Earlier this month marked the Summer Fancy Food Show in the USA! Hosted in New York City from June 12-14, it was the first time in three years that the show took place. Thousands of specialty food and beverage products and flavours were on display from hundreds of brands. Stakeholders from across the world attended to boost their national profile, from Italy to Spain, Brazil, Morocco and Korea! The show also provided a chance to reflect on up and coming growth categories in the US food and beverage industry–let’s take a look.
The US Economy at a Glance
With a GDP of US$20.93 trillion, the USA is an economic powerhouse, cementing its place as the largest economy in the world. Breaking down GDP per capita, this figure is also strong at US$63,051. And, with a total population of over 328 million, the US consumer base is over twelve times that of Australia, creating significant opportunities for exporters seeking to expand their market footprint.
Trade Opening Up Once Again
After the Trump administration’s abandonment of trade-supporting principles, the Biden administration is reversing these actions, enabling the US to fulfil its obligations under 40 bilateral investment agreements. This is good news for Australian and global exporters alike, breaking down the barriers to trade! Regarding Australia specifically, the Australia-United States Free Trade Agreement remains in place to remove tariffs from 96.1% of Australian exports. The two nations also maintain strong trading relationships, with two-way trade worth $80.8 billion and strong investment ties.
The American Consumer
Sporting middle-class status and a high purchasing power, the US population is filled with keen consumers. Upper-class consumers exercise a significant share of purchases, with OECD forecasts painting this group as the world’s largest market segment until 2030. That being said, a high proportion of weekly spending is generally allocated to lower-priced products, a trend exacerbated by the pandemic. Thus, seeking cheap products is of prime value to the American consumer, and so are products that are widely available and those that can be conveniently purchased.
The American consumer is very particular about the things they buy, frequently comparing prices, reading online reviews and seeking promotions as part of their pre-purchase behaviour. They’re also experimenting with new behaviours, with a recent McKinsey report indicating 75% of shoppers have adapted their purchasing habits since the onset of the pandemic, while 36% reported having tried a new brand, generally leading to brand loyalty. Plus, American consumers are generally keener than their global counterparts when it comes to buying local brands and products.
Consumer Demands in the Grocery Industry
So, we’ve looked at the American consumer in general – but, what exactly are they looking for when browsing the supermarket aisles? Consumers are increasingly looking at pricing when determining where they shop, and actively researching promotional offers. However, at the same time, consumers are seeking healthier foods, with 40% of consumers displaying more interest in healthy eating and nutrition. This is encouraging growth for high-protein, free-from and naturally healthy foods, especially amongst Generation Z and millennials.
Confectionary, Snacks and Sweets as Categories of Interest
As is to be expected, the US food market is expansive! And it’s only seeing further growth, with a forecast 5-year CAGR of 4.70% to 2026 expected to see the market size for food rise to US$848.55 billion. Of particular interest at Summer Fancy Food was the Confectionary, Snacks and Sweets Pavillion. Ice cream and confectionery are expected to see modest growth over the next few years, while savoury snacks, syrups and spreads will perform exceptionally well with one of the strongest forecast growth rates in the food industry.
So, which particular sub-categories should you look out for? Cakes, pastries and sweet pies and cereal bars will see strong growth, while the health trend will also prompt greater demand for energy bars amongst consumers. Even as the world moves on from the pandemic and health trends kick in as consumers seek to dodge the post-COVID kilos, demand for snacking isn’t expected to slow any time soon, particularly when it comes to ethnic/traditional snacks, meat snacks, popcorn and sweet spreads!
Coffee and Tea Also Set for Growth
It’s not just their sweet tooth that Americans are seeking to indulge–coffee and tea are also set to be strong-performing categories over the next five years. In the hot drinks space, both categories have seen strong growth over the past five years of upwards of 5-6%. This growth is expected to remain strong in coming years. But looking into the future, it’s iced and ready-to-drink coffee and tea that we should really be looking out for, as consumers seek to swap soft drinks for healthier iced substitutes and satisfy their caffeine cravings instantly, especially when on-the-go. We’re especially seeing RTD coffees and tea with craft, functional, plant-based, low sugar, quality and authenticity promises perform especially well.
E-commerce Takes Off
Tech-savviness is strong among American consumers! An overwhelming 96% of the population shops online, and this has seen omnichannel retailing grow rapidly. While supermarkets and other food retailers continue to improve the quality and accessibility of their e-commerce platforms, they’re also investing in the in-store experience, with consumers adopting a hybrid online-offline approach when it comes to buying groceries. There’s no doubt that COVID-19 contributed to this growth, with e-commerce sales jumping 44.4% at the peak of the COVID-19 crisis. But this trend is definitely here to stay, as consumers now rely on the convenience that online grocery shopping provides.
A Market Not Without Challenges
Even though we’ve explored various areas of opportunity, it’s important to note some challenges that exporters can face in the US. Some critical areas of the economy have been slow to recover from COVID-19. In particular, supply chains, while steadying, remain relatively fragile, with increased out-of-stock rates exceeding 15%. However, as container shortages and vessel delays shorten, this is expected to slowly improve. Rampant inflation is leading to historic price rises, which is seeing consumers shift from more premium products to more economical grocery products to stretch their dollars. And, depending on your market entry strategy, the USA market is also a very complex and often expensive market to enter and navigate.
A powerful economy, significant consumer base and close relations with Australia are all factors that can encourage Australian exporters to expand their global horizons into the US, while an experiential consumer base boosts opportunities to win new customers.
While confectionery, sweets and snacks are seeing strong growth, demands for healthier options are fast-emerging, creating two converging yet exciting trends for food and beverage exporters in either of these spaces, as well as healthier snack manufacturers. Coffee and tea are also spaces to watch, especially as health trends and busy urban lifestyles prompt strong growth for chilled and RTD products in this area.
For exporters who can balance the easing yet present supply chain issues and overcome inflation’s challenges as well as the complex and often expensive market entry options, the US has the potential to be a prosperous market for Australian brands.
We hope you’ve found these insights on the the US market helpful. As always, if you’ve got any questions or want to discuss export opportunities for your company, feel free to drop us a line at Export Connect – we’d love to hear from you.