2016 will be the year small food grows big. Sensors and better data will make small farms more viable. New technology will help more people to buy and sell direct. And concerns about food sourcing will get citizens more and more interested in knowing where food comes from. These will start at the top end of the market, like online supermarket deliveries, but will start taking a significant share by the end of the year.
Three trends are going to collide to make it easier for small farmers and producers to take on the big companies: technology and data that can improve small business productivity will become cheaper and more accessible; new marketplaces will gain ground, giving a real alternative to supermarkets as gatekeepers; and consumers will continue to increase their purchases of ethical, local and unprocessed foods as millennials become increasingly influential purchasers.
High-tech food production
As other industries have been changed by automation and the internet, agriculture and food are now on the brink of being transformed. Large food manufacturers and agriculture giants have been using these techniques for some time, but the sensors and software are now becoming much more accessible to smaller businesses, and have the potential to level the playing field.
Precision agriculture technologies could increase profits on small farms by 18 per cent. Our research suggests that businesses who use data effectively are 8 per cent more productive. The data needed to do this is now much more easily available to small farms and small food producers.
In 2016, the ‘big four’ supermarkets will continue to lose share, as they have done for several years. They are still the way most of us buy our food, but new marketplaces and services are starting to replace the services supermarkets have traditionally offered.
Farmdrop will collect produce from local farms and deliver it. Meal preparation services like Gousto and Hello Fresh not only package and deliver food, but match it to the precise amounts for recipes. AmazonFresh launched in the UK in 2015, and is likely to expand in the coming year.
Increasingly, going online to shop will open up a wide range of new producers and suppliers, reducing the power of supermarkets over farmers and manufacturers. And with 4 in 10 shoppers saying that price is their main criteria for food shopping, that leaves 6 in 10 who are interested in other factors such as quality, sustainability, health and convenience.
New services and apps are perfectly positioned to sell to these customers. No wonder global venture investment in food tech startups was already at $3.5 billion by the third quarter of 2015, compared to $2 billion in all of 2014.
The evidence is that our preferences for quality, authenticity, and buying local will only increase. Millennials, now a quarter of the UK population and increasingly important food consumers, have little tolerance for highly processed food and are looking for authenticity, ethics and unique stories in their food. This is already boosting markets like craft beer, and can support small producers who have a greater level of trust than big brands.
In this environment, small producers will start to secure a greater share of the market, big four supermarkets will continue to lose share to more specialist providers and increasing numbers of consumers will buy at least some of their food through channels that don't include a supermarket at all.
All this will be good for innovation in food production and distribution, an area that has been dominated for too long by price and the power of a very small number of companies.