Big Food’s Big Conundrum

Big Food’s got a big problem. Tough-to-please millennials. As the largest consumer group in the U.S., millennials want healthier food above all else. To most of them, healthy food is food that’s natural, organic, and sourced locally. Big food’s processed “low fat” and “high fiber” options are out and non-GMO, low sugar, low sodium, and other less processed options are in.

Millennial Outlook

The result is millennials are spending more of their food budgets at organic and natural food retailers. Their spending is fueling faster growth in sales of organic food than in traditional ones. In 2016, sales of organic food grew 8 percent to $47 billion from the previous year, compared to barely 1 percent for total U.S. food sales in the same year.

Ever so environmentally conscious, millennials are also patronizing locally sourced foods. Food from farmers markets, roadside stands, local food restaurants, neighborhood bakeries, and locally brewed craft beers are in and traditional “convenience” foods are out. This isn’t good news for Big Food, whose decades-long bread and butter has been processed foods optimized for affordability and accessibility; not for being fresh, local, or organic.

In addition, millennials are taking convenience with food to a new level. Traditional brick-and-mortar corner stores just aren’t cutting it anymore. Millennials want easier access to their organic and fresh foods and are using technology to accomplish this. Online grocery and meal kit delivery services are the name of the game. In fact, research has found nearly seven out of every 10 millennials are interested in meal kit delivery services.

In response, America’s big food retailers—the likes of Walmart, Krogers, and Target—are  scrambling to expand their own fresh-food delivery services. Let’s not forget Amazon’s recent $13.7 billion purchase of Whole Foods that paired a veteran online retailer with an organic grocer.

Experience-loving millennials are also eating out more than older age-groups. Tired of those food selfies? Well then get used to them, as there seems to be no end in sight. Millennials love taking pictures of their food, meaning it must not only taste but look good too.

Amidst this dizzying change in food preferences being led by millennials, America’s largest food and beverage companies have been caught flat-footed. Smaller, nimbler food providers like organic stores and farmers markets are serving millennials’ demand for healthier food better and eating Big Food’s lunch in the process.

In fact, between 2012 and 2015, the revenue of the top 25 largest food and beverage companies in the U.S. only grew 1.8 percent annually compared to between 11 and 15 percent for that of small and medium-sized food providers. In 2017, big names like Kraft Heinz and Campbell Soup recorded weaker-than-expected financial results and are re-evaluating their product portfolios.

Driving Factors

So what’s driving millennials evolving preferences for healthier, locally-sourced, and easier-to-access food?

In terms of natural and organic food, millennials have easier access to information about healthy eating thanks to social media, blogs, and other digital channels and hence are generally more enthusiastic about adopting healthy eating habits.

As for local food, the trend stems from millennials’ awareness of environmental issues. Thanks again to easy access to information online, millennials are aware about—and care about— sustainable food production and sourcing issues like animal welfare, worker welfare, and sustainable production practices. In a nutshell, transparency in food is a big deal for millennials. The growing popularity of clean meat, plant-based diets, and even more informative food labeling can all be attributed to millennials concern for sustainability.

As for their affinity for convenience, “U.S. millennials are all about instant gratification. They put a premium on speed, ease, efficiency, and convenience in all their transactions.” That’s according to research by The Boston Consulting Group. It’s no wonder millennials have been referred to as the convenience generation. This coupled with their love of technology and it’s no surprise new online and convenience-based food delivery services like Uber Eats and AmazonFresh, are upending the traditional brick-and-mortar food retailers.