2021 Food and Beverage Industry Outlook

The food industry is struggling through the coronavirus pandemic, but the end is in sight. Which of its lessons will become permanent?

When you’re discussing the state of the food and beverage industry, the pandemic isn’t just the elephant in the room. It’s the elephant who’s sitting on your lap and sticking its trunk in your ear – impossible to even pretend to ignore.

As America and the world enter the second year of the pandemic, the food and beverage industry is struggling to come to terms with it. The crisis has reversed some trends, accelerated others, and created still others from scratch. As the industry works through the crisis, with the end hopefully in sight due to vaccines in development, it remains to be seen which of the lessons will carry over afterward.

Arguably the greatest disruption was the profound changes in demand among consumers forced to shelter at home. Demand shifted away from foodservice, as consumers found themselves having to prepare most or all of their meals at home. Nonperishable center-store items, long on the decline, saw a sudden surge in popularity, for several reasons: People who were suddenly faced with cooking at home needed staples; panic buying took hold in the pandemic’s early stages; people turned to comfort foods in uncertain times.

As a result, sales of pantry and other home staples soared. Canned soup sales were up 200% year over year in March, and frozen food sales were up 40%. Demand especially surged for comfort foods like snacks, with potato chips up 30% in March and popcorn up 48%. This helped the processors who made such items: General Mills, Tyson Foods, Campbell Soup and Kraft Heinz all saw sales gains between 10% and 20% in March.

Planners at those companies and throughout the industry have had to deal with two events that are inevitable but unknowable in timing and scope: the second wave of the pandemic and its eventual end.

As long as COVID is a threat, the food chain will have to put up with fluctuating demand, says David Gottlieb, a managing director for Trax, a retail intelligence service for consumer goods companies.

"We expect to see preferences for fresh and center-store items continue to whipsaw until fears caused by the pandemic subside,” Gottlieb says. “To manage these changes, many retailers are offering more center-store options to combat fears of out-of-stocks.”

One measure of the disruption is how demand has shifted among contract manufacturers. For Hearthside Foods, one of the biggest (and Food Processing's 2019 Processor of the Year), the pandemic meant handling a surge in demand for the cookies, bars and other pantry staples it co-packs for several major brand owners.

“There were a number of cases where their demand was more than they could do internally and they came to us and asked us if we could help out and take on some products for them,” says Hearthside CEO Chuck Metzger. This included packaging product that was delivered in bulk, along with manufacturing.

This article was published in Food Processing magazine. Click here to read the entire article.