Grocery’s Online Revolution
There’s a revolution taking shape in America’s food industry—one that will greatly influence livestock production.
“Changes in where consumers buy groceries, when they buy and what they buy will inevitably force changes all the way through the supply chain,” says Don Close,
RaboResearch Food and Agribusiness senior protein analyst. “Nowhere will these changes be more dramatic than in perishables such as meat.”
Close is describing the rapid adoption of online grocery shopping and home delivery the nation’s largest retailers are scrambling to implement. The starting gun was probably fired a few years ago, but the real excitement began when Amazon kicked the process into high gear with its purchase of Whole Foods last year.
Amazon spent $13.1 billion on Whole Foods, and immediately began its transformation by lowering prices. Now, Amazon is testing free, two-hour delivery for its Prime members on grocery purchases of $35 or more from Whole Foods in four cities.
Others were already offering home delivery, but not two-hour, and most couldn’t match Amazon’s price. Amazon playing in the grocery business has board rooms across America burning the midnight oil.
In RaboBank’s report, “Food Fight! Online and Brick & Mortar Battle for Business. How Can Beef Ensure a Seat at the Table?” Close explores how food reaches the average American consumer and what the beef industry must do to make beef an integral part of the consumption experience.
He predicts 20% of food for in-home consumption will be purchased online by 2025. That includes traditional groceries and complete meals packaged for the meal kit category.
Online businesses will reach a broader pool of customers independent of geography. That means retailers can more readily serve niche markets for products such as prime, natural, non-hormone-treated, organic, grass-fed or antibiotic-free. Online shopping makes the customer pools large enough to be worth the effort.
“These niche desires will result in additional demands on cattle quality and production specifications, which will lead to a wider price spread across all classes of cattle, as well as a more detailed premium and discount schedule,” Close says. “These changes are indicative of a permanent change in the way food reaches the average American consumer—and if the beef industry is to ward off any further decline in beef consumption, it must embrace these changes and make beef an integral part of the consumption experience, regardless of where it is purchased.”
Close’s analysis supports several industry trends already in place, such as greater emphasis on genetic selection by producers and the rapid rise of branded beef products.
The trend toward online grocery shopping will also lead to increasing demands for the adoption of technology for animal ID and trace-back programs, and might be the final nail in the coffin of commodity beef.
