The food and beverage (F&B) industry has seen significant changes in the aftermath of the COVID-19 pandemic. With lockdowns and mandatory mask mandates in place, businesses and consumers increasingly “went digital”, buying and selling more goods and services online. Canada alone saw a jump of 49% in online grocery sales one year into the pandemic and business owners stepped in to capitalize on pandemic-induced e-commerce opportunities.
But is the trend here to stay?
“The pandemic permanently changed people’s habits as it relates to delivery,” says Lola Kassim, general manager of UberEats in Canada. “Everyone picked up this habit of getting food delivery a few nights a week; maybe getting their groceries delivered once or twice a week. What we’re seeing is that even as the world starts moving again, people are keeping that new normal.”
And the widespread adoption of e-commerce is not just limited to Canada (or grocery shopping, for that matter!) According to The Census Bureau’s 2020 Annual Retail Trade Survey (ARTS), e-commerce sales in the United States increased by $244.2 billion or 43% in 2020, rising from $571.2 billion in 2019 to $815.4 billion in 2020. That’s staggering…and as the world slowly returns to normal, all signs suggest that people will continue to shop online, especially in the F&B space.
Rapid delivery services have come to the fore and retailers have stepped up to provide speed, convenience, and affordability – something that’s quite welcome in light of the rising food prices.
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The impact of rising food prices
According to Canada’s Food Price Report, food prices are expected to continue to increase in 2023. The forecast predicts that Canadian families are expected to pay an additional $1000 for food in 2023 than they did the previous year.
Prices of grocery items, including vegetables, meat, dairy, and bakery products are expected to see significant increases in the coming year. The cost of eating out or fine dining will rise as well due to rising food costs, rent increases, and ongoing labor challenges.
Rising geopolitical tensions, high fuel and transportation costs, and the depreciating Canadian dollar are mostly responsible for the predicted increases.
“Conflicts in other parts of the world can impact food prices in Canada by restricting trade and exports and disrupting the supply chain,” says Dr. Simon Somogyi, professor of business and economics. “The ongoing war in Ukraine has especially impacted the supply of wheat, fertilizer and sunflower oil, which is widely used in processed foods.”
What does this mean for food business owners?
How does this impact food businesses operating in the online space?
The growing trend of online grocery shopping paired with the rising food prices presents a unique opportunity for online food businesses. Online businesses do not have any costly infrastructure. Operating costs such as rent, utilities, and repair and maintenance are virtually non-existent since consumers don’t have to be physically catered to. Moreover, with your brick-and-mortar business, you can only target a limited number of customers at one point in time. By reaching a larger audience, you can increase your sales by potentially unlocking an unlimited number of interested customers.
High fuel prices also discourage customers from driving to places like grocery stores or shopping centers, which leads to an increase in e-commerce activity. Again, excellent news for online food business owners!
Note, however, that if fuel prices continue to rise and the company has done everything possible to cut overhead costs, eventually they’d have to pass on that burden to consumers in the form of higher prices.
