The food industry’s revenue growth is now being driven by a consumer mega-shift from fast foods to healthy convenience food. This trend has catapulted Chipotle’s stock to more than $500 per share. It is reshaping your local 7-Eleven convenience store that now offers healthier food featuring freshly made sandwiches and fruits. And this consumer mega-shift is why the sale of the Coca-Cola Co.’s iconic sugary drinks are falling. Positive evidence on the health implications of Americans adopting a better diet is now surfacing with an encouraging report that the rate of diabetes for our youth is falling.
Natural Food Expo attendance explosion
I have been attending the Natural Food Expo West for years. It used to be a niche event held in a modest facility. The 2014 Expo was one of the most heavily attended events I have ever attended across industries (rivaling the solar industry for its attendance growth over the last few years). Healthy food vendors now fill several floors of the huge Anaheim Convention Center. The line to secure an attendance badge involved hundreds of people, stretched the length of the center’s main hall and remained that way for much of the morning. Healthy food has leaped from a marketing niche to a revenue growth engine for the food service industry.
Price plus depressed income levels restrain sales growth
Market research points to 64 percent of consumers buying green products. One out of five consumers buy mostly green products. Another four out of 10 buy a mix of green and traditional products. Less than two out of every 10 consumers are “unconcerned” and buy products without regard to long-term health impacts or environmental consequences.
Price and income level are the economic headwinds confronting a massive shift toward healthier and more sustainable consumer procurement. In today’s economy, 90 percent of consumers have not seen real income growth for more than 15 years. The pressure to balance household budgets and the higher price often associated with buying healthier food is the lid that is keeping this boiling pot of consumer demand for healthier diets from rapidly disrupting the food industry.
Three keys to winning the healthy convenience customer
Consumers are very clear on the three criteria they use in deciding if a food, and food companies, align with their expectations on health and sustainability. These three criteria are a “must have” for winning customers:
- Transparency. No secrets. No hype. Consumers want understandable and quick evidence that your company is acting in a responsible manner. Consumers are reading food product labels. They expect them to be easy to locate on a package and to be readable. They are scanning labels for any ingredient they do not understand, recognize or that sounds like it is an artificial chemical. They want to know if the food is fresh and local. They want evidence that the food was farmed or caught in a responsible manner. If your food service business fails to satisfy these consumer expectations then think “pink slime.” This could happen to you. Now envision Chipotle’s food sourcing and preparation. It is right out front for the customer to understand and align with. It is a major reason for Chipotle’s sales success.
- Choice. Making healthy food choices are now the norm for moms and the millennial generation. Offering “moo” milk is no longer enough. Consumers seek choices that include soy, almond and rice milk. Even though a small fraction of consumers are intolerant to gluten, almost 30 percent buy gluten-free products. The millennial generation is the most diverse generation in U.S. history. They seek variety in what they eat. And they seek choice in when they eat. For example, limiting breakfast to morning hours and offering limited healthy choices is a recipe for losing sales with millennials that expect choices on what they buy and when they buy it.
- Organic and Non-GMO. Organic food sales growth has again returned to an annual 10 percent growth rate. This sales growth rate is double that of any other food category. This trend will accelerate from the growing consumer uncertainty on the health implications tied to genetically modified organisms and as consumers come to understand that by definition an organic food is also non-GMO.
Authenticity drives food branding
The clearest marketing trend emerging from the consumer shift toward healthy convenience foods is the role authenticity now plays in defining a company’s brand alignment with customers. Customer questions on authenticity are at the core of McDonald’s stagnant revenues as it continues to price-promote food items like Big Macs while also trying to market healthier food choices. Similar mixed authenticity messaging explains why the Coca-Cola Co. is facing declining revenues even as it aggressively grows its healthier product offerings.
Stepping into this marketing opportunity are restaurants and caterers that have adopted a culture of authenticity built upon farm-to-fork menus, adoption of energy-efficient kitchens and lighting plus commitments to recycling and composting. Authenticity built upon sustainability is now the food industry’s marketing path for winning customers and growing product revenues while it also increases profit margins through green supply chain management best practices and energy efficiency.
Image credit: Bill Roth
Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017