This part 2 of my Future of Food series. See part 1 here.

If software is eating the world, its final meal is… food. The food we eat and the way it is discovered has been experiencing a decade’s long technological transformation. While slower than tech transformations seen in other categories, the food transformation is the most personal and will ultimately be the most profound.

Three simultaneous changes are happening related to the availability, personalization, and niche focus of food. Don’t believe me? Kroger has partnered with an autonomous car company, McDonalds recently acquired an AI startup, and an eSports megastar will soon appear on cans of Red Bull. These give us just a glimpse of the future of food.

I want it now!

Millions of years of evolution taught us that when we feel hungry, we must eat – immediately! Easy availability has long been a powerful moat for food companies, hence the success of the drive-thru and home delivery, both of which are undergoing significant technological disruption. In 2017, half of Domino’s global retail sales originated from digital channels, primarily online ordering.

Dominos stock over time

The pizza giant has apps and Skills for Alexa, Google Home, Facebook Messenger, Apple Watch and more. Dominos pizza can be delivered anytime, anywhere, and the company has used product availability as one of its biggest differentiators. In 2019, the concept of availability isn’t novel, but when Dominos launched online ordering in 2007, it was revolutionary. No other national pizza chain offered online ordering. This was years before the Apple App Store launched, and way before ubiquitous GPS and mobile apps made services like GrubHub and Postmates possible. Dominos’ early effort was old school, website-based online ordering, and it happened at a time when the company’s performance was in serious decline. By going all in on technology, Dominos’ stock has grown over 700%, increasing from $30 a share in 2007 to nearly $300 a share today.

While pizza companies have found ways to reduce availability friction, grocery stores have been the slowest to transform. In fact, only 5.5% of grocery sales happen online. But that’s changing as we speak. Kroger, one of the largest U.S. supermarket chains, recently partnered with self-driving startup Nuro to deliver groceries autonomously. Just as it feels archaic today to make a phone call to order a pizza, Kroger knows that its days as being a physical place where customers wander the isles are limited. Grocery delivery is on the rise, with Kroger’s digital sales up 58% in 2018. According to Kroger CEO Rodney McMullen, their digital services allow them to “offer our customers anything, anytime, anywhere”. As autonomous cars decreases the cost of delivery, shopper habits will continue to shift toward digital platforms. These changes in food availability and purchase behavior will also radically transform product discovery.

A Nuro Kroger delivery

Tell me what I want

Retailers like Kroger have long relied on the high dollar advertising deals with brands for offerings like shelf talkers, end caps and point of purchase displays. These marketing vehicles are essentially free money for grocery stores, but that revenue source will soon disappear, only to be recaptured by services like Instacart. By reinventing in-store marketing through in-app banner placements, push notifications and digital price promotions, Instacart unlocked a vital source of revenue. For a brand, that means shelf presence will become less important than its digital presence.

Hey While a premium brand’s packaging has to be Instagramable, it must also compete in digital environments like Instacart and on mobile devices which notoriously compete for user attention. Flashy banners alone won’t be enough to capture attention, however. Products must be tailored for every sub-market and niche imaginable. Enter machine learning.

If you like our burgers, you’ll also like our fries

Earlier this month, McDonald’s acquired artificial intelligence company Dynamic Yield. The goal is to bring the same customers who bought this also bought that technology that is ever-present in eCom to McDonald’s drive-through screens and in-store kiosks. Every golden arch sign reminds passersby of the billions McDonald’s has served. Those billions aren’t just driving revenue, however. They are also an incredible source of data. This all leads to, what McDonald’s CEO Steve Easterbrook says, is a “transition from mass marketing to mass personalization.”

Initially, mass personalization will be simple suggestions, like an afternoon coffee with the drive-thru order of a Happy Meal. McDonald’s artificial intelligence will infer that the order is from a parent on their way home from work, getting dinner for the kids, who likely wants a caffeine boost (a terrible reality for the health of our nation, but let’s ignore that for now). It’s the classic eCom upsell that never moved beyond “would you like fries with that?” in physical retail.

With this new ability to siphon consumer data like their eCom peers, a computer-vision and AI enabled retail transformation will begin. Look no further than this Chinese airport check-in kiosk that directs users to their exact gate, using nothing more than their face. We know you want fries with that.

This personalization does not end with the store experience. The very products consumers buy will increasingly become personalized.

What does this snack say about me?

You want keto? We’ve got keto.

Consider any diet, then scan the shelves of Amazon-owned Whole Foods. You’ll find no limit of startup consumer packaged goods brands (CPGs) focused on that niche. This year’s trend-du-jour is the high fat, low carb ketogenic diet. Every entrepreneurial-minded keto fanatic has launched a keto snack company after he or she couldn’t find one that works for them. The shelves of Whole Foods are now packed with high fat treats, and keto companies are appearing on Shark Tank.

The problem-solution timeframe has shrunk as trends appear on Reddit and Instagram, propagate quickly throughout the country, and generate demand for a convenient pre-made solution. As the joke goes for Crossfitters and vegans, how do you know that someone is keto? They’ll tell you. Your wrapped snack says as much about you as the bag you grabbed it from. Are you a Keto Bar, RX Bar or Perfect Bar?

Authentically owning a niche is a tried and true technique, and that’s never been more important than today. But owning a niche does not mean thinking small. It was only a few years ago that eSports was being laughed at. Now it’s a big business that everyone wants a piece of, from owning a team to working with top talent. And that includes CPGs. Millennials will always remember Michael Jordan on a box of Wheaties. For Gen Z, it will be eSports star, Ninja, on a can of Red Bull.

Hey Siri, make me a protein bar

Diet trends and identity are nothing new to the CPG space. What is new is the unbundling of food brands, combined with emerging technologies, to usher in truly personalized food. Just as McDonald’s is using data to sell more fast food, individual health data will soon be used to personalize food based on specific dietary needs. Genetics, environment, activity and gut biome play an important role in how food fuels each person. Individual health data hasn’t been unlocked at scale yet, but when it is, food personalization will spread just like clothing personalization has – from Unmade to Cafe Press. Imagine a protein bar custom made for you every month, based on your Apple Health data. Talk about a CPG technology moat!

Availability, personalization and a niche focus will create the next CPG behemoth during the next food re-bundling. Technology creates winner-takes-all environments, so the Proctor and Gamble of the future will leverage these three strategies to create the next mega-brand. Until then, expect a deeper fragmentation of unbundled food offerings from brands who innovate through technology, lean deeply into their niche, and deliver products to shoppers in minutes – not hours or days. In short, food brands are going to know you better than you know yourself.

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