The total market for packaged foods increased commensurate with the rate of inflation in 2016, signalling a populous which is continuing to shop, though cautiously and price consciously. Barriers to strong value growth, even in light of a healthy economy, include tough competition from consumer foodservice and the rise of discounters. As the economy continues its rebound from the recession of the last decade, Americans are treating themselves by eating out. At the same time, consumers’ continuing price conscious nature, buoyed by the proliferation of discounters, such as Aldi, are driving grocery prices, and in turn total value sales, down.
American consumers take health into their own hands
In recent years, the concept of what is healthy among American consumers was overwhelmingly gleaned from sources other than the official government dietary advice. Bucking what the FDA has considered “healthy,” consumers are reaching for short, understandable ingredients lists, even if the products contain high fat and calories. The concept of “good fat” is trending, and producers are responding. Consumers are increasingly filling their carts (analogue and digital) with high-fat, minimally processed products, such as nut-based snack bars, whole milk, or gelato ice cream. Consumer demand for probiotics has also driven the market towards probiotic products, particularly yoghurt.
Ongoing trend away from “big food”
In 2016, six out of the top seven players in the US packaged foods market saw declines in their respective overall market shares. Over the past several years there has been a trend of consumers moving towards niche brands away from brands obviously produced by “big food” companies. “Big food” companies, in turn, have been retaining their market share by acquiring up-and-coming niche companies with which they have previously been in direct competition. This year, however, none of the top seven food companies completed any major acquisitions and suffered in terms of market share as a result.
Wider distribution landscape for packaged foods
American consumers are increasingly purchasing food outside of traditional grocery outlets. The retail landscape in the United States is changing such that food is now ubiquitous across retail formats. Convenience stores in the country now commonly offer an extensive grocery section, as do hypermarkets. Health and beauty specialists are increasing their offerings, often providing a refrigerated case of chilled lunch kits from local restaurants or a selection of snack bars and nuts, for example, at the checkout counter. Internet retailing is also increasing its distribution share. The millennial population is ageing into adulthood and their demand for convenience and internet proficiency are translating into the grocery sphere.
Packaged food is expected to see modest growth in the coming years
The American market for packaged food is expected to see steady, though modest growth in the coming years. American consumers will continue to be price conscious, discounters will further proliferate, and the market will continue to see tough competition from consumer foodservice. Internet retailing is expected to increase significantly over the forecast period, which will also drive down prices as tech savvy consumers hunt for deals online. According to government statistics, the US fertility rate in 2016 reached its lowest point in recorded history due to declining teen pregnancy and an overall trend of women choosing to delay parenthood. A population which is not increasing at the same high rate as it had been will therefore impact total food volume sales negatively in the coming years.