Technology and Consumer Behavior: Disruption in Food & Beverage

By Jen Joly, Vice President, Marketing and Sales Operations

Every industry is being disrupted by technology’s impact on consumer behavior. Magid’s Executive Vice President – Consumer Products and Services, Craig Wax recently led an executive roundtable on this topic as it relates to the food and beverage industry. I sat down with Craig to talk through some of his well-received insights featured that morning.

How is technology shaking up consumer behavior?

Within the last 24 hours, most consumers have been on social media sites like Facebook or Instagram, used a voice assistant like Siri or Alexa, purchased something through an app like Starbucks or Uber, or ordered food online for pick up or delivery to their homes. Many consumers have researched and considered health, either their own or the planet’s, while deciding what food to eat.  

Technology is the common denominator that’s enabling this to happen. More specifically, it’s the intersection of the internet, mobile, and improved broadband, combined with technologies working behind the scenes like supply chain automation, block chain and artificial intelligence.

How is technology changing the way consumers interact with food?

Today consumers are carrying smartphones everywhere they go, including grocery stores and restaurants. This changes the way consumers gather info about food, think about food, purchase food, and communicate about food. If a consumer wants to verify a claim, they look it up in real time. Does the product deliver? The consumer checks the reviews. Is the consumer unhappy? They can now tell everyone about it, in real time.

How is the access to and ability to disseminate information impacting relationships with consumers?

Access to and the ability to disseminate information is changing the balance of power and causing a shift from Manufactures and Retailers to Consumers. Manufacturers are responding by going directly to consumers and, in essence, becoming retailers. Retailers are responding to store brands and becoming manufacturers. Both are competing for consumer attention. Consumers are confused about where to go for information and who to buy from.

How are experiences outside of the food and beverage category impacting consumer trends and expectations?

Experiences outside of Food and Beverage are re-shaping consumers’ expectations for the category.  Think about ride sharing companies like Uber & Lyft. With a couple taps on the phone, a car will take consumers anywhere they want to go. Think about remotely setting your house alarm, adjusting the thermostat or opening your garage. With a couple taps, consumers can control what’s happening inside of their houses.

Because of experiences like these in categories completely unrelated to food, consumers’ expectations of Food & Beverage are changing. At Magid, we call this trend the “On Demand Hangover.” It’s causing a shift in expectations associated with convenience and speed.

Ten years ago, consumers didn’t think twice about spending time in a grocery store. Now, they wonder why they must stand in line. They wonder why it’s so hard to find the products they want. They wonder why it’s so hard to make sense of the claims, artificial ingredients and nutrition information on the packages.

This frustration is opening the door for innovators to disrupt the Food & Beverage Industry. It’s what sparked meal kit delivery companies as one example.  

A second trend having a disproportionate impact on Food & Beverage is what Magid calls The Dip-in Mentality. New business models and their apps are training Millennials and younger generations that there’s no need to commit.  

Whether it’s renting clothes (think Rent the Runway) or signing up for “subscription plans” with no contract or cancellation penalty, consumers can easily dip in and out of your business without friction.  This Dip in Mindset means businesses have one chance to get it right or the consumer will move on.

What are some risks posed by technology advances and the resulting trends to the industry?

There are number of risks, all of which affect both retailers and manufacturers.  

• There’s disintermediation between the retailer and consumer.  
• Manufacturers are competing directly with retailers for consumer attention, and consumers are trying to figure out where to go for information and where to buy from.  
• There’s greater scrutiny of claims and business practices, particularly as it relates to health and the environment. Every consumer has become an investigative journalist.  
• Companies have to invest in sustainability despite its lack of differentiation: It’s table stakes.
• Consumers have reset expectations based on experiences in other categories, and food isn’t exactly on the cutting edge.
• There’s the temptation to apply technology using brute force without considering the customer.  

What should food and beverage companies do to offset the risks?

Put the customer at the center by using a human centered design approach. It allows your business to build empathy which enables you to think and create from the customer’s perspective. Consumers expectations are changing at an accelerating pace and there is no ignoring them or turning your back from the disruption. You must reinvent to grow, and there’s no better time to do it than right now because consumers have never had more access to information and have never been more open to change.