Jessica Adelman: In agri-food, now is the time to write your own headlines
The COVID-19 pandemic is transforming the way we buy and sell food, perhaps forever. This time of upheaval will determine who in the food industry will surge ahead and who will get left behind.
According to Jessica Adelman, former Kroger executive and CEO of ESG Results, in 2015, for the first time in history, the consumption of food prepared outside the home was greater than the amount of food prepared at home. However, as a result of COVID-19, sector analysts are predicting a $100-billion shift back from restaurants and food service to the retail space. Between March 9 and March 22, 2020, the internet saw a 60% increase in cooking-related tweets, as well as 250,000 tweets about ordering and delivery. This represents a seismic shift — a 294% increase in talking about food from the previous month.
Jessica has held numerous leadership positions in the food, retail and agriculture sectors, including most recently as group vice president of corporate affairs for The Kroger Co., serving as chief corporate affairs officer, chief communications officer, chief sustainability officer and president of both Kroger Foundations. She joined the Alltech ONE Virtual Experience to share her insights on the long-lasting habits of the new consumer emerging from the lockdown, including trends in food and retail as well as long-term patterns already beginning to take root.
She said that now is the time for the agri-food sector to seize opportunities and write its own story.
“The rhetorical question that I pose to you today is, ‘Who do you want to be during, and then as a result of, COVID-19?’” asked Jessica. “I encourage you to write your own headlines now. And I encourage you to think about who you want to be and how you want to lead your organizations so that, coming out of this chapter, the best headlines and lead paragraphs are written about your organization's conduct, resilience and courage during COVID-19.”
Food and retail: The meteoric rise of e-commerce
In many difficult situations, such as the current pandemic, retailers often find themselves on the frontlines of challenging discussions. Retail is currently in trouble, with estimates that 15,000 stores may stay closed permanently post-COVID. The food industry and grocery space is different, however, and is seeing a boom, according to Jessica.
Nielson has reported that $18.8 billion was spent on consumer packaged goods (CPGs) in the month of March alone, which was directly attributed to COVID-related buying. Approximately $10 billion of that was spent on increased consumption, and $8.2 billion went directly toward pantry loading.
“Interestingly,” said Jessica, “70% of Americans say they still want to be able to, and like to, venture out to the grocery store. So, all of this leads us to the insight that the food industry is one of the only sectors that is actively hiring and thriving during this pandemic.”
The retailers who will struggle, she said, are the independents, leading to further consolidation and monopolies at both the regional and national levels of the retail food chain.
The most striking trend in food and retail is the rise of e-commerce. Jessica shared Nielson data that shows that e-commerce orders saw a major surge in the month of March, with online orders increasing by 60%. Significantly, 37% of that growth came from new households, and 45% of new online shoppers were over the age of 55. As this “new normal” continues to evolve, Jessica believes retailers with good infrastructure are more likely to come out of the transition in a good place.
“I think you're going to see the retailers who have the infrastructure, the ability to invest in their rail system — and ‘rails’ is kind of the e-commerce term for the infrastructure and platform that people use — who had their rails and the infrastructure in place already, those guys are going to do really well during the e-commerce boom, meet the customer expectations,” she said. “Maybe not in all cases, but they'll walk away with a decent customer experience, and they'll probably win that business for the long term. Those who had infrastructure and systems that were held together more by duct tape will just find themselves slowly losing ground and won't be competitive in the long run.”
A combination approach, which Jessica referred to as “bricks and clicks,” could also develop, similar to what happened when e-commerce giant Amazon bought brick-and-mortar Whole Foods. Whether retailers are online or just around the street corner, the important thing will be building an emotional relationship with the customer base.
“People don't really care about the infrastructure behind it,” explained Jessica. “We don't want to get too worried about what kind of rails or systems the retailers are using. We just want to know we can get the thing that we want, in the venue that we want, for a competitive price, when we want it.”
A key challenge the food and retail sector must meet going forward is retraining and upskilling workers as the industry continues to become more efficient, which will involve more technology, automation and “touchless” environments.
“Many of those manufacturing jobs and other positions might never come back to the 100% mark they were pre-COVID,” said Jessica. “That's what we're going to have to deal with as a society, is how do we retrain workers, and how do we make sure that we can have a productive workforce in this nation and other nations who are facing similar crises as a result of COVID. How do we upskill? And what is the future of work?”
Consumers: Food as medicine will grow, and trust in science could see a resurgence
University College London has conducted research that shows most new habits take an average of 66 days to form, which means that we are cementing new habits during the COVID-19 crisis, even while many of us remain in lockdown. Consumers, said Jessica, will likely begin to blend their new habits with their old routines. In fact, among consumers who have purchased alternative brands due to the effects of the pandemic, she said only half indicate that they will return to their previous brands once the pandemic calms.
Both private-label and national brands are winning in different areas of the market. Private-label brands could be growing as much as four times faster than national brands at the moment. On the other hand, one sector analyst from Stifel mentioned in a recent Washington Post article that big-company sales grew 39% through the month of March, a number that has never been seen before in the industry.
Food as medicine and the importance of health is a trend accelerated strongly by COVID-19. Functional foods are becoming more mainstream, and Jessica believes agriculture must take action in this space.
“Certainly, as we are taking these drastic steps to preserve our health and safety right now, you can't help but imagine a world where we're all much more dialed into food, food safety and how to keep ourselves healthy for the long term,” she said. “And I think the food and ag position to take the leadership role and thought leadership in this space is absolutely a great moment in time. And we should step up and seize it.”
Another critical development at this time could be a renewed sense of trust in science in the food space, which has traditionally been wary of science. Now, more than ever, we must listen to experts if we want to feed the world while also ensuring we protect it for future generations.
“We might be at the tipping point where consumers will permit science to re-enter the discussion on agriculture, food and nutrition,” said Jessica. “It's been very interesting to watch how COVID-19 has led to a re-appreciation of scientists, science, doctors and, in general, the return of experts. And we might have a newfound appetite for letting experts do more to ensure food security versus just hope for the best, which means we might have a chance of feeding the 10 billion and better preserving our planet.”
Traditionally, she explained, agriculture has answered questions of a more emotional nature with scientific responses, but food is a very emotional topic.
“Society has been asking emotional questions for the past couple decades about science in food and technology in food,” said Jessica. “And we, as an industry, have done kind of a lousy job and only given them scientific answers back. Now, things that I love in this space are thought leaders — much like Alltech and your Planet of Plenty™ work; you are stepping into that void, hearing that people want to have emotional answers, but then answering in a scientific way with data and facts.”
The future of food and retail
Jessica identified six long-term patterns that will continue to evolve as the agri-food space emerges from COVID-19:
- Big data and the internet of things (IoT): People’s appreciation for harnessing information and gaining relevant insights is growing, and it will likely be used more moving forward. Society may therefore accept a tradeoff between data and privacy.
- A stronger digital infrastructure: In conjunction with big data, IT departments and people around the world have been under great stress to ensure that a large number of people can complete work virtually, and the digital infrastructure should emerge much stronger as a result.
- Tele-health, tele-education, tele-everything! Many things we thought could only be done in person can now be done online, and it could remain that way moving forward.
- From “frictionless” to “touchless”: The user experience of the future will involve as little interaction as possible with hard surfaces and human beings, especially as we continue to determine how to conduct business during the pandemic. Retailers must help people to feel safe during these in-person experiences.
- Widening income inequality: Unfortunately, there are likely to be deep political repercussions surrounding income inequality for years to come.
- Stakeholder capitalism and ESG: The way companies treat their workforce today will have huge ramifications in the future, with those that focus on the environmental, social and governance (ESG) aspects of their businesses coming out on top.
The take-away, said Jessica, is that people will be more in tune with, and loyal to, brands that showed up well during the crisis with a strong focus on the ESG aspects of their business.
“Companies that are bold and don't let a good crisis go to waste will emerge stronger,” she explained. “But they also have to make sure that they're taking care of their communities and their workforce at the same time, which is a difficult balancing act and a needle that they'll have to thread, but one where I think, if you take that holistic stakeholder capitalism approach and think about the long term, you'll be able to navigate successfully and emerge as one of the winners from this chapter of history.”