Grocery Supply Chains Facing Major Challenges From Shifting Consumer Preferences

Meagan Douglas
Fri, Nov 18, 2016
Understanding shifting consumer preferences is critical to success in the food supply chain.
Understanding shifting consumer preferences is critical to success in the food supply chain.

Grocery stores are seen as a regular staple of life, a retailer visited more frequently than most others by a wide variety of consumers spanning many age groups, income levels and other demographics. However, recent market trends, frequently tied to the emergence of millennials as independent consumers, indicate that many aspects of supermarket operations need to change to create more effective, value-generating relationships with these shoppers. The pressure on grocery store supply chains, and on the other supply chains of agricultural and consumer packaged goods companies connected to them, could have major impacts on the industry and its many partners and vendors.

Foodies Make Their Presence Felt
While the market for grocery stores has diversified over the past several years with the wide acceptance of both high-priced, quality-focused retailers and value-oriented ones, the market shift brought up by publications like Forbes could be much different. The rise of millennials as foodies - those millennials who place a strong emphasis on the source, quality and production of the food they eat, among many similar concerns - means major changes to the types of products this strong segment of the overall consumer market purchases. As supermarkets begin to feel this pressure in store, so do their supply chains and those of their vendors and other partners.

As Forbes said, the pressure isn't only on high-end, foodie-centric restaurants and grocers to cater to the demands of a growing market segment. With most millennials now past the age of majority and supporting themselves to a large extent, many other organizations connected to the process of cultivating, making, packaging and distributing food must consider the potential need for change.

For a number of different businesses, the change is related to the types of food they produce, manufacture or sell. Convenience food as a concept will never disappear completely, but the form it takes has to change based on consumer preferences. That can mean producers need to rely less heavily on foods that emphasize more traditional ingredients and flavors like salt, sugar and fat in favor of organic and ethically sourced ingredients and more balanced nutritional profiles. Critically, it also means the supply chains that store and transport these goods need to adapt to new formulations and products, ones that require different or additional measures to ensure safe handling. Changes to warehouse management, inventory control and other issues need to be contemplated. 

Another major impact caused by the rise of foodies and changing preferences is shifts in production changing the commonly recognized food supply chain model. As Supply Chain Dive pointed out, the interests of foodies are eliminating the need for a middleman in many contexts. An emphasis on local sourcing, high-quality ingredients and quickly bringing food from its point of origin to the dinner or restaurant table is important for foodies. Food with extended shelf lives and additional companies in the supply chain that focus on purchasing and wholesale distribution may decrease in relevance as the trend continues to gain steam.

Businesses also have to consider how elements of their infrastructure, including the supply chain, align with consumer preferences. Flexibility of operations is a significant consideration, as its ties to the local area around the facility. Reducing or in some cases eliminating waste is a major point, one that connects to the increased social consciousness of many foodies. Businesses in the supply chain are no stranger to making their processes more efficient to reduce costs, but that is frequently a process hidden from consumers. Efforts to make these positive changes should be more publicized to tap into a strong consumer desire to avoid negative impacts on their food sources and, in a more general sense, the environment.

Getting in Sync With a Powerful New Demographic
The unique nature of every business means highly specific suggestions for considering and adapting to millennial foodies' preferences and demands is impractical. However, there are some more generally useful pieces of advice to take into account. Groceries, supermarkets and the companies that work with them have to take stock of their current supply chain efforts and see where operations are significantly out of pace with the desires of millennial shoppers. They need to work through how changes to their raw materials and finished products could impact the storage and delivery of those goods and ensure food safety is properly considered at all points.

The use of more efficient supply chain practices can also play a role. Automated data collection and enterprise mobile solutions offer increased flexibility and result in a streamlined workflow. This kind of operational improvement cuts down on costs and can be marketed to consumers as being more environmentally responsible when raw material and electricity consumption is reduced, for example.

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