Millennials’ Eating Habits are Revolutionizing Food Logistics

Millennials' eating habits are revolutionizing food logistics across the market

Millennials are changing their eating habits, and the market is rapidly evolving to keep up with all 75 million of them. Whether it be what foods they prefer or how they shop, the marketplace is drastically changing to meet new demands.

According to a report by the U.S. Department of Agriculture, millennial households are buying more unprocessed foods, like fruits and vegetables, rather than processed foods, such as pasta and potato chips. Millennials are turning toward food that is healthy, fresh, and organic.

Changing the Game 

Due to millennials’ desire for fresh, organic foods, the preservative rich and canned food demand is decreasing – and grocery stores must adapt because of it. Fresh products on the outer ring of the store are beginning to sell more while center store products are losing steam.

Millennials also want convenience.  

In fact, 55% of millennials say that convenience is one of the most important factors when deciding what foods to buy. To accommodate this demand, grocery delivery has been growing in popularity, which in turn reduces the amount of impulse buying that happens in stores.  

This preference for convenience and quality has also opened up the market to meal kit delivery companies, like Blue Apron, and grocery delivery services, like Amazon Fresh and Instacart. All of these are possible because the cold supply chain has changed with the millennial-driven demand. 

Everything from the food millennials eat to the way that food moves from location to location is rapidly changing:

  • Food Logistics have morphed to prepare delivery trucks for the “last mile”
  • Third-party logistics have changed their warehouses and equipment to accommodate an increase in fresh and frozen goods, 
  • Manufacturers must comply with new government agencies and regulations to ensure product traceability.

Let’s take a look at how millennial eating habits have caused such a shift in this industry.

Grocery Store Changes

Eating habits of millennials' are changing grocery store layouts and strategy

Grocery stores are no strangers to change. From the 1900’s to the 1950’s, big brands dominated the shelves with affordable foods that were full of preservatives and artificial coloring. During the 1950’s, freezers began to rise in popularity, leading to high demand for frozen foods as well.

Millennial’s lean toward healthier food options that omit large amounts of fat, cholesterol, sugar, and carbs. Instead they target organic, fresh, and frozen foods found in the outer ring of the grocery store, which is bad news for an industry that is already plagued by low margins.

Store Layout & Impulse Strategy 

While the preference for outer ring products has begun to define millennial tastes, long ago grocery stores designed their stores to maximize impulse buying. 

The most frequently purchased products are placed in the back of the store for specific reasons. 

Although it might not seem like it, a large amount of planning and research goes into the design of a store’s layout. For example, the end of an aisle sells considerably more than the middle. Many grocery stores take advantage of this, using features like wing shelves to entice their customer’s attention.

Grocery stores rely on the impulsive behaviors of their shoppers and their store layouts prove this. 

The Journal of Marketing Research found that the average shopper backtracks three times in a store they are familiar with and six times in a store that they are unfamiliar with. This provides several opportunities for merchandisers to influence shoppers into purchasing products spontaneously.  

Therein lies the problem. 

Grocery stores must now solve 2 problems to win millennial’s business: getting an entire generation to embrace shopping at grocery stores and advancing the cold chain. To keep up with the rising demands of America’s largest demographic, grocery stores have poured billions of dollars into ensuring fresh and frozen goods that millennials desire that make it to their shelves unspoiled. 

Average Trips to the Grocery Store a Month 

  • Millennials – 5.33 Trips/Month
  • Generation X– 6.27 Trips/Month
  • Baby Boomers – 7.33 Trips/Month
  • Traditionalists – 7.78 Trips/Month

[click_to_tweet tweet=”Not only are millennials actively avoiding the center store, but they are avoiding the grocery store altogether. Read how this will affect the cold chain and the logistics of the food industry!” quote=”Not only are millennials actively avoiding the center store, but they are avoiding the grocery store altogether.” theme=”style3″]

Meal Delivery and Online Shopping

Millennials want their food healthy, fast, and easy to make, and with trends changing so quickly, dozens of companies and services are starting up every day to meet the new market demand. 

Millennials in urban areas with no access to cars and don’t want to waste time commuting to the grocery store began this trend. To these individuals, it was easier to have groceries or meals delivered to them. 

Today, this trend has spread far outside urban cities.

These demands have led to the explosion of two new markets: grocery and meal kit delivery.  However, the growth of these new markets comes with many logistical challenges.

A graph showing how millennial's have shopped online only over a 3 year span

Online Grocery Shopping & Delivery 

According to Statistica, U.S. online grocery sales are expected to grow to nearly $30 billion by 2021.  Two of the leaders emerging in this space are Instacart and Amazon Fresh.

Instacart

Instacart is expanding their grocery delivery service thanks in part to millennials

Instacart is currently valued at above $4 billion. In fact, Forbes rated Instacart the #1 Most Promising Company in America, and the company is continuing to expand their grocery delivery service. Their value to millennials is simple: remove the burden of time spent through the entire shopping process. This includes going to the store, walking the aisles, waiting at the checkout, and bringing the goods home. 

In short, they give millennials something they value more than money: their free time. While this might sound like a win for grocery stores, it comes at a great cost –  no more impulse buys.

Amazon

Ordering groceries online means grocery stores must find a new way to adapt

Ordering online significantly decreases the amount of impulse buying, leading to fewer ways to catch a shopper’s attention for products they may be interested in. Grocery stores must find a new way to adapt because the desire for convenience isn’t going away. 

Back in June 2017, Amazon purchased an organic grocery chain, Whole Foods, for $13.7 billion. This purchase kickstarted Amazon’s involvement in the food industry as they aimed to deliver foods to customers. 

In February 2018, Amazon and Whole Foods began to deliver groceries directly from Whole Foods in certain cities. Customers are able to shop online for their groceries, including fresh produce, and have it arrive to them in two hours or less.

Amazon also began implementing their loyalty program, Amazon Prime, in their new grocery delivery strategy. Prime members who shop at Whole Foods will get 5% cashback with the Amazon Prime Rewards Visa Card.

Meal Kits

Purple Carrot
Greenblender

Services like Blue Apron provide the perfect solution for millennials looking for convenient and organic foods. Blue Apron ships out all of the ingredients needed to cook a meal at home, making meals healthy and quick to prepare. 

Some home-delivery meal kit options focus on special diets.

Some examples include:

  • Purple Carrot – focuses on making their meals 100% plant-based 
  • Green Blender – focuses on healthy smoothies 
  • Sun Basket – is completely organic

Meal kit companies won’t be going away any time soon. They are currently a $2.2 billion business and are expected to grow 25-30% annually in the next five years.

The Cold Chain

Cold vs Freezing

The cold chain is simply a term for the management and transportation of temperature-sensitive products in the supply chain. This can include food like dairy and meat or pharmaceutical products that need to be kept cold. Basically, anything that can be ruined as a result of temperature changes can be part of the cold chain. Since dry and processed products like granola bars, crackers, and most canned foods don’t need to be kept cold to stay edible, they aren’t considered part of the cold chain.

It’s a lot simpler to transport dry and processed goods, but with the rise in demand for fresh products, changes must be made.

Transportation Challenges

The cold chain is directly affected by the change in eating habits

Transportation companies must adapt to safely and quickly deliver food before it spoils. These changes to the structure for temperature control can be expensive, especially since transportation costs have increased by 8-15% in the US. 

Refrigerated delivery units are also on the rise. 

In fact, the global market for commercial vehicles is projected to reach 29.1 million units by 2020

It’s not as simple as putting a freezer unit inside of a truck. There are several different temperatures that food must be stored at to avoid becoming damaged and spoiled, as well as accounting for proper air circulation. 

The units must have grated on the floor with a clearance of 15 centimeters between the cargo and the ceiling. This is essential because internal temperatures must be reduced. Trucks are also being painted light colors to increase the amount of light reflection which helps reduce heat.

The Last Mile and Third-Party Logistics

Another challenge faced by the rise in cold chain demands is the last mile. 

The last mile is a term for the final stage of transportation where the product is delivered to its final destination. In this case, it’s the customer’s home.

The last mile is a difficult hurdle to clear because delivery personnel need the right equipment to keep food from spoiling due to fluctuating temperatures during transit. Industrial trucks are evolving to be refrigerated with multi-temperature settings, but the last mile is often done by delivery drivers who don’t have access to that specific type of storage.

Even if delivery drivers have the right storage options, a problem arises if the customer isn’t home when the groceries arrive. Leaving fresh food out in hot weather isn’t an option. 

 To combat this, food companies have tried new concepts:

  • In September 2017, Walmart announced that they would be testing a new option for grocery delivery – the deliverer would enter a customer’s home and put groceries away if they weren’t there to receive them. This new feature was not received well by the public as people felt uncomfortable with the idea of a stranger entering their home. Walmart no longer offers this feature.
  • Shipt will call a customer’s cell phone and ask how to complete the delivery, but they acknowledge that someone should be home to receive it.
  • Blue Apron packs their boxes with insulated thermal liners and refrigerants, but they still prefer that someone is home for delivery.

While it can be difficult to come up with solutions for trends that are rapidly changing, new demands mean there will always be an opportunity for innovation.

Innovative Solutions 

New truck models are equipped with refrigeration and freezers
Truck designs are changing to accommodate cold chain items
Truck models are able to transport refrigerated and dry goods

To stay ahead of trends, Jarossy recommends reading about current events, going to industry trade organizations to listen to experts, and to listen to what customers want.

There have been many new models of trucks and technology being tested to accommodate for the new trends and the growth in the cold chain. Mickey Truck Bodies, America’s biggest supplier of beverage trailers and beverage bodies, recently introduced a refrigerated van with thermal-efficient panels on the roof, walls, and floor.

Morgan Corporation recently announced a new truck of theirs that appeals to retailers looking for low weighing vehicles. The truck is used for delivery from the store to the customers’ homes, has multiple temperature zones, and accessibility for curbside loading and unloading. There are numerous retractable shelves, telematic systems, and it is 20% lighter than ordinary body designs.

Kroger, America’s largest supermarket chain, started to improve their equipment in 2016. They are changing the design of their trucks for better fuel efficiency and expanding the use of multi-temperature trucks so they can transport refrigerated and dry goods at the same time.

Creative Packaging

Not only are transportation options changing, but recent trends have called for more creativity in packaging so that foods can stay cold for as long as possible in their designated packaging.

The last mile is no problem for non-perishable, dry food products. The Food Marketing Institute and Nielsen did research that estimates that 40% of center-store shopping goods will be ordered online by 2025. 

Grocery stores can use third-party logistics or partner with existing delivery services. Stores can also begin to build their own fleet of safe and secure trucks for delivering needs.

Just one mistake in the long line of cold chain delivery can spoil the product, so every single detail must be carefully reviewed. Some examples of this can include:

  • Unattended products while being unloaded
  • A rise in warehouse temperatures where products are stored
  • A malfunction in the delivery truck’s temperature control equipment
  • A driver failing to deliver the product on time

FSMA & Public Health 

To ensure public health and safety, The Food Safety Modernization Act, known as FSMA, was signed into law by former president Barack Obama in January 2011. 

The FSMA allowed the Food and Drug Administration (FDA) to regulate the way food is processed. These regulations include the power to recall products that may be causing sickness.

With so many different situations where the cold chain can be compromised, it is more difficult than ever to keep up with demand and with FSMA.

Third-Party Logistics 

While transportation and grocery store companies are making new changes, third-party logistics are also reinventing their storage techniques.

So what exactly is third-party logistics?  

Third-party logistics, or 3PL, is a company that takes care of supply chain processes, like warehouse inventory and management, transportation and delivery, and more. In simpler terms, they hold stock for stores and companies.

3PLs must also adapt to and change technology so food can be delivered to them. 

In 2017, Wabash National, North America’s largest producer of semi-trailers, bought Supreme, a truck body maker. This was done to accommodate the rise in e-commerce food deliveries and resulted in the launch of dry and refrigerated body trucks.

D&D Wholesale Distributors has begun working with Volta Air to test all-electric refrigeration units for vehicles so they can deliver a wider variety of products.

A Demand for Fresh Products 

3PLs are growing with the demand for fresh products. In fact, global 3PL revenues reached $802 billion in 2016, and are currently on track to exceed $962 billion in 2020. 

Due to the rise in fresh produce, 3PL’s were also forced to evolve to consumer’s demands and are adapting to hold cold chain supply. More demands for fresh food means that 3PLs need to accommodate more space for fresh food inventory. This means purchasing expensive industrial freezers.

This can begin to open up problems that warehouse managers haven’t had to consider. This can include learning how to keep a warehouse cool in the summer to ensure the product remains fresh and evaluating greater distance travels between the supplier and customer where changes of food spoilage increase. 

Each product has a specific perishability time so they must be carefully attended to for maximum shelf life.

The Rise of the FSMA

Another change that millennials have brought to the market is a stronger need for cold chain supply visibility. To improve visibility, the Food Safety Modernization Act was brought into action.

But why is the FSMA a recent development?  

Well, it actually got its roots from another program, the Produce Traceability Initiative, or PTI. 

According to the Center for Disease Control and Prevention, 48 million people in the US get sick from foodborne diseases every year, 128,000 people are hospitalized, and 3,000 die due to food-related illnesses. 

The FSMA not only responds to foodborne illnesses, but they work on preventing them. FSMA has very clear rules and guidelines for products to ensure they are fresh and being taken care of at each checkpoint through their journey from producers to customers. 

Every item that is shipped must be tracked and accounted for at every location. This allows the FSMA to track down exactly where in the shipping process an item went bad. Additionally, it helps the FSMA determine what other products may cause customers harm.

How FSMA Works 

The FSMA forces businesses to have better visibility of their products so if something goes wrong, they can easily backtrack to determine what went wrong.

Imagine this – a local baker makes ten dozen batches of muffins. While selling these muffins, a customer reports that a muffin they bought made them sick. The baker now must determine which muffins are the culprit of the sickness.

The FSMA provides rules and guidelines for similar scenarios.

 If correctly following FSMA rules, the baker should know precisely which muffins came from which batch. From there, the baker can look at the ingredients to determine what is making people sick. 

For example, if the butter used in the recipe was bad, the baker would be able to look back and assess what else specific ingredient was used in. The baker will then be able to recall any items that he baked with the contaminated ingredient, therefore preventing further customer’s from becoming ill.

Thermal Labels Help FSMA

To keep up with new food safety and regulations, Jarossy said the Morgan Corporation has begun to use telematics. This is a wired or wireless system that can monitor various activities throughout a truck or truck body. It alerts personnel when doors are open and for how long, and monitors all aspects of a truck, such as temperature ranges. Not only that, the device will also send the collected data to the driver and back to the depot for analysis.

Freezer labels and temperature labels are tools that are used to help the FSMA with visibility.

Freezer & Temperature Labels 

Freezer labels are thermal labels made with an adhesive that can withstand cold temperatures to prevent damage and peeling. Making sure a label sticks is vital. If the label is lost, there is no way to track the product and, therefore, it won’t be FSMA compliant.  

Freezer thermal labels come in two variations:  thermal transfer and direct thermal. 

Many people that use direct thermal freezer-grade labels prefer either a polypropylene label or a top coated freezer label. This durable material can withstand the harsh environments of a cooled warehouse.

For those that use freezer grade thermal transfer labels, most companies use paper labels as they are much cheaper than polypropylene thermal transfer labels.  

Temperature labels will keep track of how cold it is and that way people will be able to see the temperature of the product and if the temperature dropped too low.

Conclusion

Overall, the millennial generation’s craving for healthier and more convenient food is having a huge impact on cold chain and the operation of grocery stores. 

New markets like online grocery shopping and meal delivery have flourished with developing opportunities, and although grocery store locations are hurting, they recognize these new trends and are taking the necessary steps to stay afloat. 

Transportation companies and third-party logistics are also joining in by implementing freezers into trucks and storage facilities. Government regulations are making cold chain logistics safer for the public to buy fresh food through FSMA and better visibility of products.

With all of these changes already in place and with conditions continuing to evolve, we can expect to see more modifications and innovations arise in the future marketplace.