Food businesses will have to change to stay competitive – online, in-store, and at sorting and processing plants too. Bjorn Thumas, Director Business Development Food at TOMRA Food, looks at what we can expect.
Disruptive change is coming to supermarkets and this will have a ripple-effect throughout the food industry supply chain. Technical innovations online and in-store and shifting consumer demands will re-shape the supermarket of the future. And that future is approaching fast.
Proof that we are on the brink of a supermarket revolution came last year when e-commerce giant Amazon invested USD13.7 (EUR11.7) bn in acquiring supermarket chain Whole Foods Market. This promises to be a game-changer in food retailing. And it is not only in funky-looking offices in Seattle where the supermarket is being re-imagined: other specialized enterprises already fulfill online grocery orders by delivering directly to customers’ front doors, and more businesses will jump on the bandwagon.
Traditional bricks-and-mortar supermarket chains, seeing that they are at risk of losing power and profits in this revolution, are strengthening their own e-commerce capabilities. The value attached to Whole Foods Market by Amazon will have come as a wake-up call: established food retail chains must use CRM data to increase sales. It is true that Whole Foods Market has stores only in the USA and the UK, and that today’s online innovators such as Instacart are mostly US-based – but the shift to selling more food online will quickly sweep through developed nations.
During the next decade the global grocery e-commerce market is forecast to expand at a compound annual growth rate of 13.5%, from an annual value of EUR43bn today to EUR135bn by 2025. Business analysts note that although e-commerce players are making efforts to establish a foothold in the USA and Europe, they face serious challenges here because the existing grocery market is saturated and margins are low. This means global growth in food e-commerce will be driven by Asia, where there is highest consumer willingness to purchase groceries online, combined with rapid urbanization, low labor costs, and a relatively undeveloped retail market.
To give just one example of growth potential, in China, the world’s most populous nation, the e-commerce share of the grocery market is currently only 4.2%. To put this into perspective, in nearby Japan the share is 7.2% and in South Korea it is already 16.6%. This is a sure indicator that businesses such as the Chinese multinational conglomerate Alibaba Group, owner of Alibaba.com, will be at the vanguard of big changes.
You can find more information in the November-December print issue of Frozen Food Europe.