In recent years, the food and beverage industry has faced significant supply chain challenges, rising inflation, and an increasing consumer appetite for alternative meat and dairy products. As we enter 2024, many of these trends are expected to persist, albeit with different implications. For instance, financially constrained shoppers are resistant to further price hikes, leaving manufacturers with limited options for passing on costs. Consequently, some food prices may even decrease in the coming year.
The enthusiasm for plant-based products has diminished due to a noticeable slowdown in demand and concerns about food quality. In 2024, many businesses will need to “course correct” and prioritize consumer preferences in order to stimulate growth in this sector. On the other hand, cultivated meat had a positive trajectory in 2023, with two companies receiving regulatory approval from both the USDA and FDA to enter the U.S. market. However, this emerging sector is currently limited to a few specialty restaurants and is hindered by high prices, which may delay its retail rollout. The primary challenges for cultivated meat in 2024 will include scaling production, gaining consumer trust, and securing funding.
Moreover, the new year is likely to see an increased integration of artificial intelligence in the industry, a transformation in the breakfast category, and a downturn in the beef sector. Here are six trends that experts and analysts predict will define the industry in 2024.
After two years of price increases to counteract rising costs, food manufacturers have less flexibility to raise prices again in 2024, and in some cases, they may need to implement cuts. As companies navigated inflation, sporadic supply chain disruptions, and higher labor costs, both consumers and retailers largely accepted the elevated prices. However, with commodity prices stabilizing and shoppers reducing their spending, the capacity for further price hikes has diminished. As Neil Saunders, Managing Director at Global Data, noted, “Inflation tolerance just isn’t there.” Food prices at home have risen by 2.9% over the past year, with recent months showing increases of only 0.1% to 0.3%.
Brian Choi, CEO of The Food Institute, estimates that the average consumer packaged goods (CPG) company has raised prices by 5% to 10% annually over the last couple of years, but he anticipates that price adjustments will be “more subdued” in 2024. Instead, businesses will need to explore new strategies for managing costs and maintaining margins—such as adopting artificial intelligence and other efficiency-enhancing methods—rather than relying solely on price increases. Retailers are also likely to exert additional pressure on food manufacturers. For instance, Walmart executives expressed concerns about elevated food costs despite reduced pricing in dairy, eggs, chicken, and seafood. CEO Doug McMillon stated, “The pockets of disinflation we are seeing are helping, but we’d like to see more, faster.”
As artificial intelligence continues to penetrate the food and beverage industry, it is set to play an increasingly significant role in operations in 2024. Companies are expected to leverage AI to save costs and enhance efficiency. Mikael Bengtsson, director of industry and solution strategy for food and beverage at Infor, remarked, “We’re just at the start of it.” As businesses explore how AI can be utilized, the technology has evolved to provide more value to companies of all sizes, including smaller and mid-sized firms that are starting to adopt AI alongside larger corporations like Coca-Cola and AB InBev’s Beck’s beer.
Despite the diverse applications of AI—ranging from production optimization to pricing and product development—most companies are currently using it in only one or two areas. As the ability to increase prices wanes, AI is expected to be integrated into more applications. Infor recently assisted a goat cheese manufacturer in the Netherlands in optimizing ingredient use and increasing output, resulting in substantial annual savings. Additionally, Infor is collaborating with a “large food company” in the U.S. to utilize AI for recipe development.
Brian Choi noted that AI also holds promise in communications, marketing, and product visualization. He stated, “It’s truly disruptive. It’s scary how quickly and how much better AI can work in certain functions than human workers.” As consumers become more health-conscious, there is a noticeable decline in breakfast consumption, with only 35% of individuals reporting they ate something in the morning every day last year, according to Statista.
Analysts predict a long-term decline in the breakfast cereal category, fueled by a growing aversion to processed ingredients. General Mills has adjusted its 2024 sales projections downward amidst a 2% decline in retail sales in its latest quarter. Other major players are diversifying beyond cereal to stabilize their economic future by investing heavily in snacking and pet food. Gary Pilnick, CEO of WK Kellogg, acknowledged the challenges facing the cereal category but noted that it remains an affordable option for consumers amid inflation.
As consumer preferences shift towards breakfast items that require minimal preparation, such as protein bars, the cereal industry must adapt to meet nutritional needs. There is potential for growth in vegan, gluten-free, and non-GMO cereals targeted at health-conscious consumers, although these options currently represent a small fraction of the market. Newer brands focused on nutrition, like Magic Spoon, are gaining traction, while traditional companies are adapting to the trend of cereal as a snack food.
The meat industry is also navigating a challenging landscape, grappling with inflation and facing scrutiny from environmental advocates. Rabobank’s 2024 beef industry report projects a 4.5% decline in production and a 3% decrease in consumption, primarily due to economic caution among consumers, particularly in Asia. The demographic of beef consumers is contracting, with Baby Boomers making up the majority. In contrast, the poultry sector is anticipated to experience slight growth, benefiting from consumers’ focus on affordability.
Concerns regarding carbon emissions continue to disrupt the meat industry. Gene Baur, president of the non-profit Farm Sanctuary, criticized meat companies’ pledges to reduce emissions as merely greenwashing, advocating for a shift towards plant-based diets that could significantly lower global land use. Despite these challenges, some industry experts argue that the livestock sector is making strides toward more sustainable practices.
For the cultivated meat sector, 2023 was a landmark year, with Upside Foods and Eat Just receiving regulatory approval to enter the U.S. market. However, significant challenges persist, including the need for commercialization and cost-effective production scaling. Mark Lynch, a partner at Oghma Partners, emphasized the importance of consumer education and addressing safety concerns for the industry’s success. As funding for cultivated meat becomes more constrained, companies must demonstrate a clear path to financial sustainability to attract investment.
In 2024, the cultivated meat industry will need to focus on providing sample products, educating consumers, and developing economically viable production methods. Additionally, transparency regarding safety processes will be crucial as the USDA works on new labeling requirements. Ongoing disputes regarding terminology could further confuse consumers and hinder acceptance of cultivated meat products. The potential for consolidation within the industry looms, as well-funded companies may target less financially stable businesses to enhance their technical capabilities.
Overall, the U.S. market presents unique opportunities for cultivated meat companies, thanks to its favorable regulatory environment and the presence of well-funded players. However, the industry must overcome significant challenges, including consumer perceptions of “lab-grown” food, to thrive in 2024 and beyond. As the plant-based sector also faces headwinds from market saturation and consumer confusion, companies are urged to refocus on quality ingredients and consumer preferences to foster positive growth. According to Samuel Dennigan, CEO of Strong Roots, the future of plant-based offerings lies in ensuring they meet the nutritional needs of consumers, moving towards a “plant-based 3.0” approach that emphasizes genuine food experiences over artificial alternatives.