Editor’s note: This story is the first in a series on trends impacting the food and beverage industry in 2024.
The food and beverage sector has in recent years experienced supply chain challenges, elevated inflation and rising consumer demand for alternative meat and dairy offerings. As 2024 begins, some of these trends will remain firmly entrenched but their impact will be different.
For example, cash-strapped shoppers have shown a reluctance toward further price increases, leaving many manufacturers unable to use them as a way to pass on costs. In some cases, food prices might drop in the new year.
Plant-based offerings have seen their once-promising future tarnished by a slowdown in demand and questions over the quality of their foods. The upcoming year will see many businesses “course correct” and place greater importance on what consumers want to bring growth back to the space.
Cultivated meat, meanwhile, had an upbeat 2023 with two companies getting regulatory approval from both the USDA and FDA to enter the U.S. market. Still, the nascent sector is relegated to a few specialty restaurants and a higher price tag that could hinder its rollout at retail. The biggest challenges cultivated meat will face in 2024 are scaling up production, winning over skeptical consumers and raising cash.
The new year also will see a rise in artificial intelligence across the sector, a morphing breakfast category and a downturn in the beef industry.
Here’s a look at six trends experts and analysts say will shape the industry in 2024.
Food price relief
After two years of price hikes in an attempt to offset surging costs, food manufacturers have less room to increase them again in 2024 — and in some cases will be forced to implement cuts.
As food makers grappled with inflation, sporadic supply chain issues and higher labor costs, consumers and retailers alike largely accepted the higher prices. But with commodity prices easing, and shoppers cutting back purchases to save money, the ability to further hike prices has largely dissipated.
“There’s still some inflation kicking around, but everyone expects prices, not necessarily to come down dramatically, but certainly to be a bit more competitive in places,” said Neil Saunders, managing director with Global Data. “Inflation tolerance just isn’t there.”
Food prices at home, which have risen 2.9% during the last year, according to data from the Labor Department, have increased between 0.1% and 0.3% in each of the last few months.
Brian Choi, CEO of The Food Institute, a food industry media and market research company, estimates that the average CPG company has raised prices between 5% and 10% per year over the past couple of years but that it “will be more subdued” in 2024
Instead, Choi said businesses must find new ways to manage costs internally and keep margins in check – such as embracing artificial intelligence or other methods of improving efficiencies – instead of primarily turning to price increases.
Pressure from retailers also will likely put further pressure on food makers.
In November, Walmart executives said despite lower pricing in dairy, eggs, chicken and seafood, elevated food costs continue to be a concern for the retail giant and its shoppers.
“The pockets of disinflation we are seeing are helping but we’d like to see more, faster, especially in the dry grocery and consumables categories,” CEO Doug McMillon told analysts.
Walmart’s efforts to lower food prices will inevitably trickle down to other retailers selling food and beverage products.
“We’ll see a lot more focus on pricing and promotions because I think the retailers will demand and the consumers want it,” Saunders said. “That’s going to put enormous pressure on CPG companies to deliver it.”
Artificial intelligence hits a growth spurt
After infiltrating the food and beverage space in recent years, artificial intelligence is poised to become an even more intricate part of operations in 2024 with companies increasingly turning to it to save money and boost efficiencies.
“We’re just at the start of it,” said Mikael Bengtsson, industry and solution strategy director of food and beverage at Infor. “We’re early in the curve.”
Bengtsson said a reason for the uptick in the technology is that companies are growing more curious about the ways the once futuristic process can be used within their businesses. At the same time, artificial intelligence technology has improved, making it more valuable to companies of all sizes that integrate it into their operations.
Still, Bengtsson noted that while there are several ways that food and beverage companies can use AI – including increasing production, setting prices, developing products and improving efficiencies in their supply chain – the majority of them are using it for one or two areas within their operations.
With companies looking for further ways to cut costs as their ability to pass along price increases dwindles, he added that AI is poised to be incorporated into more applications.
Infor, which helps companies determine the best use of AI within their operations, recently worked with a goat cheese manufacturer in the Netherlands to optimize its use of ingredients and increase output in its manufacturing process. It saved the company hundreds of thousands of Euros annually. Infor also is working with “a large food company” in the U.S. to use AI to develop recipes.
Brian Choi, CEO of The Food Institute, a food industry media and market research company, said the technology also has a promising future in communications, marketing and the creation of visuals for products and services.
“It’s truly disruptive. It’s scary how quickly and how much better AI can work in certain functions than human workers,” Choi said. “Its [use] is definitely going to pick up.”
Breakdown in the breakfast category
While often called the most important meal of the day, the breakfast category is at an inflection point, with companies working to keep up with shifting consumer attitudes toward what they eat in the morning.
Research indicates Americans are consuming breakfast less these days — with only 35% of people reporting they ate something in the morning every day last year, according to Statista data. This could spell trouble for the category.
Analysts believe the breakfast cereal category is in a state of long-term decline, driven by a growing aversion to processed ingredients. Unit sales of ready-to-eat cereal declined in both 2021 and 2022 by roughly 8.5% and 3.5%, respectively, according to Circana data referenced by The Wall Street Journal.
General Mills lowered its 2024 sales outlook amid a 2% decline in retail sales in its most recent quarter. Other giants in the space are looking beyond the category to secure economic stability in the future, investing heavily in snacking and pet food.
For leading brand Kellogg, 2023 put its cereal operations into sharper focus after it split into two companies — one prioritizing snacks and another cereal. Gary Pilnick, the CEO of WK Kellogg, the cereal business with brands like Frosted Flakes and Froot Loops, told Food Dive in an interview this fall that while he believes the category faces headwinds, consumers see it as an affordable option amid inflation.
Still, the executive said the new business sees a “future beyond cereal,” with plans to launch products in new categories within the next three years.
Marion Nestle, a former professor of food studies and public health at New York University, said consumers will continue shifting toward breakfast options that do not require much preparation, like power bars. She said cereal has the potential to continue evolving to meet nutritional needs, citing Cheerios with better-for-you attributes, as a recent example.
“We will see more vegan, gluten-free, non-GMO cereals aimed at the health-conscious crowd. It’s possible to buy breakfast cereals that are not ultra-processed, but they are a small minority,” Nestle said.
Dr. Uma Naidoo, a nutritional psychiatrist whose work is published in Harvard Health Publishing, said fermented breakfast foods that offer more immune-boosting benefits, like probiotics, could grow in popularity in the coming years. With social media, Naidoo said, consumers have so much more information about which breakfast options offer true health benefits.
“The ball is now in the industry’s court to marry high-quality education with products that ‘walk their talk,’ and provide inclusive options for consumers with all sorts of dietary needs and preferences,” Naidoo said.
Some newer cereal brands aimed at nutrition-minded consumers are gaining popularity, such as Magic Spoon, which expanded its better-for-you offerings into 6,800 stores earlier this year. CPGs are also leaning into the growing popularity of cereal as a snack food, like General Mills with its Minis varieties of popular offerings like Honey Nut Cheerios and Reese’s Puffs. And last week, WK Kellogg Co announced a better-for-you cereal brand targeting Gen Z consumers, which contains 22 grams of protein per serving.
— Chris Casey
Meat industry grapples with shifting demand, sustainability critics
With inflation hitting consumers’ wallets and pressure from environmental activists, the meat industry is positioned for a rocky road to restoring growth heading into 2024.
Concerns about inflation are projected to hurt beef the most. In its 2024 beef industry report, Rabobank projected a 4.5% decline in production and a 3% drop in consumption of beef. The group said economic caution from consumers around the world, including in Asia, could drive down beef volumes in the U.S.
“It is possible that 2024 will see margins in beef supply chains being squeezed to manage higher prices and accommodate the consumer,” Rabobank said in its report.
The demographic of people that eat beef also is shrinking, with the majority of consumers in the Baby Boomer generation, according to a study published by Tulane University earlier this year.
By comparison, the poultry industry is expected to improve slightly, with expected growth between 1.5% and 2% in 2024, according to Rabobank’s poultry report. The agribusiness research group said consumers being more concerned about affordability will benefit the chicken industry, with consumers trading down more expensive meats like beef.
The issue of carbon emissions continues to roil the industry.
Gene Baur, the president of the nonprofit Farm Sanctuary, said in a Food Dive op-ed last month that the pledges to lower emissions made by meat companies at the United Nations COP28 conference — where the organization reaffirmed a goal to halve global methane emissions by 2045 — amounted to greenwashing. Baur cited a statistic that found a shift toward plant-based diets would result in a 75% reduction in global land use.
Don Close, a beef industry veteran and the chief research analyst at Terrain Ag, argued in an interview that the livestock sector is making strides toward more environmentally friendly operations.
“When you look at the multitude of feed ingredients that cattle can use to produce beef that is unusable to humans or other species, when you look at the improvements that grazing cattle make on soil and grass improvement, the beef industry has made huge contributions on the sustainability front,” Close said.
— Chris Casey
Cultivated meat sees less funding, more brands and a potential for consolidation
For the cultivated meat industry, 2023 was a pivotal year. Upside Foods and Eat Just were granted regulatory approval from both the USDA and FDA to enter the U.S. market, and plans of new production plants were announced.
Even though these milestones paved the way for cultivated meat to be integrated into retail, grave challenges remain. And right now, the product is only being served at restaurants.
“The key challenge remains commercialization of products and scaling up production at an economic cost,” said Mark Lynch, a partner at Oghma Partners, which specializes in the food and beverage sector.
Though 2023 saw brands like Blue Nalu, Air Protein, Meatable and New Form Foods, among others, announce new funding rounds and other news announcements, with funding rounds and announcements. The space still has a lot of ground to cover when it comes to consumer education, and funding going into 2024 will be drier than years prior.
“Business plans will need to demonstrate a clear and verifiable path to cash flow neutrality or profitability to encourage follow-on funding. Getting start-up funding may prove even harder. In this environment the potential for more businesses to pop up in the space is more limited,” said Lynch.
The cultivated meat category is still in its very early stages, he said, and in 2024, businesses should focus on “providing sample products, educating the consumer and developing a production platform that can produce at a market sensible cost.”
In addition to consumer education, Tommy Tobin, an attorney at Perkins Coie who specializes in regulatory matters, said “addressing safety concerns will be key to the industry’s success. ... The sector will benefit from manufacturers being very transparent on their process.”
The USDA is currently developing new requirements for labeling.
Disputes over what the official term of the cultivated meat space should be may lead to further confusion for consumers, and potentially hinder the category from being accepted.
In November, a Nebraska senator reintroduced the Real Marketing Edible Artificials Truthfully Act, which would make alternative protein companies clearly display “imitation” on their packaging.
Meanwhile, cultivated meat companies and organizations, such as the Good Food Institute, are “arguing that there’s a First Amendment right to use the words that are typically reserved for conventionally produced foods,” said Tobin.
Funding is another hurdle in the new year, and some businesses may be at risk of consolidation.
“Less well-funded businesses with a good technical platform will become targets of well-funded businesses looking to strengthen their technical edge,” said Lynch.
His firm recently published a report that predicted the cultivated meat space will go through a consolidation similar to the plant-based arena. Many plant-based players have exited the space, curtailed innovation and cut jobs.
As has long been a challenge of the cultivated meat space — overcoming the sentiment around ‘lab-grown’ food and educating consumers remains to be a challenge, and will continue to be in 2024.
Despite these challenges, though, the U.S. may be the best place for companies to overcome these hurdles.
“The U.S. is the market where most activity will be seen, due to its favorable regulatory environment, the presence of the biggest cell-based meat businesses and the presence of the best-funded businesses,” said Lynch.
— Elizabeth Flood
Plant-based to course correct and bring the ‘plant’ back
The past year proved difficult for the plant-based sector. It had to overcome confusion among consumers and competition in a saturated market, leading to disruption in the space.
Companies like Planterra, the plant-based meat subsidiary of meat giant JBS, Maple Leaf Foods and Impossible Foods have all faced headwinds recently, from layoffs to supply chain issues, with some shutting down operations altogether. Most recently, in November 2023, Beyond Meat announced job cuts in laying off 19% of its nonproduction workforce. It also reported negative sales growth for the sixth quarter in a row, and analysts said the troubles for the California company do not look like they will subside any time soon.
Meanwhile, two smaller plant-based companies — Hooray Foods and Nowadays — announced in 2023 they were shutting down business operations within one week of each other.
Whole Foods Market recently forecast a trend of more companies putting the “plant” back in plant-based products, with the use of ingredients like mushrooms, walnuts, tempeh and legumes in place of complex meat alternatives.
Looking into 2024, plant-based companies will have to “course correct,” to give consumers what they want and bring sales back to positive growth, according to Samuel Dennigan, CEO of Strong Roots, a European plant-based company focusing on whole food ingredients.
“Plant-based food consumers are tired of additive-filled, unhealthy offerings — just look at the ingredient list on the back of an Impossible Burger,” Dennigan said in an interview.
Between 2019 and 2021, there was a plethora of funding for smaller brands to make their way into the plant-based space. But a lot of these businesses focused on the sustainability aspect, and sacrificed taste as a result. Now, the category has to “course correct,” to give consumers what they want, and not what they have been force-fed, said Dennigan.
“Ultimately, people want food, they don’t want something that is staged as food,” he said. “What the last 5 years is going to teach everyone is the investigation into what the nutritional contents are will be just as important as what was driving the trend in the first place — a healthier and more sustainable way to eat.”
Dennigan coined the term “plant-based 3.0” for the strategic moves companies will make in 2024 to “course correct” and put the focus back on consumer needs.
— Elizabeth Flood