions are real and lasting and what that means for the new products they need to bring to the market. Yet only part of the success equation will be the new products they offer consumers. What is becoming increasingly important to consumers is what kind of company is behind these products. Are they good corporate citizens — are they making the right sourcing, employment and production decisions? Consumers know every dollar they spend is a vote for the kind of world they want.

Food companies will be taking a longer term view of what kind of company they want to be over the next decade, making tough choices, and perhaps even deciding to step back from product categories which have been their brand heartland. We’ll see product being dramatically simplified, moving to a cleaner nutritional panel OR if the products can’t be made to fit their new corporate positioning, they’ll sell them off to companies who will reduce R&D and milk the historical cash cows until dry.

Musical Chairs Before the Surgery

The large food companies have mostly got on board with the fact that external innovation is both a threat and an opportunity. After years of having their brand folks wading through pages of research to start the three year new product cycle, the penny has dropped, and there are more efficient ways to be at the forefront of food innovation. Over the next two to three years, I believe there will be a considerable amount of musical chairs in the food industry as larger companies acquire much younger companies while they work to recreate and re-energize their old companies and even older brands. They will chase these young companies, hoping that by owning them, they can persuade the younger consumers that they are as relevant to their generation as they were to their parents and grandparents. My own POV is that these acquisitions are not the answer and will delay the work that needs to be done to restructure the companies for the decades ahead. These large food companies need to take the necessary steps to redesign their own business models, processes, and in some cases, culture to become more in tune with the new generations of consumers. When this last point is taken onboard, the first response will likely be to bring in one of the big five consulting companies, which is unfortunately not the right answer. They can short cut to the tough decisions, but most won’t. Hope I’m wrong.

Rabbits, Accelerators, and Incubators

Rabbits are famous for having floppy ears and for breeding as fast as…well, rabbits. What do rabbits have to do with accelerators and incubators? They all seem to be breeding fast with new ones popping up on almost daily basis. It’s no shock why there are new accelerators are appearing so regularly, as more companies receive series A investment after coming out the top five accelerators (Crunchbase). Yet the part of that sentence which often gets overlooked is those funded companies come out of “the top five accelerators”. Data tells us investors are looking at the output of the top accelerators and using them as a pipeline for great new companies.

In other words, all accelerators are not created equal, and the companies that come out of them are not all of the same quality.

It’s great that there are more food accelerators because they, ideally, provide cash and an impressive ecosystem of mentors who can help the young new companies grow and succeed. Food-X receives circa 400+ applicants for every 10 places available. That means 390+ companies CANNOT come to Food-X. Many are fantastic and could really benefit from cash and our help. My fear is that not all new accelerators and incubators are created equal and may not be a benefit to the young companies who are trusting them to help.

Accelerators are currently seen as the focal point of innovation. In some cases a few of those big food companies who haven’t been nimble, innovative, or a startup in decades(maybe centuries) have also started accelerators, proposing to guide young, intrinsically innovative startups and teach them how to be more innovative. Companies having a tough time being innovative teaching innovative entrepreneurs to be….innovative? Hmmm, why? Because having an accelerator is seen as being more ‘innovative’. It goes back to the musical chairs mentioned above. Older companies are looking to reinvent themselves through being associated with innovation. One could argue that association is not enough.

Nature Abhors a Vacuum: Horror Vacui

The trends or observations above have one thing in common: turmoil. Consumers are changing who they trust to provide what they want to purchase. Who to trust, what to purchase, how to purchase it, when to purchase…all of these questions and more are being asked every minute of every day, and the old brands, products, and companies are no longer the default answers. The future is no longer as predictable for many companies, brands, and retailers in the food industry, but one thing which is for sure is the rate of change is increasing, and how food companies respond to these changes will determine which will survive and which will die or be swallowed up.

One challenge is that many of the large companies have a big enough market share that slight annual declines are excused, and as the brand managers shuffle throughout the organization, responsibilities for addressing the root deep challenges are fleeting and soon to be someone else’s problem.

It’s not all turmoil, however — just as nature abhors a vacuum, I believe there will be catalysts across the food industry, and imbalances will be resolved. New products, brands, and business models which more directly address consumers’ needs and desires will prevail, and we’ll see a whole new food industry over the next decade. The vacuum will be filled.

Maybe some of the old brands and older companies will be still alive. I hope so, as I grew up with them, and they have a special place in my heart. Unfortunately, they do not currently have that same place in the heart of the new generations. The big food companies who take the tough decisions first, stop playing around the edges, and get the strategy right to address that vacuum will likely prevail.

If anyone would like to sit down and chat about any aspects of the above, reach out.

And if these three macro trends don’t satisfy you, and you were looking for something a little more product-centric: plant based foods, especially around sea food alternatives. We’ll see a shake up in the frozen category outside of ice cream with much better quality meals. And last, vegan and vegetarian meals will take their game to the next level, making even avid meat eaters consider a more flexitarian approach to their food: just as Tesla realized electric cars needed to be sexy to become popular, vegan food producers have realized its all about taste and mouthfeel. Only some people can consistently eat something if it tastes good. I know, light bulb moment — crazy, right?

Andrew Ive is Partner and Managing Director of Food-X, SOSV’s food business accelerator program.