UK Food System Mapping out the Future

The food industry is no stranger to change and opportunity, especially after the turbulence and rapid acceleration experienced during the COVID-19 pandemic.

Sector Forecast: UK Food System Mapping out the Future 2022
Published 2022 - Report Highlights

In this first-in-a-series of features, we assess the state of the food industry, how it reimagines the work, workforce, and workplace of the future.

Our primary research considers the food industry’s current status including, legacy systems and work routines, goals, roadblocks, and investment. The good news is that we find much progress to date, but some critical gaps will need to be in place for the future.

The time for change
Restaurants and most of the food service sector suffered during the pandemic. But large segments of the retail food industry, the subject of this study, truly benefited in terms of sales—as people shifted to at-home consumption, consumer food sales rose to new heights.

Of course, food retailers and product suppliers would like to keep this enhanced revenue stream flowing, even after pandemic restrictions and hesitancy subside. However, doing so is now more difficult and expensive. The pandemic unleashed new forces in consumer preference that appear to be in opposition to the industry’s revenue and cost goals.

As consumers quarantined during the pandemic, their preferences shifted, accelerating demand for e-commerce. The shift was sharp and immediate. Online grocery spending quickly grew to 28% of shoppers’ overall food retail spending during the early stages of the pandemic. While new and innovative delivery solutions addressed consumer requirements for safer transactions during lockdown, they also were considerably more complex and costly solutions for industry players.

Additionally, the value of maintaining an omnichannel presence—that includes digital engagement systems—was largely captured by consumers and third parties, meaning these investments mainly helped food retailers maintain market share while increasing costs.

Food retail executives suggest that these change drivers are mostly affecting the nature of the work itself. Consider that promoting items on a website or app is a different kind of work than building attractive end-aisle displays, or that rapidly picking items while inherently making decisions on behalf of consumers, engaging with them in chat through the app, and delivering groceries to a customers home is different from operating a cash register. Executives also report that the skills required to do this work are changing and so are the physical locations, which might include a “dark store,” which is used only for fulfilling online orders.

Change drivers for the product supplier side might appear quite different at first glance. However, upon closer inspection, we find they are, in part, quite similar - two sides of the same coin in fact.

Here, changes in what retailers are asking of their suppliers is the top change driver—an artifact of food retailers passing some of their e-commerce challenges to their suppliers. For example, product suppliers are asked to create e-commerce–appropriate pack sizes and packaging, help meet unique logistical challenges (of delivering to new locations at different frequencies and of different shipment sizes than usual), and more.

Product suppliers’ heroic performance during the pandemic may even have raised retailer expectations. As one supplier put it, “[The concern is] it’s going to work, and they’re going to get used to it.” Only 4% of food retailers said the evolving demands from food manufacturers was a top-three change factor, which may demonstrate a one-way nature of requirements flowing from retailers to product suppliers and presents an opportunity for better trading partner communication and collaboration.

While many issues exposed product suppliers’ underlying resiliency problems, the rapid shift to at-home consumption was easily one of the most significant factors 2020.

As the pandemic forced people to cook and eat more of their meals at home, product suppliers quickly learned how difficult it was to shift supply from food service channels to retail and to keep their existing retail offerings—e.g., toilet paper, hand sanitizer, yeast and flour, soft drinks in aluminium cans, certain breakfast cereals or cuts of meat, and many niche varieties of consumer packaged goods-in stock.

As a result, product suppliers are looking to organise their work, workforce, and workplace to be more adaptable to any planned or unplanned shifts in the future. While events on the scale of the pandemic might be considered once in a lifetime, the industry still should prepare to react to large shifts in consumer preferences.

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In addition this report highlights how: 

When asked how they are developing their plans for the future, most companies pointed to culture. Some 41% said their most important action was building an organisational culture that celebrates growth, adaptability, and resilience. But when asked what they hoped to achieve, the answer was financial. The food industry sees the change in the business model as a means to grow sales and market share. In fact, this competitive and business-minded objective is the most important overall outcome they seek from their work transformation efforts, according to our survey.

Of course, companies also hope to achieve other critical outcomes. These secondary goals of their work transformation efforts include improving the customer experience (27% overall but 39% among food retailers), as well as increasing innovation, increasing capacity, and reducing cost (approximately 7% overall for each goal). If food companies are going to lead successful working initiatives and programmes, they should use these goals for focus and motivation—or risk the way forward becoming a label for efforts without a coordinated or cohesive meaning and result.

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