Emerging themes of Food & Hospitality sector
With massive urbanisation and growth, coupled with less farming and resources, a huge shake up is underway around about new food, new ways of producing it and getting closer to the customer. There is much change ahead and our Food and Hospitality team have ben partnering with our clients to work out how they can best structure and position their businesses to take advantage of this. It is interesting from a consumer perspective as well as business, as this is such a broad and competitive sector. What worked in the last decade may not work moving forward as disruption continues with low prices, speedy access, convenience and a great customer experience but we do question if all of these models are sustainable from a commercial perspective.
The shift towards health through food, transparency, and 24/7 social access gives food a higher visibility culturally. You only have to look at the raft of cooking programmes to see how we value the experience, and increasingly demand the traceability of where what we consume comes from. Top high end restaurants have been moving to retail by selling their cookware and products which also plays to this the element of voyeurism and the concept of instagrammable food.
Sitting alongside the adventurous customer are the rise of healthy food products and food with a function, seemingly at odds with the statistic that 63% of Australians are overweight or obese. Some of the quick serve restaurants are however focusing on healthy menus to capture the changing tide, following the abundance of ready-to-eat food much more readily available. Personalisation is also interesting which is where a diet is delivered to your door based on your DNA or food preferences and goals. That leads into the growth of food sales as consumers eat more regularly at home, as the food is viewed as entertainment in itself in and out of the house. Our demographic transition to an older, more ethnically diverse and increasingly urban population will continue to shape our food demand profile to 2050, and consequently what we need to do to meet this.
Artificial Intelligence, Robots and Technology are already manifesting themselves in many different ways in this sector. We’ve got robots preparing food, driverless cars, and 3D printing from pixel to plate through to facial recognition when you pick up a coffee. Sustainability and having a zero-waste environment is also gaining momentum from fake meat and fish to smart Tupperware that tells you when the food inside is ready right through to edible cotton.
According to Simon Corah of Growth Mantra, a leading expert in the food industry who has worked with many high-profile food businesses including Woolworths, McDonald’s and Coca-Cola, the two impactful trends in play are the emergence of the Direct to Consumer relationship and the rise of the share economy. We are only at the beginning of this disruption and Simon feels that food, beverage and alcohol will be in the second wave and supply and demand printing in the third part of the disruption curve. This is effectively about creating channels online (like supermarkets) which sell to the consumer direct. Data and how you can leverage it is the name of the game in this evolving relationship. The rise of the share economy is also beginning to be a reality as there are now some restaurant chains that don’t have kitchens who are using networks for shared kitchens, and it will be interesting to see if will this continue into shared storage facility and drop off points.
If you are going to position your business for sustainability and future growth look at technology and how this can enable a better experience for customers and your supply chain. While being nimble is a great attribute don’t be the first - make sure you look at the platforms you have and work out if they are part of your future or your past and do something about it. There are lots of online and offline opportunities for potential joint venture to achieve goals such as Messina and Drumstick, and as start-up companies are here to stay they may be worth collaborating with. To free up cash to invest, fend off hostile acquisitions, and asset leverage, modernise operations where you can, and if you can take advantage of the market disruptions Food and beverage are still flavour of month with Private Equity and Venture Capitalists /family office paying high multiple.
Should you have further questions or need help with developing a corporate governance framework and a tax risk management policy please do not hesitate to contact your relevant ESV engagement partner on 02 9283 1666.