Growth 08 May 2023
Winning in the kitchen: Addressing evolving consumer needs for at home meal consumption
The home meal space is a vast market with strong growth potential for the CPG industry. We believe collaboration between players offers opportunities for higher level solutions for consumers, better addressing emerging needs. Read on to discover the state of play, and our suggested framework for development.
The home meal space is a vast market with strong growth potential for the consumer packaged goods industry. Current macro trends across the food industry are impacting development while consumer choices are also becoming more complex. Diverse players seek to meet evolving consumer needs by approaching them from different perspectives, claiming higher relevance versus the alternatives.
Moving away from a combative approach between the different offer segments to a more effective form of cooperation between the various CPG players, will provide higher level solutions for consumers. There is the potential here to address underlying consumer needs more effectively and flexibly, which will therefore release incremental value.
Setting the scene: External influencing trends
When looking at home meals, there are a set of different major trends impacting the way they are produced, supplied, and consumed. The most relevant of these are:
There is a rapidly changing landscape, particularly since pre-pandemic times, in terms of household’s composition and typology. There has been a continued increase in people living alone. For instance, the number of single-person households without children in the EU increased by 28.5% between 2009 and 2021 (1). Also, many countries are experiencing a rapidly ageing population. By 2030, 1 in 6 people in the world will be aged 60 years or over and life expectancy will continue to increase (2). At the same time, social housing is becoming increasingly popular and new arrangements are defining different and novel models of co-living. All of this is affecting the way a portion of consumers are approaching their meal needs.
Consumers are spending more time at their place of residence, mainly due to increased remote working in the last years. In 2023, 78% of global employees will either work in a hybrid way or fully remotely (3). Moreover, the home is changing both its role and its structure. Particularly after the pandemic, the home has become a place for additional and amplified activities. The traditional boundary between in and out of home has blurred. Also, the size and space allocation are changing as the kitchen becomes progressively smaller, especially in large urban centers.
There is increased pressure to deliver on sustainability, with many countries expected to enact specific regulations in the next three to five years (4). This is already having an impact on the way food is produced and delivered. This comes hand-in-hand with regionalization of the economy, with countries driving regional convergence at the expense of global integration (5). This impacts supply chain dynamics and forces a rethinking of many of the processes that go into producing food for meals.
Evolving consumer needs: A more difficult balancing act for CPG brands and players
When consumers seek to solve their home meal needs, they are considering an increasing number of variables. Those can be clustered into the following:
This is about how quick and easy the preparation of the meal is, as well as affordability. Cooking remains an important activity for many, but there are, increasingly, more ways to spend free time (e.g. with on-demand entertainment, social media, gaming, etc.) and as a result, cooking has become less attractive. In the U.S. the share of respondents who said they cooked a meal from scratch for dinner each day dropped to less than 50% on Fridays and Saturdays vs. higher percentages on the other days of the week (6).
This is not only about the taste of the meal but also about how varied the taste can be. Attached to pleasure, there is also the whole experiential dimension (namely, how you enjoy preparing, serving, and eating the meal) as well as the emotional reward linked to serving the meal to people you care about.
Consumers increasingly associate food with health and wellbeing, as they evaluate their meals option through the criteria of it being ‘clean’ (i.e., it has the presence of certain ingredients) and ‘simple’ (i.e., a judgment regarding the number of ingredients). Also, functional benefits as well as the nutritional contribution of ingredients are becoming relevant elements driving consumer decisions. For instance, 44% of UK consumers claim they are trying to make more healthy choices when approaching food (7).
This doesn’t come as a surprise, as consumers are increasingly aware of elements like sourcing and how sustainable this is, as well as how socially equitable the food is. At the same time, they also are more concerned about minimizing waste and energy consumption (for both environmental and financial reasons).
In all, the range of choices has become more complex. More information is needed, and an ongoing balance is sought by consumers. This balance must be adaptable to cope with different moments and occasions as they emerge.
A fast-evolving offer: The need for different options to cope with demand
To answer expanding consumer needs and the continued search for a balance, the offer is becoming more varied and sees different players converging in the kitchen:
- Food manufacturers are managing their portfolios and innovation centered on ingredient/food-based products with different levels of service, spanning from packaged ingredients or meal sets to ready-to-eat offers.
- Appliances manufacturers are developing and offering smarter and more connected systems supporting the preparation of meals.
- Delivery providers and takeout restaurants are removing the barrier between in and out of home meals, connecting a varied offer of foodservices that include prepared meals for consumers.
These three clusters of actors have an offering primarily based on segments that include consumer packaged goods, meal kits (e.g. Hello Fresh), kitchen appliances, ready meals and meals delivery.
The amount of time required to consume the offer is a key discriminating factor, spanning from heavier/lighter cooking to simple preparation/heating, through to direct fruition. Sizing and the level of maturity of different segments is different, ranging in valuation estimates from as little as US$20 Billion to over US$2,000 Billion (8) at a global level. All segments are growing and are expected to continue growing albeit at different rates, with a CAGR between 5% and 9% (8). This indicates substantial business potential for this whole area.
Each segment has strengths and weaknesses that contribute to its development. Solving the main challenges can increase the growth potential of each of the segments by aligning more closely with multiple consumer needs at the same time.
A framework for development
Looking at how different consumer needs (convenience, pleasure, healthiness, and sustainability) link with the existing offer segments (packaged goods, meal kits, kitchen appliances, ready meals and meals delivery) provides a framework outlining potential opportunities.
Each offer performs on almost all the main consumer need areas but with different levels of intensity and, most importantly, in different ways. Consumers have perceptions of the strengths and weaknesses of the different options and tend to adapt to an evolving environment. In the UK 39% of consumers claim that they have used their freezer more in 2022 because of concerns around inflation and food waste (9), while 63% of adults state that they purchase packaged ready meals as an alternative to having a takeaway, considering this as a more affordable proposition (10).
Also, manufacturers’ innovation is impacting the way consumers perceive the different offer segments. For example, Kaltech uncovered the Food Fresh Keeper, a preservation box that uses a chemical procedure called photocatalysis to keep bread and produce fresh for longer, allowing consumers to better plan the use of ingredients for their meals (11).
Recognizing where the offer performs better versus the other alternatives highlights opportunities for further developments. At the core remains the need to optimize and balance the needs either through innovation or simply through portfolio management.
Potential evolutions and new opportunities
Based on the overall mapping of consumer needs and offer segments, a set of potential innovation drivers can be identified to improve the offer and impact growth in this area, driving profitability for CPG companies. Those drivers are:
Linking some of the offer segments with the appliances can provide an opportunity for enhanced value to consumers. This could be, for example, meal kits and subscription services that are linked to pre-installed software in smart appliances, which are able to make the most of these kits. There might be opportunities in developing products that can better fit with a specific appliance to boost one or more benefits (i.e., frozen pizza and a dedicated pizza oven that boosts the convenience and pleasure dimension).
Leveraging assets and initiatives from one of the offers into another area. For example, taking a ready-to-eat offer closer to a premium restaurant delivery using home appliance technology, which can boost both the experience and pleasure in the meal. Or, for instance, offering air-fried chips that boost health benefits.
This is the idea of building higher level solutions that better address different consumer needs around preparing meals during a week/month period, by combining more of the existing segment offers within the CPG industry. This could include meal plans based on a combination of different levels of cooking or preparation during the week, which also addresses the balance of different benefits (e.g., convenience when needed most or pleasure when the focus is on fully enjoying the meal).
Building on the previous, there is an opportunity for a broader connection between preparing a meal and improving on grocery store shopping when sourcing ingredients, while also reviewing and tracking nutritional components, all of which can be connected to the appliances used at home and provide better transparency and tracking of meal activities. By boosting the experiential side of home meals with increased and ongoing connectivity applied to the provision and execution of recipes, the selection of ingredients, preparation of dishes and the elevation of consumption moments, there is space to provide everything within food and services to deliver an ideal combination of all the expected consumer needs simultaneously (i.e., convenience, pleasure, health, and sustainability at once).
The opportunity for supporting value creation in the CPG industry
A potential way forward for any CPG player in the space of in-home meal solutions hoping to position its offer in sync with developing consumer expectations is to check how the current value proposition aligns with the four consumer need areas. Analyze the portfolio composition and its ability to cover the various needs in a differentiating and meaningful way. This check should be applied also to the innovation pipeline to see if it can contribute to balancing the offer. An additional step would be to look at more disruptive innovation that can combine or connect the different offer areas (from packaged goods through to delivery services).