Commentary

Foodservice: innovation Kitchen For Consumer Goods

  • by , Op-Ed Contributor, April 25, 2017
Time-pressed consumers are redefining how and where they dine. They spend over 50 cents of every food dollar in foodservice, and approximately $731 billion annually in dining out.

Other changes in consumer tastes and behavior are having an impact. In a quest for health, consumers are buying more produce. They are also buying locally and from alternative channels. In the process, they seem to be led further from what used to be considered center-aisle staples. Millennials, in particular, want product transparency and healthy options.

Grocer sales of ready-to-eat, healthy meals are growing steadily.
Fresh prepared foods generated $15 billion in sales in supermarkets in 2005, a figure that nearly doubled to about $28 billion last year, according to Technomic, a food industry research firm.

That’s an annual growth rate for foodservice at retail of 10.4% from 2006 to 2015,  Wade Hanson, a principal at Technomic, told attendees at the recent National Restaurant Association Show. “Just as a point of comparison, traditional foodservice, restaurants namely, over that same period grew on an annual basis by 2.1 percent. So we’re talking basically about five times bigger in terms of growth for foodservice in supermarkets.”

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As the lines between foodservice and retail food outlets blur, with grocerants (any retail food item that is ready-to-eat or ready to heat) alone growing at 30% since 2008, consumer product manufacturers may have found a niche from which they can fuel innovative growth—satisfying not only the customer, but also the shareholder.

Serving the new food consumer
Other research shows changing consumer preferences and lifestyle, leading to a changing meal scenario. From taking the work out of grocery shopping through restaurant-quality food at home, CPG companies have plenty of field to play within—and they have really just begun to test their abilities.

As companies develop capabilities to meet changed consumer preferences, they create additional routes to profitability.  Benefits include:

Packaging savings due to foodservice products anchoring production lines, maximizing capacity due to higher volume runs.

Dependable, repeatable business. Repeat orders and order frequency are common due to customer loyalty in foodservice.

A reprieve from the margin compression inherent in the consolidated grocery channel.

Grocery stores willingness to experiment. They are seeking new ways to atttract. consumers. Some have seen initial success with foodservice and prepared foods, so they are open to the possibilities in partnership—from grocerants to new items.

How leading CPG companies are leveraging food service
First and foremost, the leaders are putting foodservice on the table during planning processes,with company decision-makers moving the category into the mix.

Innovation is comprehensive versus siloed for two main reasons: One, the consumer demands it. The second reason is because when foodservice is put into the mix from the top down, cross-functional teams must work together versus in their own camps. Insights are also shared between internal channels and throughout the ecosystem.

Also, the marketing function hops aboard the foodservice train early, seeing the advantages to owning the consumer experience and creating a strong brand image with proximity and immediacy.

Digital technologies and their impact are built into the equation from day one. Leaders study how digital can enhance the consumer experience and help the operator, facilitating any necessary changes.

Teams utilize foodservice as a quick and at-scale test market for innovation, complementing or even replacing other testing methodologies.

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