2015: The year of the Kraft-Heinz merger, the Keurig Kold lesson, the demand for transparency ... all critical ingredients that made up the food industry's market.
The industry proved this year that consolidation, innovative technology, and transparency are the keys to surviving in an increasingly competitive marketplace. But 2015's lessons — recalls, product missteps, and marketing innovations are in the past, as far as the industry is concerned.
Looking ahead, the food and beverage industry is poised for trillion-dollar growth in the next few years, and that's considering that there will also be significant sector declines. The global packaged foods market is anticipated to reach more than $3 trillion by 2020, per an Allied Market Research report. Still, packaged foods companies have to innovate when it comes to struggling products, like cereal.
The declines are coming in foods and beverages deemed less healthy by consumers. Soda's significant decline — falling for the tenth year in a row, in terms of U.S. consumption — has yet to be stopped. Not even an at-home soda machine looks like it's going to bolster much progress. SodaStream — yes, with soda in its name — is even rebranding itself as a sparkling water maker. As for processed foods, companies across the industry are investing in health food products through acquisitions, minority investments, or innovating on their own.
Throughout the year, Food Dive was on top of the latest industry developments. Here's a look back at our five most-read stories from 2015:
Above all other stories, our top 10 trends piece dominated. Though published in August, these are the trends that have affected — and will continue to affect — the industry as we head into 2016. Many decisions regarding ingredient removal in particular won't go into effect until after next year.
Mergers and acquisitions have flooded the industry this year, with reverberations that will continue to keep the industry searching for profit solutions. "The investment bank Jefferies reports that the [major] brands lost market share in 42 of 54 categories, from baby food to yogurt, over the last five years as new products gained," reports The New York Times.
The $54.5 billion Kraft-Heinz merger reflected a packaged foods industry searching for consolidation, as did smaller scale mergers and acquisitions like Pinnacle Foods buying Boulder Brands and Snyder's-Lance buying Diamond Foods. ConAgra Foods' impending split is the result of an industry in need of increased profits.
Moody's predicts the industry will see less consolidation in 2016, though that's not to say there won't be any.
The food and beverage digital push is making its way to manufacturers and retailers.
Grocery delivery remains a slow-growing fixture in the food industry. Couple delivery with e-commerce, and the industry opportunities are important for manufacturers to take a hold of now.
"As online grocery delivery grows, it will force us to re-evaluate the assortment we make available online, how we plan production and how we deliver our products to our retailer partners," according to Eric Ong, director of e-commerce at Nestle USA.
What Phil Lempert told Food Dive is paramount to more than just grocery delivery, but the industry as a whole. "As long as you're segmenting your population, your customer base properly and you're meeting their needs and you don't try to be everything to everybody, your path to success is gonna be much better," he said.
Convenience is a key factor in overall food tech, too, with VC-backed food tech investments topping $449 million in Q4 2014.
"People want to spend less time planning and cooking food and startups are leveraging the new mobile infrastructure (the fact that everyone, including couriers, now own smartphones) to offer highly efficient delivery options of fresh/hot food at low costs," Martin Mignot of Index Ventures said in an email discussion on the race to convenience.
E-commerce is going to be "mission critical" for the industry in the near future, according to Matt Pierre, General Mills' director of e-commerce. Food and beverage e-commerce sales are expected to reach $12 billion by 2018. If manufacturers fail to soon adopt e-commerce, they're going to be far behind their competition.
"It’s estimated that by 2020, between 3 and 10% of total CPG sales will come from e-commerce," Cindy Chen, Mondelez's global head of e-commerce, recently told Food Dive in an email.
Extinction is harsh, but when it comes to in-demand foods, it may be reality.
Commercial banana viability has returned to headlines following a new study that explores its possible extinction. Bananas are prevalent in food and beverage products — so is the lethal fungus going to lead to stockpiling for manufacturers for fears of a shortage? It's too soon to know, though there isn't a way to destroy it.
Potential outcomes include a banana shortage, total loss, or a replacement. But finding a replacement won't be simple.
The Food and Agriculture Organization said, "Developing new banana varieties is not an easy task and takes time due to sterility problems, so scientists have to make extra effort to develop types that are preferable and disease resistant at the same time. One promising banana in this respect, known as GCTCV-219, resembles the Cavendish banana in both taste and shape."
Mergers and acquisitions indeed kept the industry busy, but not every acquisition made it to the final approval this year. The Sysco-US Foods failed merger reminded the industry of five key insights.
- Expert testimony cannot void damaging internal documents
- Never underestimate third-party testimony
- Market definitions can make or break a case
- Proposed concessions need to maintain or create viable competition
- Precedents matter
The key determination regarding divestitures is one that could haunt the AB InBev-SABMiller coming to fruition: "PFG's recognition that it needed more than 11 distribution centers to compete nationally is reflected in internal documents that were created months before PFG began negotiating with Sysco. The court credits those internal projections over PFG's current position that an additional 11 distribution centers is enough to compete for national customers," Judge Mehta said in his opinion.
"That really was the nail in the coffin because Sysco and US Foods lost on the product market, and the solution they offered wasn't sufficient," Adam Hudes, partner and group leader of Mayer Brown's Antitrust & Competition practice, told Food Dive. "The deal's not going to go through."
AB InBev’s proposed divestment of SABMiller's MillerCoors is so the company doesn't control a whopping 70% of the U.S. beer market.
"If anything, our divestiture of SABMiller's interest in MillerCoors will create an even more competitive marketplace, building upon what is already a golden age of consumer choice in American brewing," CEO Carlos Brito said at a Senate Judiciary hearing.