Rob Morren: Trends in the food sector

How will Brexit and the policies of the new Dutch cabinet affect the already extremely dynamic food sector? And which trends can we expect to see in 2018? Rob Morren, Sector Banker Food at ABN AMRO, looks ahead: “It’s wise to be prepared for several scenarios.” 

“The food sector should go back to the drawing board”

According to Morren, a number of strong shifts in the industry are creating a new food reality in which the food consumer is increasingly in charge. Distrust and engagement are affecting consumer behaviour; there are growing demands on the transparency and the significance of food – which increasingly must be sustainable, organic and/or healthy and certified for good animal welfare. Furthermore, the product should ideally be supported by a nice back story and it should be clear where it comes from. A growing number of smaller companies whose very existence revolves around authenticity and sustainability are challenging the status quo. Food is increasingly being bought online, eating out is growing more strongly than eating in, and food has become a lifestyle that is widely shared on social media. Besides that, consumers (and hence the products on offer) are more focused on convenience, as demonstrated by the popularity of recipe boxes. Disruptive technologies such as blockchain can take food safety and integrity to the next level. The traditional industry is not immune to market entrants from outside the sector either, and some of them have deep pockets (e.g. Amazon). Moreover, geopolitical and macroeconomic factors are playing a role; as food supply chains become even more global, they are increasingly becoming pawns in geopolitical negotiations.

The complex interplay between the above-mentioned trends has led to today’s food revolution, states Rob Morren – and the worst isn’t over yet. Morren takes us on a journey through the current and future developments in the food sector. 

Which trends do you predict for 2018? 

“Food and drink is increasingly under scrutiny, both in the Netherlands and primarily in northern Europe. In addition to the industry’s own initiatives, NGOs are also increasingly influencing how society perceives food – especially in terms of sustainability, shorter supply chains and more control over the chain. Apart from that, it will increasingly be about convenience. That’s not a new development, but it will really take off in the near future and its impact will be reflected in many different trends. For example, on-the-go eating will become more common. New sales channels such as railway stations and petrol forecourts are increasingly evolving into fully fledged fast-food outlets with a high-quality product offering. For forecourt retail alone, in the Netherlands we’re seeing food revenue grow by approximately 3% to almost EUR 535 million in 2017. Moreover, railway stations, petrol stations and company canteens are changing from purely commercial locations to pleasant places to hang out, with a wide choice of products, Wi-Fi and clean toilet facilities. The petrol station manager is turning into a hospitality manager, and company canteens are increasingly opening up to external customers, such as freelancers looking for a workspace.
Convenience and transparency are becoming more important at product level too. Packaging is being designed for use on the go, such as for easy one-handed opening. We’re seeing roughly chopped vegetables, making food ‘recognisable’ again. For example, retailer Whole Foods in New York is experimenting with an in-store vegetable counter where your vegetables are chopped just the way you want them. Another product trend that has been floating around for a while but will only continue to grow is: ‘texture is the new flavour’. Changing the texture of food creates a different taste sensation. I recently came across hollow chocolates at a food trade show; in addition to a better flavour experience, other benefits are lower calorie content and the use of fewer raw materials. Apart from that, I expect the food offering to be even more focused on life stages and functionality next year, such as food aimed at elderly consumers, with a higher protein and/or vitamin D content – although it won’t be called ‘food for the elderly’ because that puts people off.”  

Which developments can we expect in the longer term?

“The million dollar question is, of course, how are we going to feed the growing world population? Geopolitics shapes the agenda. The UN has drawn up the 17 Sustainable Development Goals which include the sustainable use of raw materials, waste reduction and a more equal distribution of wealth. Many of the major players in the food sector are using these goals as a blueprint for their policymaking. Companies supplying to retailers, foodservice companies and/or other manufacturers would be wise to be aware of these goals and to be able to clearly state how they make a positive contribution to them. Furthermore, there will be a growing demand for high-quality sources of protein as an alternative to meat, such as plant-based proteins (pulses) or more exciting sources such as insects – either fit for human consumption or as animal feed.” 

Rob Morren

As Sector Banker Food at ABN AMRO, Rob Morren closely monitors the developments in the food industry. With entrepreneurs and his peers, he regularly discusses topics such as supply chain collaboration, corporate culture and the impact of consumer and retail trends on the product offering. He also helps the bank to analyse risks and advise customers. Morren puts his knowledge to good use in presentations, publications and columns, including on insights.abnamro.nl/contact/rob-morren/

The food revolution is clearly increasing the tension in the existing relationships within the industry. How should the sector respond? 

“In some areas, the sector really should go back to the drawing board. The new food reality calls for flexibility and speed. In the years ahead, food companies will need even better insight into their cost prices, including the environmental costs. It’s important to be able to cope with the greater diversity in customer needs. Everyone is looking for products that will set them apart. Additionally, the demand for more transparency about the origin of food products will require the links in the chain to work together more closely, so you should look at your upstream and downstream partners. For example, Moyee Coffee not only pays its coffee growers a fair price but also roasts the coffee beans in the country of origin. You could seek new suppliers who support your vision of the sector and reinforce your image. Awaken your foodservice genes too, such as by hiring more employees with a background in hospitality. They will be indispensable now that the boundaries between sales channels are blurring and the rise of out-of-home consumption is opening up new sales opportunities. Last but not least, take a critical look at your corporate culture. Stop clinging on to the top-down structure, and stimulate a culture of innovation in which employees have lots of freedom and are encouraged to be proactive. As an added bonus, that’s exactly what young, talented people are looking for.” 

Apart from the steps it can take itself, the sector is of course also affected by external developments, such as Brexit; how do you expect that to impact on the industry, and what can companies do to prepare themselves for it? 

“There is of course still a great deal of uncertainty about what will happen to the existing trade agreements. Will it be a soft Brexit or a hard one, leaving companies with no – or only difficult – access to one another’s markets? Our short-term advice to non-UK clients is to invest heavily in maintaining good contact with your British customers and show them that you appreciate your relationship. At the same time, make sure that you’re prepared for a couple of different scenarios and adapt them continuously. Think about a phase-out strategy and consolidation, for example. The UK is not self-sufficient and will continue to depend on imports for a large number of high-quality products, such as fresh produce. In the case of a soft Brexit, which is the most favourable option for the Netherlands, the existing trade flows can be expanded, but even a hard Brexit could represent growth opportunities for our country. The UK exports approximately EUR 4.5 billion worth of agrifood to the EU. If that business comes under pressure, it will create a gap that Dutch companies can help to fill.” 

There’s also a political change in the pipeline closer to home; what role do you expect the new Dutch cabinet to play? There is talk of appointing a minister of agriculture and food – what’s your stance on that?

“The Netherlands is an export nation and agrifood accounts for an important share of that so it must be supported by government policy. Additionally the collaboration between the government, the sector and society as a whole could be further intensified to better respond to the developments. Food is a hugely relevant topic for society. Irrespective of whether the government will be stimulated by consumer behaviour or is intrinsically motivated, the topic will dominate the political agenda. Just take the public- and private-sector ambition to obtain 50% of the primary raw materials from recycled flows by 2030, for example. That could be led by a minister, but it could just as easily be handled by various departments.”