Demand Drivers Facing the Food System
DOWNLOADMarch 31, 2010 - William A Knudson
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This paper is an update of a previous paper entitled Economic and Demographic Forces Affecting the Agri-Food System that dealt with demographic forces and the main demand drivers facing the food system. That paper was written in 2007 and can be accessed online at http://aec.msu.edu/product/documents/Working/raepaper.pdf. The focus on this paper will be less on the demographic forces and more on the demand drivers. There have been two major changes in the demand drivers since the first paper was written. The first is that value has become relatively more important. The recession has made consumers more price conscious and trading down has become more common. For example, eating as restaurants has declined and the number of meals eaten at home has increased. Indulgence remains a demand driver but its position relative to value has declined.
The second major trend is the increased interest in products that are considered to be produced in a socially and environmentally responsible manner. The previous paper considered this trend has an aspect of the demand driver of indulgence. Over time this demand driver has become more and more important to some consumers, especially some consumers who have the purchasing power and the political acumen to alter the food system to reflect their preferences. As a result it is analyzed as a separate demand driver in this paper.
The main demand drivers affecting the food system are convenience, wellness, value, indulgence, social/environmental characteristics, and ethnicity. This paper will analyze each of these demand drivers individually and their impact of firms in the agri-food system. These demand drivers present opportunities for firms, and Michigan is well situated to take advantage of some of these drivers.
The identification of most of these drivers was the result of discussions with MSU Product Center staff and staff from the Hale Group. Taste is not considered. The reality is that it is extremely unlikely that food and beverage products that do not taste good will be successful. Consumers take products that are good tasting as a given.
