The food industry saw several twists and turns in 2014. Higher costs led to price increases on everything from cheese slices to chocolate bars. Expanding delivery services gave shoppers more ways to shop. And McDonald’s saw sales slump as diners headed elsewhere for fresh, customized meals, even if they cost more.
Expect more shake-ups in 2015, as food-makers respond to consumers’ choosy eating inclinations, grocery stores become more like restaurants and delivery services, and restaurants try to entice patrons with everything from customized food to tablet ordering.
Here’s a look at some expectations for the food industry:
Many food-makers made 2014 the year of packaged protein, including the debut of Kraft’s Oscar Mayer P3 portable protein packs and the Hillshire Snacking line of premium meats, crackers and cheese. They also worked on reducing the use of artificial ingredients, which is likely to continue.
For 2015, expect packaged-food-makers to emphasize health and wellness.
Companies will market their own goods as better for you as shoppers look for simple ingredients and fresh foods, experts say.
“It’s going to continue to become a larger and larger portion of food and beverage companies’ volume or drop in volume, depending on what’s in their portfolio,” said Rich Nanda, a principal at Deloitte Consulting focused on consumer products. “It’s just not a fad.”
Food-makers that have seen their goods ignored in the center aisles want to get their products positioned throughout the grocery store, particularly next to produce and protein sold around the perimeter of the store as shoppers pay more attention to those foods, said Morningstar analyst Erin Lash.
Food-makers raised prices because of soaring commodity costs in 2014. In July, Hershey announced its first price increase in three years, an 8 percent hike, citing soaring cocoa and dairy prices. Kraft ran into trouble when it raised prices on items such as Oscar Mayer meat, Kraft cheese and Maxwell House coffee, and competitors were slow to follow with their own increases.
“Overall, we’re still expecting modest inflation looking at the overall basket of goods,” Lash said.
Food-makers also are paying more attention to delivery.
First up, delivering to retailers. Lower gas prices should lead to lower costs, as delivery prices typically include fuel surcharges, which fluctuate with the cost of fuel. But a shortage of truck drivers is raising other delivery-related costs.
“We expect those pressures could offset some of the potential benefit from lower fuel prices,” Lash said.
Second, there’s the issue of home delivery. It still accounts for a small fraction of overall grocery sales, but is growing at a rapid clip.
“They’re now gearing up internally because it has become meaningful enough. It’s not a little side business for them anymore,” Nanda said of food-makers.
Supermarket operators know they need to do more to stand out. They are rolling out everything from in-store dietary experts to fancier prepared foods and remodeled stores to keep shoppers coming back.
Retailers also are paying attention to the growing number of online delivery services, especially as powerhouses such as Amazon and Google dig in. Newer delivery networks such as Instacart also are adding attention to the space long dominated by Peapod and Fresh Direct.
“I think you’re going to see more consumers adopting e-commerce and subscription models and they’re going to get their convenience from home delivery,” said Deloitte’s Nanda. “We’re getting close to a tipping point where consumers doing a large portion of their supermarket shopping from home ... is starting to become the norm.”
For now, expect online-focused companies to lead the way in grocery delivery, but don’t count out the traditional supermarkets.
Hourly minimum wages are set to rise in several parts of the country in 2015, adding pressure to labor costs, which already are a major cost for restaurant companies. A number of states and cities have minimum wage increases ready to go into effect, including a move that will take the minimum wage in San Francisco from $10.74 to $11.05 on Jan. 1 and to $12.25 on May 1.
Some industry groups suggest the higher wages are one of the main reasons restaurants are putting more emphasis on systems that allow patrons to order on their own mobile devices or use tablets placed on dining tables or at kiosks. Increasing the variety of tech-enabled self-service options also helps restaurants appeal to tech-savvy customers such as millennials.
“They want their world in their way, and they want it now,” said Bonnie Riggs, restaurant industry analyst at NPD Group.
She expects to see more mobile apps for ordering and payment, along with other uses of technology that make things easier for diners.
Starbucks, for example, introduced mobile ordering Portland, Ore. in December. Starbucks has said the system, which allows customers to order before heading into a shop, will roll out across the United States in 2015.