Food Delivery 2.0: Implications for incumbents

The new era in food delivery is a hot topic at the moment—and it marks an incredible opportunity for existing players and others in the food industry, rather than a total disruption. In this report, Rabobank looks at how food producers, grocers, and restaurants can take advantage of this USD 60bn per year opportunity. We believe these food delivery platforms are here to stay, and the majority of consumers will, to varying degrees, shop both online and offline. We have four recommendations for the food industry.

Do not sit out this trend

No major player in the food industry should sit this one out. Online food sales are growing fast and e-commerce tends to appeal most to those shoppers who are least price-sensitive, creating new opportunities to increase margins. Countless new players are fighting to muscle in on the space if incumbents don’t claim their share.

Leverage your strengths

Existing players are playing catch-up as many of the new entrants have been more successful in finding a workable business model for last-mile delivery logistics. But existing players shouldn’t sell themselves short: they have other strengths that they can leverage in order to compete in the new space. For example, while retail’s existing footprint, including warehousing and distribution, implies high costs which can put them at a disadvantage when competing with purely online players, it can also be used as a strength. Existing players also have a focus on price, quality, and safety that is recognized by consumers. Leveraging these by way of updated sites and mobile platforms will help retain loyal consumers who are hesitant to buy—particularly fresh products—from e-commerce-only sites.

Acquire the technology and expertise you lack

Companies such as Domino’s or Kroger have invested in-house to develop the necessary technological skill sets. But in other cases, it may make more sense to acquire an existing player, rather than spending the time and money to build in-house.

Reconnect with the customer

Consumers have changed. Not only are the types of foods preferred (the ‘what’) different, but the ‘how’ and ‘where’ we shop have changed as well. More and more, companies are investing resources in analyzing online behaviors in order to obtain a better level of customer understanding. Having direct access to consumers through digital purchasing platforms is a must-have for companies who want to keep track of consumers’ behaviors and preferences. At the end of the day, the story will be about consumer loyalty—and incumbents have a longer history with consumers, which they should use to their benefit.