Chickens, Eggs and Black Swans: 3 Food Industry Trends That COVID-19 Will Accelerate

Pre-virus infrastructure investments will pay off when the panic dies down
Kroger Associate Ellen
Photograph courtesy of Kroger

The arrival of COVID-19 is a “black swan,” a rare and near-impossible-to-predict event that has thrown normal life and the industry into chaos. In the middle of such unprecedented disruption, it’s hard enough for the grocery industry to keep up with day-to-day changes in demand, supply and population health data, let alone to think two, five or 10 years down the road. But looking ahead has never been more important.

By looking beyond current events and short-term trends to identify the technological and sociological forces of change that are shaping them, it’s possible to create scenarios around which to paint a post-COVID-19 picture.

For the past decade, online food retailing experienced a major chicken/egg problem: When consumers tried online shopping, the extra costs and often buggy experience indicated that it wasn’t quite ready for prime time. And when grocers looked at consumer demand for online shopping, much of the data told them it wasn’t there, as such, investment in digital grocery infrastructure remained a low priority. 

In 2017, FMI, using up-to-the-minute data from Nielsen, projected online grocery would grow from $20 billion to $100 billion in 2025. 

A year later, the FMI-Nielsen team moved the projected arrival of the $100 billion mark up to sometime between 2022 and 2024. And then earlier this year, FMI-Nielsen revised the 2025 projection upward to $143 billion. Keep in mind that this latest revision was calculated more than a month before COVID-19 shelter-in-place orders began. 

What were the forces of change that drove such a remarkable shift in consumer behavior over such a short period of time? AI-powered delivery logistics and sophisticated software running on ubiquitous mobile computing devices. A torrent of venture capital helped grease the wheels of consumer adoption. Quite simply, the technology finally, and seemingly suddenly, became affordable enough and good enough for Generation X to start using it.

Chicken, meet egg.

Now, back to the black swan. Consumers are on lockdown. Restaurants are closed, offering food for delivery or pickup only. Demand for groceries, particularly shelf-stable products, is surging, up in many places by double or more, year over year. At the same time, as overall national unemployment numbers are soaring, food retailers are racing to hire hundreds of thousands to service an avalanche of online orders for grocery delivery. 

While impossible to predict when this pandemic will conclude, we do know that at some point in the future things will get “back to normal”—that is, restaurants will once again be open for dine-in service, and shoppers will be officially cleared by the Centers for Disease Control and Prevention to roam store aisles free without respirator masks or social distancing. At that point, will people snap back to pre-COVID-19 patterns? Or will the crisis extend long enough to establish a new normal? 

Those answers depend in large part on how effectively federal and state officials address this health crisis. One silver lining: FMI-Nielsen’s pre-COVID data showed online grocery growing as an upward curve not a straight line. COVID-19 didn’t cause this shift—but it is accelerating it.

That means today’s emergency investment in scaling up to meet COIVD-level demand for online ordering—including click-and-collect and home delivery—won’t go to waste.

Here are three food industry opportunities that COVID-19 will accelerate: 

  • Center-Store Reset: increased appreciation for shelf-stable foods will outlive COVID-19, but a can is a can. For the center aisles, virtual shelf space replaces in-store shelf space, freeing up square footage for food/culinary experiences in a post-COVID-19 world.
  • Increased Local Sourcing: International supply chains are fragile, and consumers want more than ever to support and connect with food producers at home and in their communities
  • Peer-to-Peer Foodservice: Thanks to shelter-in-place measures, millions of Americans are rediscovering their inner Julia Child. At the same time, communities are finding ways to support local food sellers and restaurants. Those networks and mechanisms will accelerate the rise of community-based food operations already taking hold in urban areas.

Those who can lean into the disruption by building their own infrastructure (rather than outsourcing their entire customer base to cloud-based delivery platforms) and experiences will emerge from the crisis strategically strengthened. 

Josh McHugh is the CEO of Attention Span Media, a Boston and San Francisco-based strategy consultancy. Contact Josh at josh@attentionspan.com and follow him on Twitter



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