E-labelling, smart packaging and global partnerships offer new ways for companies to create more loyal customers and increase profitability. In 2018 these factors will be crucial for those aspiring to succeed in the food industry, where customers' demands for transparency are increasing, says Colin Elkins, global industry director for process manufacturing at the enterprise software provider IFS.
E-labels go mainstream: Use of e-labels is forecast to grow by 50% this year as companies realise the potential for loyal customers and opportunities to "upsell" consumers.
Picture this: You pick up a can of soup in your supermarket and see two ingredients on the label -- E948 and E242. What is the difference? E948 is oxygen, but E242 is dimethyl carbonate, a hazardous chemical that causes skin, eye and respiratory irritation. This example reminds us how powerful labelling is, and how deeply consumers care about it.
Recent Kerry Group research showed 74% of consumers regard clean labelling as the most important factor when buying food today. And 9 out of 10 of the 53% of consumers who read labels are willing to pay more for clean-label products. In 2018, we'll see two powerful trends in food processing converge -- clean labelling and e-labelling -- and together they offer a decisive competitive edge to early adopters.
If we are what we eat, we had better be 100% sure we know what is on the end of our forks. The drive for transparency and traceability in food labelling has never been stronger. Clean labelling has until recently been associated with lifestyle consumers and vegetarian chains. But it has made major inroads into the High Street too.
The European supermarket chain Aldi recently pledged not to use 200 additives and preservatives in the products in sells, many fairly common in processed foods. And Walmart too has realised the increased sales and loyalty that come with cleaner, more transparent labelling. The US retailer's Great for You range, where products must meet a range of freshness and nutritional criteria to be awarded the label, was introduced in 2012 and has grown to cover 30% of all the food items it carries.
With governments, industry bodies, consumer groups and retailers pressing for more transparency and more information -- but on simpler labels, e-labels are a powerful solution. They could also be an appealing, immersive new sales channel. QR codes on food products can take shoppers to a website where they will not just see required regulatory information, but allergen inclusions, the environmental story of the product, its GMO status, which farm and farmer it came from, its ethical credentials, green benefits and the brand's CSR efforts.
For the consumer, e-labelling means more traceability, transparency and trust. For the producer it means more upselling and point-of-sale engagement with younger generations of smart, mobile, eco-aware consumers.
E-labelling also offers the tantalising prospect of more personalised, interactive labelling. Labels that let a DIY shopper, for example, enter the dimensions of a room, when considering which paint or blinds to buy, modelling the contents of the package in the room on a screen. With next generation near-field communication technology, shoppers would not even need to swipe, wait or download to access these data-rich, immersive labels. Just going near products would trigger a push notification.
Affordable smart packaging: The first affordable smart packaging will make it onto our shelves this year, starting with meat, according to IFS.
An urgent need to deal with food waste is a major driver of this trend. Worldwide, 4 billion tonnes of food is wasted every year. In America 50% of food is never eaten. Waste is a business, social and environmental emergency.
The EU law on packaging changed in 2015, allowing a range of elements to be included in packaging as long as they do not change the flavour of the product. By the end of 2018 we will start to see smart packaging make it to regular retailers, beginning with meat.
More an art than a science, the "best before" and "use by" dates on today's food packaging are not exact -- meaning wasted produce and time. What if the packaging itself could tell you exactly how long a product had left, or when it was at its peak? Down to the nearest hour? The volume of time, food and cost saved would be a powerful competitive edge.
This kind of smart packaging is already here. Take the fruit packaging company ripeSense. An intelligent sensor on the fruit's package label changes colour to tell consumers exactly how ripe the fruit is, from crisp (red) to firm (orange) to juicy (yellow). The sensor reacts to aromas released by the fruit as it ripens. Such smart packaging lets shoppers buy their fruit just how they like it, while extending the life of the product and reducing waste significantly.
New partnerships: The third prediction for 2018 is that one in four global food manufacturers will form new partnerships to secure scarce raw materials.
"Keep your friends close, and your enemies closer." Whether you believe it was Sun Tzu who first said it in The Art of War or Michael Corleone in The Godfather II, 2018 does look like being the year "frenemies" and "coopetition" become the drivers of globalisation. Recent collaborations between Kellogg, Pillsbury and Nabisco on their online sales have shown, in a world of scarce resources, cooperation with competitors delivers major benefits.
Mergers and acquisitions have until recently been the most common method for companies to secure materials and supply globally -- but costs and challenges come with the territory. Acquiring a supplier in Brazil may secure a certain resource, but create new complications in the process.
Agile joint ventures and looser partnerships could well become the new normal, as competitors work together to innovate, get the greatest value out of their supply chains. More innovation creates more diverse product ranges, which in their turn drive more small to medium players into the industry -- requiring increased collaboration.
A collaborative, "know your frenemy" approach, strengthens manufacturers in range reviews. Finding someone who can do the things you can't, and vice versa, enlarges your offerings to retailers without requiring major capital investment. And ensuring you have the right kind of web and cloud capacity ensures you can compete and collaborate with all your resources -- everywhere you need them.
Colin Elkins is global industry director for process manufacturing at IFS, a multinational enterprise software provider. For more information, visit IFSworld.com
