KANSAS CITY, MISSOURI, US — Ghost kitchens and store layout reinventions. A better foothold for value and private label brands. Increased consumer price sensitivity. Health, wellness and preimmunization attributes coexisting with indulgence and taste trends.

These and other food and beverage consumer demand trends in 2021 will reflect the evolution of concepts born of the pandemic and the transition to a new normal, said Sally Lyons Wyatt, executive vice president and practice leader at Information Resources, Inc., in an April 19 presentation to the North American Millers’ Association 2021 virtual spring conference.

“Everybody wants a crystal ball,” Lyons Wyatt said. “While I don’t have one, I can provide some context to what’s been happening and what we perceive happening.”

Food and beverage consumer trends in 2021 will reflect the odd year that was 2020. The pandemic caused millions of Americans to begin working from home, attend school virtually, and consume most of their snacks and meals at home.

Shopping, for many, shifted from in-store to e-commerce during the pandemic year. There were fewer grocery trips, bigger baskets and less product discovery.

Leisure, entertainment and holidays changed drastically. Consumers were investing in home workspaces, gardens and cooking spaces.

“There are underlying trends that will help milling industry really capture growth, but it’s going to be tough because there were these huge increases in sales,” Lyons Wyatt said. “It’s going to be hard to overlap those, but if you look at context, look at how you can move forward and at least get the demand from 2019 and then some.”

That path involves examining trends fueling growth for the past year.

Lifestyle consumption shifts

“A year ago, the industry for food and beverage in 2019 was $674 billion,” Lyons Wyatt said. “Over the course of 2020, general food gained an incremental $20.4 billion. You saw that consumers were definitely increasing their at-home consumption of foods as well as snack categories.”

But some products saw a decline in sales. For example, consumer packaged goods commonly placed in school lunchboxes, such as granola, nutritional health value bars, refrigerator Danish pastries, coffee cakes, and toasted corn nut snacks.

In 2021, “we do believe consumers are going to keep baking, maybe not at the same level as mobility is going to drive a lot of change as people get out and about,” she said. “It will be hard to overlap 2020, but we do think that baking will see higher amounts than 2019.”

Channel consumption shifts

“Most consumers were looking for a place where they could get in, get as much as they could, and get out,” Lyons Wyatt said. “Or they were searching for value, which could be convenience, such as online, or value as in ‘less money out of my pocket.’“

The best-performing channels in 2020 were grocery, club stores, dollar stores, and online. Drug and convenience stores suffered.

While brick-and-mortar food stores posted double-digit growth, an impressive feat in any other year, the clear winner for the biggest sales expansion was online. E-commerce food sales outpaced all other channels but started at a much lower base.

“Primary research from two companies stated 24% growth year-on-year in revenue occurred in the food delivery market in March 2020 alone,” she said.

Surveys showed the percentage of adults who used restaurants to pick up meals for consumption at home increased for breakfast, lunch and dinner occasions.

Economic bifurcation

Wyatt contrasted food and beverage categories that struggled during the pandemic with those that excelled.

Analysts first thought premium category sales were jumping as the wealthy sought to recreate a restaurant experience at home.

“As we started to peel the onion, so to speak, we started to understand this is something that almost all types of consumers, no matter the income level, were opting in,” she said. “Consumers were wanting to have that restaurant-quality experience at home, something to make home feel special, to make it a special event.”

One consumer category, “startups,” typically young adults with smaller incomes but positive expectations for salary improvement, purchased far more premium wine, beer and liquor, premium specialty coffee, premium specialty foods and meal kits than the United States as a whole.

Valuable cohorts

The heavy shift to online food purchasing revealed some of the deficiencies in the retailers’ ordering systems. Entering search terms such as “sustainable” failed to return 92% of products that qualify, research showed, as the product’s attributes were not properly connected for search purposes.

“This is a huge opportunity for the industry to really advance what’s going on online and the infrastructure underneath them to make sure that searches don’t represent an empty aisle,” Lyons Wyatt said.

Innovation takes a backseat

Innovation was on the back burner for most food and beverage companies in 2020 as they focused on supply chains and surges. After a lull, many companies resumed their innovative offerings in late 2020 and early this year.

“Innovation drives growth,” Lyons Wyatt said. “It’s the lifeblood of consumer packaged goods, food and beverage, restaurants. It just drives growth. One of the things we have seen more and more over the last 24 months are functional benefits.”

Such benefits have included inclusions of added fiber, cannabidiol (CBD) and immunity ingredients.

Proteins and energy ingredients continue to drive sales. Plant-based proteins were included in a plethora of products in recent months and the category is expected to grow, and not just in the meat-substitute space, Ms. Lyons Wyatt said.

Indulgence was a big winner in 2020 as consumers sought things to make at-home eating more pleasant. That included plenty of crossovers, such as candy in ice cream, and brand extensions, such as Pop-Tarts with Froot Loops cereal, she said. Fruit, maple and dessert flavors, along with hot and spicy flavors, remain popular.

Refrigeration is also a strong category.

“The minute you take a product and put it in a refrigerated case, it immediately has a halo around it, that it is probably more fresh than those that are sitting on a shelf,” she said. “Whether it’s true or not, it’s a perception, so we have seen some categories opt into refrigeration.”

Foodservice innovations, some inspired by government mandates during the COVID-19 pandemic, are expected to continue to drive restaurant sales as the United States emerges from the pandemic.

“Shuttered restaurants that have kitchens that are just sitting there, and the, limited mobility we had in 2020 has spurred new business models,” Lyons Wyatt said. “Ghost kitchens, when you have delivery only foodservice, will account for 1 trillion in global food service in 2020.”

Meal kits and pantry stocking kits grew in 2020 as consumers learned to cook for the first time. Goldbelly overnight service connecting consumers to restaurants and small businesses saw growth. DoorDash introduced DashMart, offering products and restaurant items.

Online offerings are expected to grow. Studies have shown greater loyalty to online brands than brick-and-mortar counterparts.

“Several studies show once someone’s been on an online buying platform, whether the local grocery or Amazon, once they have bought a product and they like it, they keep going back,” she said. “So, it makes sense to have some online offerings that differentiate from what is found in a store.”

Lyons Wyatt closed her presentation reviewing food and beverage trends expected to continue this year:

• Affordable, healthy, convenient meal solutions tied to some specific health issues.
• Package size innovation as mobility returns.  
• High-quality private label brands.
• Online shopping: Store-pickup adoption outpaces home delivery, so click-and-collect is here to stay.
• Health and wellness, indulgence, preimmunization and taste exploration trends will continue.
• As in-stocks improve, consumers will become more price sensitive.
• Manufacturers will continue to invest in e-commerce and get higher levels of service differentiation.
• Retailers will continue to reinvent store layouts. Some will close and become fulfillment centers. Others will build in-store experiences to keep consumers coming back and invest in contactless payment options.
• Special occasions such as holidays will be an opportunity to promote innovation that came out of 2020 and meet evolving consumer needs for such demand occasions as drive-by celebrations and movie nights.
• Growth of retailer-specific loyalty subscriptions is likely to be modest as consumers increase spending elsewhere.