Food and Beverage Industry Undergoing Transformation

Escalating on-demand customer requirements and industry consolidation impacts food and beverage supply chains.

Food and beverage has undergone a transformation in recent years. More flavors of the same product. Different sizes and promotional packaging. Changing ingredients to meet consumers’ preferences. While these trends have been changing what consumers see on the store shelves, another trend has been quietly transforming the supply chain.

Mergers and acquisitions among grocers have been occurring at a record pace. In 2016, the number of transactions more than doubled from the year before. And for good reason: “Strategic acquirers are also in search of opportunities to consolidate the industry, as the operating environment has become increasingly competitive,” according to the 2016 report Food Retail Industry Insights from Duff & Phelps, a global valuation firm.

It comes as “competition in the food retail market has increased in recent years,” the report states. “Traditional food retailers have faced fierce pressure from alternative channels including warehouse clubs, supercenters, drug stores, mass retailers and convenience stores, as well as online retailers and grocery delivery services. As consumers distance themselves from the traditional supermarket model, grocery retailers are attempting to stay competitive by creating more intimate and innovative shopping experiences tailored to individual shoppers with an emphasis on fresh, organic and prepared food options. As some large chains have actively pursued relationships with smaller niche retailers, other grocery chains have failed to adapt.”

The Kroger Company, the largest pure-play grocery company in the United States, purchased Roundy’s, which took it into new markets. Harris Teeter expanded into the mid-Atlantic markets. ACON Investments purchased Fiesta Mart, while Pace Food Retail picked up Dean & DeLuca. “As secular trends continue to put pressure on the traditional food retail model, industry consolidation is expected to continue.”

By Sandy Smith

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