Food and beverage e-commerce could hit $109B in 2021

11 Feb 2021

This year, U.S. online sales of packaged food and beverages are forecast to reach between $90 billion and $109 billion, according to recent research from the Food Industry Association (FMI) and NielsenIQ. The final dollar figure will be contingent on the vaccine rollout and economic recovery in the U.S., among other factors.

Surging demand for e-commerce grocery is largely attributable to the pandemic, but researchers say that this is a trend that is liable to stick around for the long term.

Food and beverage e-commerce could hit $109B in 2021

Grocery sales drove a notable increase in e-commerce traffic with sales rising 125% for the year ending Nov. 30. Click-and-collect services like curbside pickup were a particularly large force behind this uptick in demand for online grocery shopping solutions. But not all products are equally as popular. Within the food category, the largest growth segments by dollars were beverages, wine and coffee.

Despite this substantial increase in sales, the two market research firms found that companies still have a $58 billion opportunity to get shoppers to spend a similar share of dollars for online food orders as they do for non-food items.

E-commerce, while not a new concept, experienced meteoric growth over the last year as manufacturers across categories rapidly adapted to demands for direct-to-consumer and ship-to-home solutions. Companies ranging from Beyond Meat and Perdue Farms to Mondelez and PepsiCo rolled out their own independent e-commerce portals to tap into this trend. Nevertheless, last March, industry research firm Profitero and Kantar found that only 17% of the 200 companies were fully prepared to lead in e-commerce strategies. Many firms lacked dedicated e-commerce pricing and supply chain strategies although four in 10 identified having an online DTC platform as a strategic priority.

Since then, the focus has continued to be fixed on online shopping. Although many more models centered on the distribution of boxed and bottled goods are available, companies are continuing to work to make online fulfillment a more profitable arm of their businesses rather than an appendage that functions out of necessity. To accomplish this, many companies have made workforce and warehouse adjustments, invested in new digital tools to specifically allow for e-commerce growth and are renegotiating with third-party companies like Instacart, a company that FMI and Nielsen identified as the main point of entry for online shoppers. The company posted $15.7 billion in online food and beverage dollar sales for 2020. Amazon, Walmart and Kroger were the other leading online platforms pulling in $17.4 billion, $6.5 billion and $6.1 billion respectively.

But proprietary e-commerce platforms continue to gain steam alongside those hosted by grocers. Kellogg’s e-commerce business represented 6% of its global retail sales in Q2, after doubling its share of business during the pandemic. By optimizing an online presence, McKinsey research found that brands can get ahead as shoppers are switching brands at an unprecedented rate, causing them to be more dependent on online inventories that list available products.

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