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Top economic trends of 2018: The tech revolution of food retail

Jan 30, 2018

As we head into the new year, the Ag Economics team wants to help you anticipate 2018 with a look at five economic trends likely to affect Canadian agri-food this year. 

The evolution of the food-to-consumer relationship is our fifth and final trend to watch in 2018.  The food retail landscape has changed significantly in recent years with further transformation expected ahead. Agile businesses that are willing to change and embrace the new era of technology for food have a bright future.

E-Commerce is disruptive

The expansion of e-commerce is altering the food consumption experience by focusing on convenience and choice. This is disruptive for the traditional food supply chain.

In many ways, the Amazon takeover of Whole Foods Market set the e-commerce stage for online food products in 2017. Now dubbed the “Amazon Effect,” many people are choosing to shop online which is pushing other grocers digitalize their processes.

Companies such as Instacart are creating opportunities for businesses to launch online interactions with consumers. In 2017, Instacart reached 52% of American households through retailers like Costco and Whole Foods, and with their recent purchase of the Canadian company, Unata, they hope to increase their reach in both countries.

Hybrid technologies and food

Although few grocers are looking to go to online only, there’s a push towards incorporating more tech hybrids to increase convenience for consumers, such as a personal scanner in stores for customers to see their running total or GPS guidance through the store for consumers to easily spot their desired food items.  

By maintaining the “touch” aspect with food, food retailers are hopeful they will be able to leverage the bricks-and-mortar model to compete head-to-head with e-commerce.

Leveraging the supply chain

The customer experience can also be developed by leveraging the existing supply chains of established grocers. Marketing exclusive food products and focusing on freshness are two examples of productive processor-to-retailer and producer-to-retailer relationships that create value across the supply chain.

We expect more opportunities for agricultural producers and food processors to establish strategic alliances with retailers.

Retail disruption and food prices

Competition between emerging and traditional food retailers has kept food inflation low in 2017. Prices of staple food products like butter, fresh fruits and flour have been trending lower in 2017.  Food inflation has been lower than overall inflation in Canada.

What's the bottom line?

We expect food inflation to be contained once again in 2018 due to competitive pressures in the industry. This trend will be positive for agricultural producers who have seen the demand for red meat, dairy, and fruits and vegetables remain steadily strong. This is especially important to minimize possible downward pressure on farm prices at a time when supply of agricultural products is projected to be abundant in 2018. 

Amy Carduner

Agricultural Economist

Amy joined the FCC Economics team in 2017 to monitor agricultural trends and identify opportunities and challenges in the sector. Amy grew up on a mixed farm in Saskatchewan and continues to support the family operation. She holds a Master in Applied Economics and Management from Cornell University and a Bachelor in Agricultural Economics from the University of Saskatchewan.