BGL Insider Special Report

Food Ingredients: A Growing Emphasis on the Supply Chain

The Food Ingredients industry witnessed various shifts in consumer demand and behavior both before and after the COVID-19 pandemic. The Direct to Consumer (DTC) and Food Retail Ingredients markets are demonstrating significant growth post-COVID-19 as more homebound consumers engage in leisure cooking and seek out unique and ethnic flavor profiles.

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Managing Director

The Food Ingredients industry, a critical component of the Food & Beverage supply chain, has experienced significant disruption and change due to shifting consumer behavior and changes stemming from COVID-19. In addition to the traditional applications such as taste, texture, appearance, nutritional content, and shelf-life, providing supplementary health advantages and offering comfort amid the uncertainty have been at the center of the industry’s demand drivers. As companies continue to navigate the impacts of supply chain disruption coming out of COVID-19, we anticipate that the following key patterns will continue in the “new normal”:

  • Favorable Sector-Specific Trends: Homebound consumers demonstrated an appetite for global and exotic flavors to compensate for the lack of thrill, travel, and adventure from their pre-COVID-19 lifestyles. Themes such as clean-eating, mental well-being, and fortified foods became increasingly prominent. Ingredients boosting ‘health and wellness’ and ‘immunity’ advertised foods gained traction and are expected to outpace the overall ingredients industry growth. In particular, specialty herbs, botanicals, and broader plant-based ingredients will continue to grow as companies expand into new end markets.
  • Food & Beverage Long-Term Outlook: Broader macro-economic and environmental drivers, such as an increase in government initiatives, continue to drive market growth. Government initiatives are on the rise, including sugar taxes and guidelines to reduce meat and dairy consumption. In addition, rising consumer disposable incomes along with the willingness to pay a higher price for premium products adds to growth. Consistent R&D efforts and technological advancements that support the demand for lab-based or plant-based protein and other ingredients have further enabled companies to stay relevant to consumers.

Food ingredient companies are challenged to address the growing demand for the specialization of food products, while staying on top of overall changing consumer preferences. The most successful companies are those taking a proactive approach in undertaking the necessary measures to address evolving consumer habits.

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