Consumer sentiment is low when it comes to faith in the current state of the economy, but the Food & Beverage industry isn’t panicking.
At a high level, labor issues continue, supply chain delays have diminished (but not disappeared), and food costs are leveling off (but still about 10% higher than two years ago).
Clearly, there are challenges facing the foodservice industry. There is also a host of exciting changes, including the influence of global cuisines, digital ordering and loyalty programs driving engagement, Gen Z’s increasing impact, and even the expected rise in restaurant spending from those 65+ (up from 15% to 24% by 2030).
The Martin Group recently joined the International Foodservice Manufacturers Association (IFMA) and our team attended a variety of webinars as well as their COEX (Chain Operators Exchange) event in Tampa in the first quarter of 2023. Here are some takeaways from everything we soaked up:
Increasing Interest in Ethnic Foods
Indian is the new Italian. And Asian and Latin American dishes go miles beyond sushi and tacos. Restaurants with innovative new menu items are driving more sales (48% of consumers enjoy trying different foods) and worldly ingredients like yuzu, prickly pear, and turmeric are in high demand.
This trend isn’t without challenges. Schools, colleges, and healthcare institutions lost a lot of veteran foodservice staff in the Great Resignation, and inexperienced kitchen workers are struggling to authentically prepare ethnic dishes. There is also an education factor that comes with new items and ingredients, so that people can understand flavors, origins, and benefits.
Continued Debate About Plant-Based Foods
There is considerable debate about where the plant-based foods sector heads next. While Gen Z continues to demand vegan, vegetarian and plant-based foods – especially on campus – this hasn’t translated to mainstream ordering at restaurants. Opinions vary about whether manufacturers like Impossible Foods are fading or just beginning.
One push from Gen Z is that these dishes must be “mainstreamed,” meaning they have to be available everywhere, not cost more than animal-product items, and be attractive on their own merit – not just because they’re plant-based.
On the grocery side, where you do you put plant-based meats? And should laboratory-created products like Impossible and Beyond Meat be in the same category as veggie burgers? They’re often in vegetarian sections, but that misses a huge segment of the potential market that is just looking to dial back their animal-protein intake.
Bottom line is that with younger demos driving a lot of this interest, and more people in general monitoring their carbon footprint, this is far from a fad.
This has been a huge evolution in the restaurant world. On one hand, third-party apps like DoorDash and Uber Eats are great for discoverability and convenience since they are essentially search engines for restaurants. But with service and delivery fees – and the cut taken by each app – margins are much lower.
Restaurants want to create their own apps but that’s expensive. Also, 46% of users only use one delivery app per month, and 50% of people don’t know what restaurant they want to order from or even how much they want to spend when opening a delivery app. So not being on these apps removes restaurants from a lot of decision-making moments.
K-12 Sodium and Sugar Limits
The USDA recently announced substantial changes to K-12 dietary restrictions that will significantly impact what schools can serve children. Sodium limits will be reduced 10% per year starting with the 2023-24 school year through 2029-2030, added sugars are being restricted, whole grain foods and products are being pushed, and there will be a 5% ceiling placed on non-domestic commercial foods a school may purchase per year.
There is a lot of ambiguity in what’s come out so far – for instance, do artificial sweeteners count as added sugars? – and suppliers haven’t been given a ton of time to change their products to adhere to these new rules. Flavored milks are also in the crosshairs, and most foodservice operators report that chocolate milk is often the only way they can get their kids to take in those important nutrients. Clearly the intentions here are good, but it sounds like there are still some details to fine-tune.
Menus Are Shrinking – For Good
Due to the labor and supply chain issues of the last few years, many restaurants have shrunk their menus to focus on their most popular (and available) items – and 58% of operators say the changes they’re making are here to stay.
This drives another interesting debate about limited-time-offers. LTOs drive customer interest, but suppliers don’t like them because of their shortened time frames and unpredictability. So restaurants are struggling with this as well, especially as they try to come up with ways to boost the value of all-important loyalty and rewards programs.
How to Communicate Sustainability and Social Justice Efforts?
There is more and more interest in brands that are committed to sustainability and social justice – but that interest doesn’t appear to be translating into sales. Multiple restaurant operators we’ve spoken with recently have said whether they use recycled paper products or sustainably sourced chicken doesn’t impact sales.
And communicating that you treat your employees well – whether in the manufacturing or processing plant or serving food – and are committed to inclusion in the workplace isn’t necessarily easy to do in authentic, appropriate ways through digital and social channels. That said, we believe there is tremendous value for this storytelling content when it comes to recruitment and retention, and long-term brand health.
Read more Q1 2023 Insights via this report from The Martin Group. And please reach out with any questions or thoughts on the industry.