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  • Writer's pictureMeyrick Consulting

Fighting For Margin

From the comfort of your home, order your weekly groceries or have pre-portioned ingredients delivered to your door. But it's not all smooth sailing - these brands have their share of challenges, from ensuring the strawberries aren't squashed on arrival to tackling the packaging waste problem.

So, let’s dive into this fascinating new wave in the food industry, exploring the rise and challenges of DTC food brands.

The Undeniable Powerhouse

The digital revolution has fundamentally altered many aspects of our lives, but its impact on the food and ingredients sector has been particularly remarkable.

The recent projections for the US e-commerce market indicate a significant trend in revenue growth. The sector shows potential for unprecedented growth, with an anticipated increase of $551.9 billion U.S. dollars between 2023 and 2027, representing a 54.59 percent rise. By 2027, the forecasted revenue will ascend to an impressive $1.6 trillion U.S. dollars, marking a continuous upward trajectory over the years.

Accelerated Adoption

The pandemic and the unexpected turn of events led to a rapid, even explosive, growth of e-commerce within the food and ingredients sector.

Recent data for 2023 indicates a split preference among Gen Z consumers, with over 40 per cent favouring both online and offline grocery shopping. However, a distinct shift towards digital platforms is noticeable among Millennials, who exhibit a clear preference for online grocery shopping. This predilection underscores the increasingly critical role of e-commerce within the food industry.

The E-commerce Edge

However, it's not just about the consumer. E-commerce also presented food brands with an opportunity to innovate and adapt. From leveraging analytics to understanding consumer behaviour to creating personalised shopping experiences and targeted marketing, brands have been able to deepen their relationship with customers in ways that were never possible before.

Let's check out the key trends driving these DTC food brands to success.

Online Grocery Shopping

For long, online grocery shopping was seen as a novelty for tech-savvy millennials or the time-starved urban professional. But over recent years, it has transitioned from convenience to a necessity. Remember when you had to walk down the aisles, juggling shopping lists and screaming kids? Now it's just a few clicks, and your groceries are at your doorstep!

And it's not just about convenience. It's also about access—no more settling for what's available at your local store. From organic quinoa to artisanal cheese, online grocery shopping has brought a global pantry to your fingertips.

The New Home-Cooking Companion

Fancy cooking up a gourmet storm but dread the prep work? Enter Meal Kits. These handy little boxes bring the restaurant to your kitchen - with all ingredients pre-portioned and a recipe card included, you're all set to cook like a chef.

Meal kits have become popular thanks to their promise of convenience and the joy of cooking without the hassle. Whether you're a vegan, gluten-intolerant, or on a keto diet, there's a meal kit for you. The meal kit trend has not only made cooking accessible but has also made sticking to dietary choices easier.

The Power of Personalisation

What do consumers crave apart from great products? Transparency and personalisation. And niche DTC brands are giving them exactly that.

Take your favourite organic peanut butter brand, for instance. They source sustainably grown peanuts and tell you precisely where they came from. Thanks to these niche DTC brands, the connection between the product, its journey, and the consumer is more direct and transparent than ever before.

Moreover, these brands are also carving a space for personalised experiences. From granola mixes that can be customised to your preference to coffee blends tailored to your taste, the focus is on making the product feel like it was made just for you.

Now that we've uncovered the trends propelling DTC brands let's delve into the hurdles they encounter and the innovative solutions they employ to overcome them.

The Complex Web of Delivery

One of the major challenges in the DTC food business is logistics. How do you ensure your delectable chocolate truffles reach customers in Alaska and Arizona in the same pristine condition?

One solution that brands have turned to is partnering with expert delivery services. These services specialise in the fast and efficient transport of perishables and other goods. Another solution is leveraging technology for superior supply chain management, ensuring transparency and efficiency from warehouse to doorstep.

One innovative company It's Fresh! have developed a solution to slow down the ripening of fruit allowing for less wastage by supermarkets and fresher ingredients for consumers.

More Than Just a Wrapper

Another puzzle that DTC brands need to crack is the packaging. It's a delicate balancing act - you want to keep your products fresh but don't want to contribute to the growing global plastic problem.

Some brands have tackled this issue head-on using innovative and sustainable packaging materials. Think compostable insulation for your meal kits or edible packaging for your snacks.

Another emerging trend is the use of returnable and reusable packaging, which not only minimises waste but also reinforces the brand's commitment to sustainability.

The Promise of Freshness

Maintaining product quality is top of the list for many. After all, nobody likes wilted lettuce or squashed berries.

Many brands resort to cold chain logistics to keep the promise of freshness, ensuring temperature control from pick-up to delivery. In addition, stringent quality assurance procedures and responsive customer feedback systems help brands continuously monitor and improve their product quality.

Final Thoughts

Looking at the rapid rise of Direct-to-Consumer (DTC) food brands, it's evident that this is a growing trend. Instead, it signals a transformative shift in the food and ingredients industry, reshaping how consumers shop and what they consume.

This is leading to greater choice, better quality products and allowing companies in the food and ingredients industry to enjoy an actual profit margin rather than have it stolen from them by large retailers.

The future of the food and ingredients sector is, without a doubt, digital and disruptive. With their relentless innovation and adaptability, DTC brands are not just riding this wave but actively shaping it. As a result, the future dining table will likely be a testament to this exciting revolution.

Find the best executive leaders with Meyrick Consulting...

Meyrick Consulting carry out deep talent mapping, globally, to ensure our shortlists contain only the very best executive leaders. We help to drive your organisation's next stage of growth and transformation in the food and ingredients industry.


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