News about multi-million dollar venture capital investments in food and beverage startups may give the impression that such funding is the best way to scale a business, but the model is far from perfect and actually harms the majority of entrepreneurs. In the year ahead, consumer trends triggered by the coronavirus pandemic are expected to continue, driving further innovation in food production and distribution. Startups tackling key issues in the supply chain are capturing the attention of investors.
Investor trends have accelerated since the onset of the pandemic, which will undoubtedly have long-term implications for the industry. As for the short term, the following are trends to keep an eye on: • Private equity groups and high-net-worth individuals will continue to be active investors of restaurants and hospitality industry assets. As food and beverage industry liquidity was down more than 60 percent from 2019, private equity groups and institutional investors took advantage of assets that were made available for sale.
• The manchise structure is on the rise, as parent brand companies evolve from traditional franchise management agreements.
• Consumer preferences will drive technology advancements.
While uncertainty plagued 2020 due to the Covid-19 pandemic, the global food industry is eager to move forward.
Interest in a wave of trends has grown, as restaurateur leaders quickly shifted operations and strategy to navigate through one of the most transformational and economically challenging times in modern history.
We saw a huge evolution of functional foods with high-impact ingredients concentrated with super foods, together with the creation of the dining experience at home, as well as the need for clean, whole and less-processed labels.
Alternative protein companies and plant-based options with a surge of food traceability solutions have been the biggest driver of these trends as sustainability and supply chain resiliency come into greater focus. Health and wellness products are expected to gain greater relevance as consumers continue seeking food and beverage brands promoting immunity benefits, relaxation and stress relief. Consumer demand for healthy food and beverage products that can improve mood, immunity and overall mental health will undoubtedly continue to see an unprecedented spike.
Several experts expect to see increased investment in technologies that automate production and delivery as labor challenges persist across the food and agriculture industries.
The rise of e-commerce
Another trend supercharged by the pandemic is e-commerce, which will continue to grow across categories as large corporate buyers acquire direct-to-consumer brands at higher multiples. Consumers are shopping from a food or beverage brand website because of better quality, better selection, better customer service and personalization.
Large- and medium-packaged food companies seeking to sustain top-line gains achieved in the past year due to the shift to at-home consumption may pursue acquisitions in high-growth categories.
The events of the past year amplified the importance of conscientious consumption. Increasingly, shoppers are making purchases from companies that care about equity, diversity, justice and inclusion, casting a bigger light on women- and minority-owned businesses. As a result, efforts to support previously underrepresented entrepreneurs are advancing.
Looking ahead, restaurants are drawing on the lessons they learned during the pandemic and are heading toward major strategic and operational changes. Leaders in the quick-service space are prioritizing heavy technology investments that will prepare restaurants for the digitally enabled future of the industry. Some of the strongest trends which will change the restaurant business model for a long time are:
The dramatic growth of off-premise dining has certainly been the biggest change. Pickup, carryout, delivery and drive thru options have become even more popular following lockdown orders and social distancing guidelines. Food “at home” has overtaken “away from home,” and e-commerce is representing a growing share of grocery sales.
Menu adaptation and innovation
Not only must restaurants invest in takeout and delivery packaging, they must also make major improvements on product and meal regularity. It is more difficult to correct a mistake when a meal is delivered, especially if a diner ordered through a third-party platform. As consistency is the most essential tool, many restaurants have simplified their menus and invested in innovative products that help attract diners in a competitive environment. They are also expanding either through catering or by launching ghost kitchens. By operating a second concept out of the same back-of-house footprint, restaurants are able to appeal to customers on multiple fronts without incurring additional investments.
Maya Bekhazi Noun,
co-founder and managing director of The Food Studio