KANSAS CITY — The promise of e-commerce is running headlong into the reality that many consumers have yet to yield their preference for a brick-and-mortar shopping experience. Among consumers open to online purchases of food and beverages, interest varies widely from market to market. The situation is challenging food and beverage manufacturers to make the investments necessary to capitalize on the opportunity e-commerce will one day offer while maintaining competitiveness in traditional retail formats.
In the International Food Information Council Foundation’s 2019 Food and Health Survey U.S. consumers were asked how often they buy groceries online. More than 60% of the 1,012 grocery shoppers said never. When those consumers who answered less than once per month are added, the figure jumps to greater than 70%. By contrast, 69% said they shop in physical stores at least once per week, and that number jumps to greater than 85% when including respondents who said they shop in person several times per month.
The issue is even more challenging for multinational companies that must navigate retail trends in significantly different markets. These challenges were cited repeatedly by executives during presentations at the Sanford C. Bernstein Strategic Decisions Conference held in late May in New York.
Jeffrey L. Harmening, chairman and chief executive officer of General Mills, Inc., said e-commerce currently accounts for approximately 3% of the company’s food business (excluding pet food) in the United States. He added that U.S. e-commerce sales will grow in the next five years, but that he did not expect the online share to exceed 10% of U.S. sales.
“It’s big, and it’s important,” he said of e-commerce. “It’ll be a big part of our growth, but that means that 90% (of U.S. sales) will not come from e-commerce. So, as I think about it, we need to make investments in e-commerce that will help us be successful, but we also have to pay attention to the 90% that will not be e-commerce.”
Consumer research by Mondelez International, Inc. highlights the differences in how consumers in different international markets approach e-commerce. In China, for example, snacking has an online penetration of 18%, and 75% of those transactions are through mobile devices.
“It is impulse in some cases because if people need something, they go on mobile and they order,” said Luca Zaramella, executive vice-president and chief financial officer for Mondelez. In the United States, e-commerce consumers are less impulsive, and Mondelez’s focus is on ensuring its products are included in “full baskets” ordered online.
The market research company Packaged Facts forecasts global food e-commerce sales will reach $321 billion by 2023 and account for nearly 5% of total e-commerce revenues. The researcher also projects the Asia/Pacific region will account for much of the growth, primarily due to the rapidly expanding Chinese market. China dominates regional e-grocery activity in part because of the country’s large urban population and rapidly expanding middle class, Packaged Facts said.
E-commerce holds great promise for the food and beverage industry, but its adoption, particularly in the United States, may be frustratingly slow. The pace of change is rarely predictable, but those businesses that take an omnichannel approach will have the flexibility to adapt when the market shifts.