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As of May 2019, food and beverage ecommerce retail sales were growing at over 23% per year and were projected to surpass $40 billion by 2022. That was before COVID-19 broke out and wreaked havoc on most business sectors. But food and beverage wasn’t one of them.
In fact, online food sales surged 183% between March 12 and 15 compared with the same period in 2019. The spike was caused by the lockdown restrictions and uncertainty.
You’d probably think the growth would taper off as the coronavirus pandemic subsides and the sales would settle down to their pre-pandemic levels, but historical trends suggest otherwise. The good thing about ecommerce sales is that once they go up, they never quite fall back to the previous levels. Online retailers have been experiencing the step growth phenomenon for years.
Here’s what happens:
Every year, as the holiday season starts, there’s a predictable surge in online sales. As Q4 ends, however, the sales never fall back to where they were in Q3. Instead, they lock in most of the Q4 gains to set a new baseline for the following year. Applying the same formula to food and beverage ecommerce sales, it’s clear to see that the buying behaviors initiated by the coronavirus pandemic are going to lock in most of the growth in food and beverage e-commerce retail sales.
In the US, the retail sales of food and beverage are a $1 trillion dollar category. Before COVID-19, US food and beverage e-commerce sales were projected to grow to $32.22 billion this year, constituting just 3.2% of total retail sales. From March 1 to 22, there was more than 300% increase in the number of people who said they had increased their online grocery shopping.
Even if the e-commerce share of food and beverage retail sales were to grow by 2% as a result of the shift in the buying patterns, we’re talking about $20 billion growth in online F & B sales. Unless small and medium food and beverage retailers and wholesalers act fast to capitalize on the opportunity, most of the added revenues will go to big online retailers like Amazon.
Food and beverage mega brands are already ahead of the game. Amazon acquired Whole Foods back in 2017 for $13.4 billion not because it wanted to know how to operate stores, but to learn about the grocery business so it could convert grocery consumers to online. Unilever dedicated a team of 800 people to its e-commerce business which was growing at 40% back in 2018. Nestle grew its ecommerce sales by 18.5% in 2019 to reach 8.5% of its total retail sales, a remarkable e-commerce share in the food and beverage industry.
When 2020 started, only 56% of companies in the food and beverage industry had an e-commerce presence. These companies were in a good position to capitalize on the surge in online sales triggered by COVID-19. But there’s still a lot of room for more players.
Here are the major challenges, trends, and opportunities in food and beverage e-commerce in the post-pandemic world:
Poor communication between food supply chain partners, increasing demand for shipping traceability, growing regulations, and lack of honesty and transparency are issues that have plagued the F&B supply chains for years. COVID-19 has further complicated an already difficult situation. Changing commodity prices, disruptions in supply chain, and scarcity of certain products at certain hotspots are making it increasingly difficult to make decisions about planning, production, logistics, and pricing. The new CDC guidelines for long haul truck drivers, rapidly changing local delivery regulations, and the mandatory cleaning and sanitizing of trucks put even more pressure on logistic networks.
The overall demand for food and beverage products increased during the lockdown, but many businesses suffered the consequences of unpredictable changes in demand. For example, the closure of coffee shops brought on oversupply of milk, causing US dairy farmers to dump 3.7 million gallons of milk every day. A chicken processor interviewed by New York Times said they had to smash 750,000 unhatched eggs every single week. On the positive side, US sales of orange juice, which had been declining for years, went up by 38% compared to last year. Sales of oat milk grew by 347.3% and fresh meat alternatives grew by 206.4% in the month of March.
Wal-Mart, Whole Foods, Kroger, and other retail chains are struggling to keep up as the demand for delivery services outpaces their logistics capacity. This makes DTC ecommerce sales a lucrative segment for continued expansion. Many food and beverage companies are already capitalizing on the opportunity by setting up DTC ecommerce operations on the double. Last month, PepsiCo sidestepped retailers and started selling many of its food and beverage products online. Kraft Heinz launched Heinz to Home. Roberts Bakery, Brave Foods, Ugly Drinks, and other European F&B retailers have established or scaled DTC sales during the pandemic.
According to the World Health Organization (WHO), it is highly unlikely that people can contract COVID-19 from food or food packaging. But consumers were already concerned about food safety long before COVID-19. Issues such as food borne illnesses and carcinogens, pesticides, and chemicals in food were causing many to change their eating habits. Covid-19 and the ensuing consciousness about overall safety and hygiene will only accelerate the healthy eating trends. Meanwhile, more frequent washing down of manufacturing plants and equipment and shortage of workers because of the new social distancing restrictions can slow down production and slice down the already thin profit margins
Before the pandemic and the ‘Great Pause’ disrupted everything, Asia Pacific was the largest region in the global food and beverage market. The F & B sector is expected to stabilize and continue growing at a CAGR of 23.4% through 2023, as a recent Research and Markets report observes. Ecommerce is going to spearhead the growth. Here’s how you, a small or medium F & B company, can take advantage of the situation and claim your share of the $20 billion pie.
Your customers use multiple marketing channels in their buying journey. They may discover your home delivery offerings through your Facebook post, read reviews about your products and delivery services on Yelp, place an order on your website, and pick up the products in store. That’s why you need to develop and implement a cross-channel marketing strategy. Use the power of search engines, social media, email and mobile to your advantage.
Today’s e-commerce is driven by hundreds of online channels that businesses use to reach their audience. These include company websites, social media channels, email, blogs, mobile, and more. As a food and beverage business, you can also target online retail channels such as Amazon. Before you can decide which particular online channels to target, you should know your target audience and their media habits. For example, Facebook or Instagram may be a great channel for DTC marketing while LinkedIn may be good for B2B sales.
You’ll need digital assets such as your website, social media pages, graphic design, video and more. At JoshMeah.com we launched a very successful e-commerce beverage business from scratch and prepared all the required digital assets within 60 days. Within 120 days, thousands of new and repeat buyers were purchasing Teonan Teas. Read the case study to learn more about creating and launching a food and beverage business.
Design a website that sells. If you have a static website, convert it into an interactive web store, where your customers can order the products they need. Depending on your business strategy, you can have a single website for the entire production line or separate websites for different brands, like PepsiCo and other big companies are doing. You don't have to be Pepsi and Coke to have awesome websites. Small businesses like United Sodas of America and Java Saga Coffee are doing an amazing job with ecommerce web design too.
No matter how awesome your website and other digital assets look, it all comes down to how they come together to create a smooth and slippery sales funnel. Your social media pages, Google ads, website, and sales pages should help your potential DTC or B2B buyers move forward through their buying journey, until they get to the sales page and buy your product.
Recent research shows 86% of B2B buyers are willing to pay more for a better customer experience. Almost half of shoppers made impulse purchases after going through personalized experiences. Ben & Jerry’s website allows consumers to buy ice cream in bulk or in limited time web-only flavors. Bear Naked, owned by Kellogg, lets customers personalize their granola.
Yes, you got that right. Ben & Jerry’s is actually another Unlilever’s company. But small businesses like eCreamery, though their websites may not have as many bells and whistles, are also doing a splendid job with F & B ecommerce.
Get into Content Marketing
Develop a comprehensive content marketing strategy in place and regularly share helpful content through your blog, social media, email, and other channels. Content will answer your customers’ questions and help them trust your brand. High quality, relevant and consistent content generates quality leads and improves conversions.
Run online advertising campaigns to boost sales during high seasons. Use Google Ads, Amazon advertising, social media campaigns, email blitz, and mobile marketing to drive customers to your web store. Display posters or banners announcing DTC offerings inside and outside your physical store. Keep the profit margins in sight and don’t end up spending more on advertising than you earn through online sales.
In particular, we’re great fans of PPC (pay per click) advertising for food and beverage brands on Amazon, Google and Facebook. Grocery is the fastest growing category on Amazon, with nearly $20 billion in sales; and as we mentioned before, food and beverage is the hottest subcategory to watch. Google PPC advertising has a solid 100% return on ad spend for the ecommerce sector. Facebook claims nearly half (44%) of people who hear about new products have bought a food product after seeing it. That could give you some food for thought.
Alright, so your website and social media pages are up and running and you’re waiting for customers to visit your web properties. How about selling at a platform where millions of people are looking for products like yours? With an estimated $2 billion in food and beverage sales, Amazon is the ecommerce goldmine that no online food and beverage brand should ignore.
Amazon places your products in the buyer’s line of sight, especially when you add a dash of optimization and Amazon advertising. Contact Josh Meah today if you want to sell your private label food and beverage products on Amazon but don't know where to start or how to sell more.
Go green in food and beverage ecommerce. 73% of global consumers say they would definitely change their buying and consuming habits to reduce the impact on the environment. Adopt sustainable packaging and environmentally conscious delivery. Focus on food safety and hygiene.
D2C sales are where the growth is, but that doesn’t mean you should ignore B2B ecommerce sales to retailers. The US B2B ecommerce is a $1 trillion market. The online F & B shopping trends that started off during the Great Pause are going to persist and influence B2C as well B2B buying behaviors. You should create a dedicated experience for B2B buyers, who generally tend to buy food and beverage products in bulk.
Ecommerce business may be just an extension of your brick and mortar store, but it’s a different type of business and merits special treatment. You’ll probably need to make significant adjustments to the 7 Ps of marketing—product, packaging, pricing, placement, promotion, positioning, and people. Rework your marketing strategy by considering ecommerce-specific factors such as the shipping and packaging cost, returns, and marketing cost.
Online selling is a data-driven activity that isn’t profitable unless you know your numbers really well. A survey of 345 middle market C-level executives in the food and beverage industry revealed that 64% of the successful companies had implemented e-commerce technologies. Make sure you have the complete technology stack for food and beverage ecommerce and know how to use it.
By 2025, Internet sales of the food and beverage sector are forecast to account for 15% to 20% of the sector’s overall sales. It’s a tenfold increase over 2016. Small and medium sized food and beverage businesses need to act now if they don’t want their share of the cake to be eaten by the likes of Amazon, PepsiCo and Nestle. Team up with a reputable e-commerce agency if you can’t spare the time or just don’t want to take the headache of setting up your food and beverage business for e-commerce all by yourself.
The art is building the right growth campaign. The science is in the results.