posted on: 11.13.2020
Jaka Marinšek

Author:

Jaka Marinšek

Project Manager

The Digital Future of the Food and Beverage Industry

I think we’re all well aware that e-commerce isn’t just a trend: it’s our new business reality. Based on research made by Nielsen, by 2022 consumers could be spending 100 billion dollars a year only on online grocery. That’s equal to every U.S. household spending $850 online for food and beverage annually.

Not so long ago, there were predictions that digital food retailing will reach saturation in 10 years: but as it looks right now, we can expect that in more developed markets, in just 5-7 years, as many as 70% of consumers will regularly purchase consumer packaged goods online.

Age and affluence are no longer inhibitors to online shopping – 61% of Millennials, 55% of Gen-X, 41% of Boomers, and 39% of Greatest Generation have recently purchased a CPG product online.

Still, recent experiences amid the COVID-19 crisis show that many retailers and manufacturers are not ready for the upcoming age of online grocery.

As technology drives further growth, an online offering is a must-have for organizations in the food and beverage industry. Industry 4.0 is shaping the business landscape worldwide: there’s no escaping from it. Different sectors are entering the next stage of digitization and organizations that aren’t continually developing risk having competitors outpace them.

The food and beverage industry is no exception. From packaging manufacturers to supermarkets, all businesses in the industry today are susceptible to the impact of e-commerce.

And of course, it’s no surprise that Amazon is tightening the competition even further. It entered the food and beverage industry and forced others to re-evaluate their customer experience.

Amazon bought Whole Foods back in 2017, and almost immediately saw a surge in online grocery shopping, especially for the basic items. The most popular value brand products were all sold out in a matter of days. The market began to adjust to a younger demographic, especially to millennial buyers. In response, many food and beverage businesses started embracing more innovative approaches to online sales, like click-and-collect.

Today, the food and beverage industry is looking at tremendous e-commerce growth. Revenue from online food and beverage sales is predicted to exceed $27 billion by 2023 in the U.S. alone. Globally, online sales will make up 15-20% of the sector’s overall sales by 2025. That is 10x more than it did in 2016. To capitalize on this potential, food, and beverage businesses are improving their e-commerce experiences and gearing up.

Amazon alone is expected to take the largest market share of food and beverage e-commerce sales, owning 33% of all online sales in the sector this year.

While we don’t expect a 100% digital food and beverage industry to materialize any time soon, it’s not as far-fetched as you might think. Supermarkets have stopped investing exclusively in their physical locations since their customers are demanding more varied offerings and services.

The demand for online delivery and food subscription services will continue to grow in 2021, as busy consumers show their preference for doorstep delivery. Many large enterprises are starting to understand that if they want a piece of online sales, they need to be where the customers are – and customers are online, now more than ever.

With a quick search on their phone, consumers can make quick decisions on products they’d like to buy. Successful food and beverage businesses will make use of digital and social platforms to connect and provide robust product research, tips, and stories to their information-hungry consumers.

 

But does this mean that all digital sales in the food and beverage industry are reserved for the disruptive startups, e-commerce giants, and the online supermarkets of the future? Not at all. Digitization is crucial for every organization in the industry that doesn’t want to fall behind. There’s simply no excuse for not embracing digital transformation.

But the B2B landscape for industry brands is different than it is for those selling B2C. There are additional complexities that must be taken into account when your customer base is different – and it comes with a variety of B2B-specific demands and expectations.

Consumers and professional buyers alike are increasingly choosing to order online. B2B clients aren’t the same as B2C customers, of course, but we see that professional buyers bring their consumer expectations to business interactions and purchases. This consumerization of online B2B sales is pushing B2B buyer’s needs more toward those of consumers. Professional buyers want a web store that is attractive, user-friendly, and easy to use. Companies (both B2B and B2C) are also realizing that they don’t need to limit themselves to a single target audience.

New business models like B2B2C and D2C are growing in popularity, especially in the food and beverage industry.

 

Conclusion

Largely, the food and beverage industry has a traditional sales mindset, which means there are plenty of organizations that aren’t making automation and digitization a priority. Contributing factors to this slow adoption include the complexity of logistical processes, but also strict quality requirements that organizations must meet and adhere to.

That being said, many organizations do harness the immense power of automation and digitization. Startups and various other companies use digital developments to their advantage and disrupt the industry. This group of manufacturers, distributors, and other businesses will only expand and grow faster than their competitors with less digitized organizations.

With the irrepressible advancement of technology, their playing field is anything but traditional: it’s a dynamic environment with demanding clients. These clients are online and they’re expecting that you sell online too, regardless of whether they’re consumers or professional buyers. Automation and digitization should be the driving force for companies, with smart solutions to answer complex challenges. At the heart of these future approaches is the ERP; it’s just a question of leveraging a ready-made investment to take e-commerce to new heights.