According to a Recent Study/Survey … End-of-January 2017 Edition
By MRM Staff
As part of our mission to be the go-to resource for on-the-go restaurant industry professionals, Modern Restaurant Management (MRM) magazine offers highlights of recent research. This end-of-January 2017 edition features the state of the wine industry, global vanilla market and how many wings eaten during the Super Bowl.
Foodservice Packaging Survey
The Foodservice Packaging Institute has completed a review of literature related to the impact of compostable foodservice packaging at different points in the composting value chain. Encouragingly, the review found a growing body of evidence demonstrating that the use of compostable foodservice packaging can increase food scrap diversion and reduce contamination when used in conjunction with known best practices for food scraps collection.
The study, commissioned by FPI’s Paper Recovery Alliance and Plastics Recover Group, examined how compostable foodservice packaging impacts:
- Composting program participation rates.
- Food scraps diversion rates.
- Contamination of composting feedstocks and finished compost.
- Composting process, compared with traditional carbon sources.
“As the use of compostable packaging grows, so too should the opportunities to successfully recover those items,” said FPI President Lynn Dyer. “When considering whether to accept foodservice packaging, composters may have questions about the impact on their programs, and this study helped to identify resources to answer those questions.”
Key insights from the study include:
This is an emerging field of study. The impact of compostable foodservice packaging on composting program participation, customer behavior and diversion rates is a relatively new area of study and, as such, the availability of relevant sources varies widely by topic area.
A growing body of evidence shows the use of compostable foodservice packaging can lead to an increase of food scrap diversion and a reduction in contamination. Available data suggest that compostable foodservice packaging use, in conjunction with programs such as outreach, education, new infrastructure and desired behavior models, can increase food scrap diversion rates and reduce observed contamination rates.
Coordinated consumer education is key. In order to realize the full benefits of compostable packaging in increasing food scraps diversion and minimizing contamination, coordinated efforts around customer education are essential between manufacturers, operators, consumers, municipalities, haulers and composters.
Data gaps still exist. A crucial identified gap in available research is the extent to which compostable foodservice packaging compares to natural carbon sources typically used during composting. No data was found comparing their ability to balance compost carbon to nitrogen ratios, moisture content, porosity, composting rate, ammonia volatilization and final compost properties.
“This review will help inform our strategies, investments and activities to increase the recovery of compostable cups, take-out containers and utensils used by an increasing number of foodservice outlets,” stated Dyer. “Information-sharing and education among manufacturers, foodservice operators, consumers, municipalities, haulers and composters are critical to our collective success.”
Founded in 1933, the Foodservice Packaging Institute is the leading authority for the North American foodservice packaging industry. Members include foodservice packaging manufacturers and their raw material and machinery suppliers, restaurants, grocery and convenience stores, distributors and nearly 50 school districts, colleges and universities.
Improving Healthier Offerings from Food Trucks
Convincing low-cost lunch truck operators and their customers to embrace healthier food is possible, but regulation of menus and better marketing may be needed to make long-lasting changes, according to a new RAND Corporation study.
An effort to encourage “loncheras” in Los Angeles to provide healthier meals to their predominately Latino customers showed that such change can happen, but over time the efforts lapsed despite positive feedback from customers, according to the study.
“Getting people to change their away-from-home eating habits is difficult, even after they try and like healthier options,” said Dr. Deborah Cohen, the study’s lead author and a physician scientist at RAND, a nonprofit research organization. “For lunch truck operators, offering healthy meals is no more difficult than meeting basic sanitation rules. We may need a mix of rules and incentives to improve eating habits in these settings.”
The findings are published online by the journal Public Health Nutrition.
Latinos in the United States have disproportionately high rates of overweight and obesity, both of which are associated with a diet that lacks sufficient whole grains, fruits and vegetables. Latinos’ diets also contains excessive amount of sugary beverages and sweetened baked goods.
Mobile food trucks called loncheras are common sources of inexpensive away-from-home foods among working-class Latinos and others in Los Angeles. The food trucks usually park at a single location each day while serving ready-to-eat Mexican food and other types of food.
In 2013, there were 2,580 licensed and an estimated 2,000 unlicensed food trucks in Los Angeles County, compared with 26,000 restaurants in the region.
RAND researchers worked with a trade association of lonchera operators to identify those willing to offer healthier food options on their menu. Participating food truck operators worked with nutritionists to design healthier meals and received modest subsidies to provide customers with coupons to discount the price of the healthier food.
Researchers faced some trouble finding truck owners willing to participate, eventually studying the experiences of 11 truck operators.
The healthy meals created for the loncheras were balanced with recommended amounts of protein, vegetables and fruit. The cost of ingredients for the healthy meals was slightly higher than comparable standard meals, but profit margins were higher. However, the healthier meals likely required more labor to prepare.
Audits of the food trucks showed the meals accounted for about 2 percent of all sales. A common concern from customers about the healthier meals was that they offered too much food, as customers often just sought a snack. But consumers who bought the healthy items gave them high ratings and said they would recommend them to others.
Sales of the healthier meals were most successful among trucks that already specialized in serving meals for a lunch or dinner crowds in white collar or residential areas.
Cohen says the project shows that it’s possible to convince lonchera operators to provide balanced meals based on the federal My Plate guidelines, if they receive proper training and support.
“It seems that any good outlet should be able to offer at least one meal choice that complies with the My Plate criteria,” Cohen said. “But food outlets will need to be convinced that the items will sell and they will turn a profit on the effort.”
One option local jurisdictions might consider is requiring all licensed food outlets to have at least one healthy option available, which Cohen compares to following sanitation standards that loncheras and other licensed food establishments must follow.
In addition, more marketing will be needed to convince consumers to break unhealthy eating habits to try healthier options, according to the study.
2016 closed on a sour note as December became the weakest month in over three years for same-store sales growth. The -4.3 percent sales decline for the month shrank the industry’s fourth quarter same-store sales result to -2.4 percent, the worst quarter experienced by restaurants in over five years. This insight comes from data reported by TDn2K™ through The Restaurant Industry Snapshot™, based on weekly sales from nearly 26,000 restaurant units and 130 + brands, representing $65 billion dollars in annual revenue.
“To put the second-half sales downturn into perspective, the only two quarters with comp sales worse than -1.0 percent during the last five years were the -1.1 percent in the third quarter and the very soft -2.4 percent results in the fourth quarter of 2016.” said Victor Fernandez, Executive Director of Insights and Knowledge for TDn2K. “Furthermore, restaurants have now posted four consecutive quarters of declining year-over-year sales. The last time the industry experienced a year with all negative quarters was 2009, when the economy was suffering the effects of the great recession. This was also the last year in which we experienced a quarter with a sales decline worse than -2.0 percent as we did for the fourth quarter of 2016.”
From an annual perspective, same-store sales growth for 2016 was -1.1 percent. This is a 3.1 percentage point drop from the growth rate in 2015, and the poorest industry performance since the recession.
“The resurgence in economic growth that began in the summer continued into the fall and early winter,” commented Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. “Consumer spending was solid, but the trend toward big-ticket purchases rather than soft goods accelerated. Household borrowing is soaring and paying off that debt is limiting spending on a wide variety of goods and services. Overall, total sales were solid for the restaurant sector as defined by the government’s food service and drinking places and takes into account the change in number of locations, but the slide that started early this year is continuing. The sea-change in shopping trends is upending the traditional retail sales model and has led to closings of stores and even companies. Malls are being forced to adapt, as retail spending is increasingly done online. The further tightening in the labor markets is driving up wages adding to disposable income. Tax cuts are likely, but the impacts of any changes are not likely to be felt until the latter part of 2017 or early 2018.”
Restaurants continued to struggle with guest visits, as declining traffic growth again proved to be the biggest hurdle in the fourth quarter. December same-store traffic was down -6.4 percent, the worst monthly result in over five years.
At -4.6 percent, the traffic decline in the fourth quarter was also troubling. The last time the industry faced a similar result was during the third quarter of 2009.
Average Guest Check Growth
Average guest checks grew by 2.1 percent year-over-year during the fourth quarter. This represents a drop of 0.4 percentage points from the average for average guest check during the second and third quarters. The combination of declining traffic and slower check growth made for a very tough sales environment during the fourth quarter.
A Longer Perspective
On a two-year basis, 2016 sales grew by 0.9 percent compared with 2015. Although positive, the change is a direct result of significant increases in guest checks driven primarily by price increases.
“Same-store traffic dropped by -4.1 percent over the last two years,” commented Fernandez, “but average guest checks grew by a robust 5.0 percent over the same period, lifting sales growth. Black Box Intelligence™ research revealed prices have increased on average between 4.0 and 5.0 percent over the last 2 years. Without those price increases, many companies would have a very tough time maintaining sales growth and margins. However, the question remains: can brands continue to raise prices at the same pace in an environment of declining traffic and increased competition from alternatives such as inexpensive groceries, a new breed of independents and home delivery?”
In December, the best performing industry segment based on same-store sales was fine dining. This was also the only segment with positive sales in the month.
The weakest segments in December were family dining and casual dining. The year proved to be very challenging for casual dining; it was the bottom performer in ten of the months in 2016. Results were markedly worse for the “bar and grill” sub-segment of casual dining.
“During 2016, consumers favored those segments on the extremes of average check and it was the segments in the middle that were challenged,” continued Fernandez. “The best performing segments based on both sales and traffic were quick service, fine dining and upscale casual. In the case of same-store sales, these were the only segments with positive growth during the year. Yet, none of the industry segments reported an increase in their guest counts during the year.”
After posting an average year-over-year growth in number of restaurant jobs over 3.5 percent the first half of the year, job creation slowed down to a crawl in recent months. Based on TDn2K’s People Report™, chain restaurant job growth was flat for October and November of 2016.
Turnover for both hourly employees and all levels of management continued the upward trend in November that started at the end of the recession. Management turnover is particularly concerning. It has surpassed pre-recession levels and continues to rise. At the brand level, TDn2K analysis consistently links higher restaurant management turnover with lower sales and traffic growth.
Rising labor costs are also top of mind for restaurant operators. In addition to the increasing costs directly and indirectly associated with employee turnover, nineteen states are scheduled to increase their minimum wage during 2017. Another factor that could have a considerable effect on costs during the year is the approved legislation regarding new overtime regulations. However, the new administration may provide a reprieve to the impending reclassification of employees and some potential mandated salary increases.
“As we gladly close out 2016 and focus on 2017, it is obvious we do not have positive momentum to begin the year. However, in spite of the macro environment, the story we will be able to unfold from our research, in our upcoming TDn2K Global Best Practices Conference later this month, is not all doom and gloom,” said TDn2K’s Chairman Wallace Doolin “It is one of winners and losers that are not necessarily determined by the segment, nor the age or size of the brand. We believe that in 2017 and beyond there will be a widening gap in brand performance as the industry settles into the new reality of overcapacity in a share of stomach battle. The moneyball question will be: how do brands achieve coveted and profitable top quartile performance?”
Encouraging Light Restaurant Users
Getting customers who visit restaurants less to visit more may be overstating the obvious in terms of boosting sluggish U.S. foodservice traffic growth. It turns out that it’s not. If half of the light restaurant users made one more visit per year it would be an incremental increase in sales of $1.1 billion, finds a new report from The NPD Group, a leading global information company. The report, which is based on NPD’s receipt mining service, Checkout Tracking, and its ongoing foodservice market research, examines the reasons why consumers have cut back on foodservice visits and which type of users — heavy, medium, light, and super light —decreased their visits the most.
The majority of consumers (75 percent) who have decreased their restaurants visits say they watch how they spend their money on most or all purchases, and a high percentage of these respondents think that restaurant prices are too high, according to the NPD report, Losing Our Appetites for Restaurants. Of the consumers who have cut back on restaurant visits the most are heavy restaurant users, who typically visit restaurants three or more times per week. Heavy restaurant users are the perceived low-hanging fruit for many restaurant operators and the target for promotional efforts. This user group’s visit cutback was a major factor in foodservice traffic growth coming to a halt, says NPD.
Although they may not visit often, NPD finds that super-light and light users, who typically visit restaurants one time per week, and super-light users, who visit less than one time a week, are extremely valuable customers. Combined, these two groups account for 47 percent of all restaurant customers in a year, and they spend more per visit than heavy users. If half of light users made just one more restaurant visit each year, NPD calculated that there would be an incremental sales increase of $1.1 billion. These users told NPD that regular discounts and, more importantly, discounts of their choosing would entice them to visit more.
“Many restaurant operators have spent much of their resources and time in rewarding heavy buyers,” says Bonnie Riggs, restaurant industry analyst at NPD and author of the report. “It’s important to continue recognizing heavy buyers, but to grow their business, operators need to increase visit frequency from all user groups, including light and super light users.”
RestaurantOwner.com’s 2017 POS Survey Report summarizes input gathered from 1,190 independent restaurant owners from around the world regarding over 100 different brands of POS systems, focusing on several critical aspects including cost, installation and support experience, and features. The results of this survey provide unique insight into the POS system market and emerging trends, all of which are valuable to independent restaurant owners.
The average cost for a restaurant POS system has notably decreased since 2012. In 2012, the average expenditure for a POS system was just over $18,000, as opposed to $13,344, currently. The top seven POS solutions were Aloha POS, MICROS, Digital Dining, Clover, Adelo POS, Future POS, and POSitouch. These top seven POS systems accounted for 47.5 percent of the market. Beyond the top seven, all other POS brands each accounted for less than 3 percent of the market share.
They identified a shift toward cloud-based systems and POS solutions offered by credit card processors. Clover, Dinerware, Harbor Touch, and Square were the top credit card processor provided POS solutions, accounting for nearly 11 percent of total market share.
Despite the increased use of cloud-based and mobile systems, less than 10 percent of independent restaurant owners indicated they use pay-at-the-table devices. Moreover, only 31 percent of restaurants reported using EMV compliant POS systems. This is particularly noteworthy considering the fraud liability shift that took place in October 2015, mandating that merchants upgrade to EMV chip technology or accept increased liability for fraudulent transactions.
Improvements in plug-and-play components, increased Wi-Fi capability, and a tech savvy labor pool are allowing many restaurant owners to opt for self-installation and remote support. As a consequence, only 74 percent reported using an authorized POS vendor for programming, training, and support.
Franchise Job Creation
Following an election focused on bringing back American jobs, the International Franchise Association today unveiled its annual Franchise Business Economic Outlook: 2017 report. The report finds the industry significantly outpaced the US economy in 2016, and projects a similarly strong performance in 2017.
“The Trump administration has made clear that creating more jobs in America for Americans is its number one priority. The franchise sector has shown for the seventh year in the row that it is meeting this test,” said IFA President and CEO Robert Cresanti. CFE. “We believe that our industry will continue to grow especially if the business environment improves, which could happen if the Trump administration and congressional leaders deliver on their promise to roll back onerous regulations and pass much-needed tax reform.”
Key findings from the 2017 report prepared for the Franchise Education and Research Foundation by IHS Economics include:
- Franchise employment grew 3.5 percent in 2016 and is expected to continue growing by another 3.3 percent in 2017, adding nearly 250,000 new jobs.
- Franchise establishments grew 1.7 percent in 2016 and are expected to grow 1.6 percent in 2017, an expected increase of over 11,500.
- In 2017, US GDP is projected to grow at 4.7 percent in nominal dollars, while the franchise sector is expected to outpace that at 5.2 percent, growing to $426 billion. The franchise sector will continue to account for about 3 percent of US private GDP.
- Franchise output was up 5.8 percent in 2016 and will continue to grow another 5.3 percent in 2017, surpassing $700 billion.
Within the franchise community, the number of establishments is expected to grow fastest in Personal Services, at 2.3 percent, followed closely by Quick Service and Full Service Restaurants, each projected to grow at 1.9 percent in 2017. The two restaurant business lines will continue to lead in employment and output growth.
While the outlook for the economy and especially for franchise businesses looks positive in 2017, and there is expectation that federal regulatory relief will further enhance opportunity, uncertainties remain about the speed of changes under the new administration as well as some new legislative priorities that could have negative impacts on franchising.
“Our industry is optimistic, but we are monitoring closely the public policy arena particularly issues like the new joint employer standard, to ensure on-going job growth provided by franchised businesses,” stated Cresanti.
New polling results conducted by Morning Consult on behalf of IFA show strong support to reverse the new joint employer standard and allow franchises ability to operate as independent businesses in neighborhoods across the country. According to the data, 66 percent of voters would like the Administration and Congress to focus on policies that support local ownership of stores and restaurants while 74 percent have a favorable opinion of franchise businesses in their communities.
IHS Economics Senior Economist Karen Campbell added that “the report’s in-depth look at franchising sectors and performance in individual states provides a complete snapshot of franchising in 2017, and will help policymakers understand the potential benefits of this growth.”
Mobile Wallet Services Expected to Grow
According to the latest procurement market intelligence report from Technavio, the global mobile wallet services market is expected to grow at a CAGR of 42 percent over the next five years due to the multiple functionalities they can offer both buyers as well as suppliers.
The provides an in-depth analysis of category spend, best procurement practices and cost saving opportunities, aimed at helping organizations achieve superior business performance. The report also provides insights on pricing, supplier positioning and top companies, enabling sourcing professionals to improve their competitive advantage through procurement excellence.
“For buyers, it provides the unique advantage of storing money in secure and reliable digital accounts to make fast and smooth transactions across merchants and retailers in multiple industries,” said lead Technavio procurement expert Angad Singh. “For suppliers, it represents an opportunity to invest in a new channel for processing transactions and additional marketing, to target customers real-time with localized offers and discounts,” added Angad.
Cost Saving Opportunities in the Mobile Wallet Services Market
Cost-saving opportunities can be leveraged if buyers have many transactions and would be interested in associating with suppliers for long contract terms.
Technavio procurement experts have segmented the cost saving opportunities in the mobile wallet services market into the following value-enhancement opportunities:
- Adoption of technology
- Supplier Competition
- Adoption of negotiation strategies
- Optimization of procurement practices
- Bundling of services
- Adoption of technology saving aspects
Mobile payment technologies such as NFC, HCE, BLE, and QR codes are penetrating the market with technology leaders such as Apple, Google, and Samsung spearheading development.
Consumers need to perceive mobile payments as an easy and convenient mode of payment via the integration of the mobile banking and payment experiences. Consumers are comfortable making financial transactions using mobile channels developed by trusted financial institutions such as banks. Converging these two into one seamless experience is crucial to bridge the gap and push consumers into making mobile payments online or at POS.
Optimization of procurement practices saving aspects
A fast, simple, and seamless mobile payment process can enhance brand reputation and differentiation in the market. Customers consider personalized user experiences on payment interfaces, fast and efficient check-outs, and multiple payment options (debit/credit cards, internet banking) as important features in mobile wallets. According to a 2016 market study on mobile commerce, approximately two billion mobile phone/tablet users are expected to make mobile commerce transactions globally by 2017.
Bundling of services saving aspects
With the aim of developing mobile wallets for purposes beyond payments, suppliers are expanding their mobile money portfolios from basic P2P money transfers and bill payments to services. They are strategically partnering with network operators and banks to provide localized and real-time offerings such as loyalty points, discounts, and ratings and reviews across popular retail, entertainment, and hospitality businesses.
Americans’ consumption of the unofficial staple of Super Bowl Sunday – the chicken wing – is projected to hit 1.33 billion wings, according to a National Chicken Council (NCC) annual report.
NCC’s 2017 Wing Report estimates that Americans will eat 1.33 billion wings during Super Bowl LI weekend, as the Atlanta Falcons and New England Patriots battle for the Lombardi Trophy. That figure is up 2 percent, or 30 million wings, from 2016’s report – and up 6.5 percent, or 80 million wings, from 2015’s report – revealing a steadily growing love for America’s favorite Super Bowl menu item.
To visualize how many wings that is…
If 1.33 billion wings were laid end to end, they would stretch from Gillette Stadium in Foxborough, Mass. to the Georgia Dome in Atlanta, Ga. almost 80 times.
1.33 billion wings is enough to circle the Earth almost three times.
Weighing in at about 166.25 million pounds, 1.33 billion wings weigh 338 times more than the combined weight of all 32 NFL teams.
Eating two wings per minute, it would take an NFL player 1,265 years, 80 days, 7 hours and 12 minutes to eat 1.33 billion chicken wings. Or a really long time.
Falcons vs. Patriots
When it comes to levels of chicken wing consumption, the two competing Super Bowl regions are close. According to the NPD Group, the Northeastern U.S. – Patriots Country – eats 12 percent more wings on average than other U.S. regions, while the South – Falcons Country – eats 13 percent more.
Additionally, NPD Group data reveals that millennials hold the chicken wing consumption crown, with wing eaters aged 18 to 24 consuming approximately 61 percent more wings than other age groups.
“Although we typically like to stick together with ‘feathered’ teams, we’ll keep our projections to wing consumption and not the Super Bowl winner,” noted Tom Super, NCC senior vice president of communications. “With two pretty dominant wing-hungry regions in the game, this year’s Super Bowl should be great for both football and chicken wing fans.”
Where do Americans get their Super Bowl Sunday wings?
The National Chicken Council estimates that of the wings eaten during Super Bowl weekend, 75 percent will come from restaurants or foodservice outlets, and 25 percent from retail grocery stores.
Although the vast majority of wings eaten during the Super Bowl are purchased from restaurants, bars or wing and pizza joints, wing sales at grocery stores and supermarkets spike dramatically the week of the Super Bowl. Data shows that consumers stock up the week before, too, according to Nielsen Perishables Group FreshFacts® data.
Global Luxury Wine Market to Grow
A new report published by Allied Market Research, titled, “Luxury Wines and Spirits Market by Product Type, Distribution Channel and Geography: Global Opportunity Analysis and Industry Forecast, 2014 – 2022,” projects that the global luxury wines and spirits market was valued at $812,108 million in 2015, and is expected to reach $1,122,578 million by 2022, growing at a CAGR of 4.8 percent from 2016 to 2022. The wine segment was a major revenue contributor for global luxury wines & spirits market in 2015. The European region held the leading position in the global market in 2015, and is expected to maintain its lead during the forecast period.
The consumption of luxury wines and spirits has seen a significant growth in the past few years. Further the use of technology has enabled to select the finest quality of raw materials for fermentation process to yield quality wines for aging process and consumption. Besides, with increasing disposable income globally and premium pricing of the products has provided huge profit opportunities for the manufactures of the market. However, the stringent regulations regarding the advertisement and distribution of wines & spirits are expected to affect the market growth during the forecast period.
The wines segment is expected to grow at a faster rate during the forecast period, as the market currently offers alcoholic drinks such as vodka, gin, rum, and brandy and has more alcohol by volume (ABV) than other alcoholic beverages. The market has seen a significant growth, owing to increase in popularity of cocktail drinks. Moreover, they are being preferred over beers and other alcoholic beverages due to growing popularity of cognac and tequila. However, there is a decline in the growth of rum and vodka.
Key findings of the study:
- The spirits segment occupied the highest share in 2015, and is estimated to grow at a CAGR of 4.2 percent in terms of value during the forecast period.
- Japan is the leading consumer of luxury wines & spirits accounted for approximately 24 percent of the Asia-Pacific market, followed by China.
- The wines segment is estimated to expand with the highest CAGR of 4.4 percent in the product type segment in terms of value during the forecast period.
- The European region accounted for more than two-fifths of the global luxury wines & spirits market in 2015.
- U.S. is the leading market for luxury wines & spirits in the North American region, growing at a CAGR of 4.9 percent in terms of value during the forecast period.
The European luxury wines and spirits market is largest among all other geographical regions. Furthermore, the consumption of alcoholic beverages at various social gatherings such as parties, marriages is more and provides profitable opportunities for the manufacturers. Moreover, with growing popularity of sports such as football and tennis, where audiences are often seen consuming alcoholic beverages is further expected to grow this market in the near future.
The key market players adopted diverse strategies such as product launch, expansion, acquisition, joint venture, partnership, and investment to gain competitive advantage in this market. The prominent players profiled in this report include Diageo, Pernod Ricard, Bacardi, Brown- Forman, ThaiBev, Campari, United Spirits, HiteJinro, Beam Suntory Inc., and Edrington Group.
Organic Dairy Food and Drinks Will Grow
Organic Dairy Food and Drinks Market Report, published by Allied Market Research, forecast that the global market is valued at $14,517 million in 2015, is expected to grow at a CAGR of 14.25 percent from 2016 to 2022 to reach $36,729 million by 2022. Rise in awareness of health concerns, emergence of environment protection, technological advancements, and government initiatives in organic farming are the major factors that drive the market. Organic dairy products are blended with natural antioxidants which surge its market demand. Nutritional benefits, better taste, and freshness are the factors which boost the organic market as an alternative to chemically blended nonorganic products. Moreover, production of organic dairy products naturally increases the emission of the methane gas, which can lessen the effects of the global warming by decreasing emission of nitrous oxide and carbon dioxide. Recently, innovative products such as flavored milk, organic spoonable yogurt with granola, yogurt, sour creams, buttermilk, cottage cheese, and fruit toppings are added which help to boost the market growth. Government has promoted organic farmers by assisting with low interest rate, loan facilities, and financial incentives to transition to organic methods.
According to Eswara Prasad, Team Lead, Chemicals & Materials at Allied Market Research, “Robotic milking systems are innovative solutions to improve milking frequency compared to conventional parlor systems.”
Based on type, organic milk dominated the market in 2015 with more than half of the total share by volume. Increase in health awareness coupled with nutritional benefits helps the market to generate considerable pace and the dominating type is projected to make headway by projecting a CAGR of 14.10 percent in the near future.
- Asia-Pacific is expected to be the fastest growing market in organic milk with a CAGR of 14.82 percent during the forecast period
- Organic yogurt is expected to grow at a CAGR of 14.72 percent during the forecast period
- In the year 2015, organic milk dominated the organic dairy food and drinks market with more than half of the total share by volume.
- In North America, the organic dairy food and drinks market is projected to expand at a CAGR of 14.26 percent
- India is the fastest growing market for organic dairy food and drinks by registering a CAGR of 16.19 percent
Globally, Asia-Pacific and Europe together occupy more than two-fifth of the total share. Increase in disposable income coupled with rise in health awareness fuels the organic dairy food and drinks market in these regions.
Prominent market players include the Kroger Company, Safeway, Inc., Ben & Jerry’s Homemade Holdings, Inc., Organic Valley, BJ’s Wholesale Club, Purity Foods, Inc., Eden Foods Inc., Whole Foods Market Inc., and Publix Super Markets, Inc.
Top Consumer Trends
Technomic has identified five themes that will define consumer foodservice behavior this year, A comprehensive analysis of evolving consumer lifestyles paired with exclusive industry, menu, operator, and consumer data signals that 2017 will see an accelerated fragmentation of consumer attitudes and purchase drivers.
“Overarching trends related to increased demand for high-quality, better-for-you fare and unique yet convenient foodservice experiences will not subside,” said Kelly Weikel, Technomic’s director of consumer insights. “However, the way that consumers define these important elements and their willingness and ability to pay more for them increasingly varies from one consumer to the next. This year it will be especially important for operators to understand niche consumer groups and meet expectations at a range of value tiers.”
Highlights from Technomic’s 2017 Consumer Trends Forecast include:
Patronage polarization: Instability has reached new levels due to increasing uncertainty. Though lower- and middle-class consumers will curb foodservice spending until instability subsides expect few cutbacks among affluent consumers.
Creating community: Concepts will increasingly be positioned as places for people and communities to connect, give back, recuperate, and foster diversity and inclusivity.
Old World Revival: Today’s consumers crave new foods and experiences but seek the comfort that familiar options provide. Look for more modern, unique twists on classic fare.
Food beyond fuel: Healthy intentions are starting to drive heathier orders, even away from home. Operators will increasingly tout a balanced approach as the “best medicine” to support an overall healthy lifestyle.
Robotic takeout tech: More operators will provide technology such as delivery drones and robots, chatbots and enhanced online ordering to drive off-premise sales.
State of the Wine Industry
Silicon Valley Bank (SVB) released its annual State of the Wine Industry Report. The 16th annual State of the Wine Industry report combines SVB’s expertise in the U.S. wine business with proprietary research to deliver forecasts and predictions for the year ahead in wine.
Highlights from the 2017 report show strong market conditions overall and identify notable trends that may signal adjustments in consumption patterns and segment prices:
Wines sold between $12 and $25 will grow in demand as will high-end luxury wines with an established brand.
Wines sold between $12 and $25 will grow in demand as will high-end luxury wines with an established brand. We expect to see small price increases in these segments, with volume and price drops for bottles priced under $9.
Sales growth is predicted between 10 to 14 percent for the premium wine segment. The confluence of better retail conditions, strong consumer demand and good supply will collide to deliver improving industry performance.
Overall supply is balanced with shortages of high-quality pinot noir and cabernet, but excesses are evident in certain non-core varietals and for grapes destined for lower-priced wine.
Slightly higher per capita consumption can be expected if economic conditions continue to improve despite retiring, wine-loyal baby boomers being replaced by less affluent millennials who are ambivalent about their alcoholic beverage of choice.
Winery acquisitions to remain active through 2017.
Farm labor supply and costs will be the dominant concerns in the wine business in 2017.
“We foresee a strong year ahead for the wine industry, particularly in the premium wine segment, with small price increases in the $12-25 bottle and luxury wine categories,” said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report. “However, critical labor issues will be the dominant concern this year. The reality in the wine business today is that the labor force is inadequate in every growing area, which is leading to increased costs and more incentive to mechanize.”
Additional findings and predictions for 2017:
Import growth in lower premium price points is expected, due to a strong and strengthening U.S. dollar, available foreign supply, foreign in-country marketing support and willing millennials.
Millennials are beginning to affect the lower price range of premium sales. Their presence is most visible in the $8 to $11.99 red blend category, but they will gradually move away from blends and into varietal wines or imports as their incomes improve.
Total harvest in California for 2017 is predicted to be 3.95 million tons crushed, seven percent above 2016.
Holiday Retail Sales
The U.S. Census Bureau released retail and food services sales data that included sales for the holiday season — November and December 2016. Holiday spending for total retail and food services sales, adjusted for seasonal variation and holiday and trading-day differences but not including price changes, for November and December 2016 was $935.3 billion — up 4.0 percent from the same two months in 2015 ($899.2 billion).
The comparable growth rate for the holiday seasons from 2014 to 2015 was 2.2 percent. Excluding the gasoline stations component, total retail and food services sales for the 2016 holiday season were up 3.9 percent, which was not statistically different from the 2014 to 2015 increase of 4.2 percent.
Drilling further, holiday spending in nonstore retailers jumped 12.8 percent. Holiday sales at nonstore retailers have increased each year since 2008 when sales declined 6.2 percent. The 2016 trend was the highest in the past five years. At the same time, however, holiday spending in general merchandise stores declined 2.1 percent in November and December of 2016, following a 0.9 percent growth rate the year before.
Tech Spending Benefits
Retailers who spend more on technology are more likely to enjoy high sales growth, according to a recent survey from IHL Group and NCR Corporation
The Unified Commerce Landscape Report from NCR, in partnership with research and analyst firm IHL Group, found that retailers who invest in technologies designed to create seamless shopping experiences, personalization and store transformation enjoy sales boosts of up to 100 percent and more.
Retailers can no longer view IT as only a cost center but a strategic resource to grow the business.
The report split retailers into two categories according to their sales growth, and correlated these groups with adoption of 30 different unified commerce functionalities. The research found that retailers using these technologies enjoyed a huge sales boost over rival retailers that did not use the commerce functionalities. These include:
Store transformation: retailers that provide mobile sales tools for staff saw 77 percent higher sales growth, those that deployed mobile POS saw 92 percent higher sales, while stores that offer in-store Wi-Fi saw a mammoth 663 percent increase in sales compared to those that do not
Personalization: 110 percent higher sales growth for retailers that actively market their cross-channel services; 107 percent higher average increase for those using customer preference across channels, and 84 percent more sales growth for retailers who employ loyalty programs in real time
Seamless experience: 102 percent higher sales growth for those using cross-channel demand planning, and 18 percent more for retailers that use order management systems – the foundation of Unified Commerce
90 large retail chains in the USA and UK were surveyed across two main categories: general merchandisers, such as department stores, specialty hard and soft goods, and food, drug, convenience, and mass merchants. The most successful general merchandisers also focused on an additional area, providing actionable analytics for store associates. More than half (56 percent) in this category are using analytics to empower in-store staff to make the best decision at the point of customer interaction.
“The last few years has seen brick & mortar retailers fighting back against the online giants, as retailers realize that bricks-and-mortar shops can provide a unique experience that you can’t get on the web,” said Mark Benjamin, president and COO, NCR Corporation. “Our research shows the enormous value that can be gained from striking the right balance of investment in technologies that create a seamless shopping experience – whether online or in store – and thus, increased customer loyalty.”
Retail leaders spend on average 69 percent more on IT than other respondents in the survey, but the secret is not just in the total spent: “Successful retailers understand that they need to focus on every area simultaneously, and align these systems in a balanced and strategic way, if they are to unlock all the transformational benefits that technology can bring,” said Benjamin.
“Retailers can no longer view IT as only a cost center but a strategic resource to grow the business. The IT spending commitment from retail leaders is having a dramatic impact on their ability to balance the top strategic priorities: creating a seamless shopping experience, creating a ‘WOW’ in-store experience, and improving customer loyalty,” said Greg Buzek, President of IHL Group. “Without the relevant budget available, others simply cannot keep up and are most at risk.”
Global Vanilla Market
Nielsen-Massey Vanillas, one of the world’s leading manufacturers of fine vanillas and natural flavors, recently released a comprehensive report outlining the complex supply/demand dynamics and other factors that have resulted in recent volatility in the global vanilla market.
The report focuses on the history of the Madagascar market, the source for 75 to 80 percent of the world’s vanilla supply, as well as examines crop forecasts for other growing vanilla growing regions including Mexico and Tahiti, Uganda, India, Tahiti and Papua New Guinea.
“Growing consumer expectations for pure and all-natural foods and ingredients have spurred global food manufacturers to embrace the use of pure vanilla in recent years, which has driven up global demand dramatically and resulted in massive price hikes,” said Craig Nielsen, Vice President of Sustainability of Nielsen-Massey Vanillas. “Because it takes several years for vanilla growers to bring on incremental capacity, this pricing volatility has attracted market speculators and created many dynamics that have hurt farmers and negatively affected product quality.”
As one of the industry’s leaders focused on procuring only the finest quality products, Nielsen-Massey is committed to addressing these issues through its involvement in the Sustainable Vanilla Initiative (SVI) a coalition of 20 companies that is implementing solutions to promote long-term stability in the industry and advance production of high quality, natural vanilla. By promoting improved traceability of vanilla, ensuring proper harvesting and curing methods, the SVI can benefit all partners across the supply chain, from farmers to end-use consumers.
Even though 2016 was a challenging year for the vanilla industry, Nielsen-Massey cites reasons for optimism. Farmers have added significant new plantings in Madagascar, increasing their vanilla vine renewal rate from 10-15 percent annually to a rate of 25-30 percent. Other growing regions are also contemplating new capacity, which over time should bring the global supply/demand equation closer to balance and reduce prices.
“Even despite the recent vanilla market disruptions, it’s important to reiterate that we have adequate supplies to meet the needs of our customers,” said Nielsen.
With every new year comes new resolutions. For many Americans that means working out more, de-stressing or eating better and, according to new research from Mintel, it couldn’t come at a better time as less than half (42 percent) of Americans consider their diet to be healthy.
Indeed, less than two in five (38 percent) consumers agree that healthy foods are worth the added expense and just 44 percent pay attention to serving sizes. Americans also generally appear to be largely distrusting of food brands as only 14 percent believe regulatory approval indicates a food is healthy and just 16 percent trust the health claims on food and beverage packages. What’s more, a mere one quarter (23 percent) of consumers agree that the US Dietary Guidelines are good for them.
“Despite the fact that we’re seeing such a widespread and growing interest in healthy foods, relatively few Americans believe their diet is healthy. With consumers largely wary of even regulator-approved health food options, marketing healthy foods to sceptical consumers requires far more than merely an on-pack promise,” said Billy Roberts, Senior Food and Drink Analyst at Mintel. “The key to attracting these consumers is convincing them that products actually deliver on the healthy attributes they promise and that they are truly good for consumers and their families.”
Today’s health-conscious consumers are staying away from products containing high-fructose corn syrup (50 percent), sugar (47 percent), trans fat (45 percent) and saturated fat (43 percent). What’s more, over one quarter (28 percent) believe a food is unhealthy if it has artificial ingredients, with consumers actively avoiding products with elements described as “artificial,” such as artificial sweeteners (43 percent), artificial preservatives (38 percent) and artificial flavors (35 percent).
While genetically modified (GM) appears farther down on the list of ingredients consumers avoid when shopping for healthy foods (29 percent), consumer dislike of GM foods nearly matches their dislike for foods with artificial ingredients. More than one in five (22 percent) Americans say that they would not feed GM foods to people in their household. What’s more, nearly half (46 percent) agree that GM foods are not suitable to eat, rising to 58 percent of consumers with a household income under $50,000.
“Media coverage has focused on the debate surrounding GMO labeling of late, even as consumers are much more likely to avoid artificial ingredients than GMOs. Arguments indicating genetically modified foods as a means of combating global hunger are failing to sway consumers as anti-GM campaigns have highlighted the risk of genetic modification on surrounding crops and attempted to capitalize on a general fear of ‘frankenfood,’” continued Roberts.
Well ahead of other ingredients, consumers are interested in protein (63 percent), fiber (61 percent) and whole grains (57 percent) when purchasing foods they consider to be healthy. Protein is particularly of interest to more than half (54 percent) of iGen* consumers, while consumers age 71 and older are most interested in whole grains (50 percent). What’s more, 32 percent of Americans overall agree that foods with a “natural” claim are good for their health and one third (33 percent) plan to buy more vegetarian/plant-based food products in the next year**.
When making food purchase decisions, more than one quarter (27 percent) of consumers say that health concerns influence their choice of food and nearly as many (23 percent) indicate that they are more likely to buy food with a health claim on the package than food without. Looking at American families, Mintel research reveals that fathers are more likely to purchase food with a health claim (30 percent), as compared to 23 percent of mothers.
“While many consumers are avoiding certain ingredients when purchasing better-for-you foods, Americans are seeking out foods with added health attributes, namely protein, fiber and whole grains, indicating an opportunity for foods with added-health attributes to target consumers with health claims on-pack,” concluded Roberts.
The Tech Effect
The global food and beverage (F&B) industry is witnessing rapid uptake of technologies ranging from cloud platforms, gene editing, 3D printing, and enzyme engineering, to new packaging techniques that encompass the use of environmentally friendly and hybrid packing materials, smart packaging methods, and nano-technology innovations. Along with Big Data analytics, the convergence of technologies will enhance food safety, boosting growth in food processing, testing, packaging and production.
Technologies Impacting the Future of Food and Beverage Sector, part of the TechVision (Health & Wellness) Growth Partnership Service program, finds that 3D printing innovations for foods will empower the professional and home kitchens of the future. Demand for healthier, safer and personalized F&B products will boost the use of Big Data platforms for creating personalized nutrition. It is also likely to drive the growth of active packaging systems that use oxygen scavenging techniques, which prevents food oxidation.
“While genetically modified (GM) foods have the potential to meet the growing demand for increased food supply across the world, there is much debate on the regulation and labeling of GM foods,” said Frost & Sullivan TechVision Research Analyst Vandana Iyer. “As unwanted mutations are also possible in naturally bred crops, regulatory laws for genetic modifications should be developed on the basis of the altered gene. The DNA editing technique should be monitored on an individualized basis, rather than a standardized approach.”
Big-data platforms, cloud-based technologies and advanced genetic tools will help combat market challenges such as complex international regulations and high investment costs through innovations like:
- High-throughput gene sequencing (HTGS) tools for accurate molecular food testing
- Cloud storage platforms for storage, retrieval and analyses of data
- Gene editing tools such as CRISPR/Cas9 and TALENs that minimize formation of the carcinogen ethyl carbamate during ethanol fermentation by yeast
“Extracting, storing and interpreting next-generation sequencing (NGS) and proteomic data from food samples will allow the identification of GM foods, microbial pathogens, and contaminants, including toxins and pesticides,” added Iyer. “Similarly, cloud platforms can be developed for product validation, auditing, certification and compliance applications.”