THE FOOD SYSTEM
Consumer Needs Determine What Food Is Sold
Consumers need their food to do many things besides supply nutrients
Agriculture sits at one end of the food system, and consumers sit at the other. Everything between is intended to match the supply of food to the demands of consumers. For 99+% of human history, people consumed food, but were not what we would call “consumers.” Due to limited transportation, refrigeration, and cooking equipment, diets were narrowly local. The separation of farming from eating in space and time converted people into (food) consumers. Urbanization meant that food production happened somewhere else. Urbanization also concentrated people geographically and made mass markets and standardization practical and necessary.
In the early 20th century in the US, products were sold via general stores, which were expensive with limited offerings. General grocery stores rarely carried perishable foods like meat, dairy or produce. A&P introduced “combination” stores in the 1920s. Ralph’s and Alpha Beta introduced what we would recognize as a supermarket in the 1930s. By 1950, almost 64% of the US population lived in an urban area (Figure 4.1) and obtained their food from a supermarket.
The increase in US population was essentially growth of an urban population; the number of rural citizens barely changed, while the country added 220 million urban consumers. Population growth and urbanization were not the only changes. The workforce participation of women increased late in the 20th century. Suburbs absorbed additional people, and households went from less than one car to more than two. Radio and television created national markets for many things, and competition drove companies to study consumers closely in hopes of greater profit and economic survival.
Question—What do food buyers want?
Marketers have a conceptual model for food shoppers, which is illustrated in Figure 4.2. Consumers balance cost and “quality,” where quality involves some combination of taste, convenience, and health. Each factor pushes and pulls on a buying decision because there are almost always tradeoffs. This chapter will mostly focus on US examples, but the principles seem to apply everywhere. Importantly, every consumer has a different balance in these influences at different times.
Affordability is generally the most powerful driver of choice. Food producers are acutely aware that consumers shop by price, and consumers expect price to be justified by quality. Quality (of food/beverage) is described by three properties: taste, convenience, and health.
Taste covers the entire sensory experience of eating or drinking. It includes the taste, flavor, aroma, texture, and appearance. Taste is usually the most important quality parameter for food.
Convenience relates to the effort and complication associated with food. Some foods are inconvenient to prepare. They require unusual ingredients, cooking skills, special equipment, or time. Just getting food can be convenient or inconvenient. We might like the idea of separate bakers, butchers, produce vendors, and so forth, but going to a single store is more convenient for American car-centric shoppers. Restaurants can be even more convenient.
Health is a generalized concept of health and nutrition plus specific health, wellness, nutritional, or “functional” purposes. People view “health” differently depending on their age, lifestyle, life stage, and role (a mother buying with her children in mind makes different choices than those she makes for herself).
Consumer research is used to guide new food product development. Loyalty programs track who buys what. In-store cameras track consumers movement in stores, what they look at, and in some cases, track how much time consumers spend reading labels. Products are “refreshed” every 5–10 years. In-store behavior suggests that cost, taste, and convenience are strong drivers of buying behaviors, while health is often a lower priority.
This is nothing new. Many ancient urban Romans mostly ate at what we would think of as fast-food stalls; they did not have kitchens at home. Romans were not the only early urban people to prize convenience in food. Trade in spices began thousands of years before Roman times, indicating the power of taste in food choice. It is hard to understand today just how valuable spices were in earlier periods. The idea that health was linked to food is similarly thousands of years old.
Question—Why does the same consumer buy different things at different times?
Food consumption depends on the eating occasion. You require something different in the daily family supper than in a Thanksgiving dinner. Breakfast foods are rarely supper foods. You change your standards when you are tired and just need something quick and tasty.
An occasion is a time, a place, or a context. People eat differently when alone, with their family or with a group.
A company selling single-serving chocolate milk wanted to boost sales. The first surprise was that the leading sales channel was convenience store/gas stations — not grocery stores. The second surprise was that sales peaked between 9:30 and 11:00 AM. The final surprise was that the main buyers were delivery truck and mobile repair service technicians. Chocolate milk in a closable bottle created no crumbs (like a pastry, bar or cookie might) and consumption could be spread out. The flavor was better than plain milk, and even as the milk warmed, it remained enjoyable. Chocolate milk was perceived as healthy compared to soda. Drivers felt that soda in the morning was inappropriate; soda was an afternoon snack. Single-serve chocolate milk fit the occasion of consumption in the truck.
Get Michael Porter’s stories in your inbox
Join Medium for free to get updates from this writer.
It is hard to under-estimate the variety and specificity of eating occasions. Something like breakfast could be bacon/fresh pastry/fresh-squeezed orange juice/coffee or a takeout cup of coffee/granola bar or a piece of microwaved leftover pizza. We massively over-simplify the modern consumer’s approach to eating. Every meal is an occasion in which context influences food choices.
Question—How does affluence influence food purchasing?
From 1960 to the early 2000s, the fraction of US disposable income devoted to food fell about 40% (Figure 4.3) driven by a decline in expenditure on food-at-home. Measured in constant dollars, the absolute expenditure on food-at-home barely changed from 1960 to 2014 in the US. Rising incomes made food relatively less expensive. This pattern was first recognized by Ernst Engle in 1857, who observed that as family income increased, household food expenditures increased, but the proportion of income spent on food decreased (see this source for an international perspective).
During the same time period, people spent an increasing amount of their income on food eaten away from home; in constant dollars, spending doubled on food away from home. Almost half of US food expenditure now occurs away-from-home.
Question—Does affluence significantly alter nutrient intake?
The USDA collects data on eating behaviors, nutrition, and demography (including income) through multiple surveys. Analysts are able to estimate the caloric and macro-nutritional (carbohydrate, fat, protein, fiber) intake of people in low, medium, and high income groups, and that data is the basis of Figures 4.4A-E.
These data suggest that (1) eating behavior does not differ hugely across income groups when expressed as caloric or macro-nutrient intakes, (2) at-home fat consumption decreased from 1978 to about 1990, then leveled off, (3) at-home protein consumption also declined from 1978 to 1990 before stabilizing, (4) at-home carbohydrate consumption rose to a peak in ~2000 and then fell, (5) away-from-home consumption of calories, carbohydrates, fat, and protein rose through this period, (6). It also demonstrates that while expenditure may be nearly equal between eating at and away-from-home, we still get most of our food intake (by weight) at home.
But the main observation is probably that people manage affordability such that, across the income spectrum, people have nearly the same gross nutritional intake. Many food products are available at different price points (for example, branded and unbranded ready-to-eat breakfast cereal) so that people can switch price-points to manage food cost.
Question — What job is food doing for consumers?
The model of cost and quality helped explain consumer behavior and thus their “demands,” but it was not long before need for more insight was needed. What came next was a concept called “job-to-be-done” where the question was, ‘What “job” is the consumer doing when they buy a product or service.’ The classic example of a job-to-be-done is a person going into a store to buy a drill. They do not really want a drill, but they need to drill a hole to hang a picture. Why hang a picture? Because it is beautiful and enhances the delight of being in the room. The “job” in this expression is the feeling of delight—not the drill, or hole, or picture.
Using this perspective, what job is a food doing? Three main kinds of jobs have been identified; functional, social, and emotional (this perspective is not restricted to food).
A functional job creates a tangible benefit. Saving time or money are examples of functional benefits. A social job creates or maintains your status. Eating a salad with co-workers can be a status display, as is ordering craft beer when eating with friends. A traditional holiday dinner is full of social jobs to complete. An emotional job creates or maintains a feeling. A mother choosing healthy foods for her children is completing an emotional job.
Many tasks or processes accomplish multiple jobs at once. When you choose the most cost-effective way to feed your children healthy food, you complete functional (manage cost) and emotional (I’m a good mother) jobs. The delivery/service people in the example above were doing functional jobs like keeping their truck clean while doing the emotional job of having an “appropriate” morning snack. The food people eat is doing lots of jobs. Whether consumers are consciously aware of all these jobs is unclear, but nothing makes jobs clearer than when they stop getting done.
Changes to the food system that increase cost, and decrease taste, convenience, and health are strongly resisted; we experience loss aversion when this happens and reject the new offerings. Plant-based “meats” (meant to be healthy, climate-friendly alternatives) were rejected again because they failed to complete jobs related to affordability, taste, and health. “New Coke” was rejected because it failed to complete an “expected taste” job. Most newly introduced food products fail to gain traction with consumers—probably because they fail to do some important job better than the incumbent product.
The food preferences of consumers are constantly changing, but one of the insights from the “jobs” framework is that the jobs do not. People who wish to change the food system must find ways to complete consumer jobs or replace existing jobs with new, better jobs.
Never forget that all of us are consumers in the food system. Whether you grow and cook the majority of your own food or eat 90% of meals away from home, you are acting on your preferences to complete your jobs. Those preferences create the demand that pulls food through the supply chain. There is a tendency to act like we are powerless participants and that agribusiness or big food companies are in control; this is untrue. Consumers shift their purchasing to match their own goals. In the US, consumption of ready-to-eat breakfast cereal, sandwich bread, carbonated soft drinks (full calorie and sugar-free), beef, and orange juice fell slowly for decades as consumers shifted to other options.
For these examples, declining consumption was attributed, in part, to concerns about health. While cost, taste, and convenience get lots of attention and perhaps spark rapid consumer reactions, health is slowly and quietly changing diets one consumer decision-maker at a time.
