Living in the Age of the Prosumer

How they will change the way we farm, grow, process & provide food.

‘Prosumer’ is a term used to describe consumers who actively become involved with the design, production and delivery of the goods and services they consume. Considering the power of social media, prosumers have become vocal advocates for products and brands, and what they choose to consume reflect their values, aspirations and beliefs. From a company perspective it means that more and more prosumers shape, and even control, the message and drive demand- not the manufacturer.

“(Food producers & farmers must) expect to meet consumer demands, not just those they have defined today but those they think of tomorrow.”

Walter Robb, CEO, Whole Foods Alltech Rebelation Conference, Lexington, KY. May 2015

Nowhere is this more evident than in the changing world of food production. Food is becoming incredibly cheap, representing less than 10% of the household expenditure in the western world. For the first time perhaps in history, the biggest challenges facing the food chain involve not just production technologies or costs, but the environmental and social impact of both production processes and the food itself.

Sales of processed foods are dropping as consumers turn to products with ‘clean labels’ (ingredients that you would find in a home kitchen) and organic foods. Sales of carbonated soda drinks, potato chips, packaged cereals, frozen dinners, chewing gum and even orange juice have dropped, by as much as 25% in the last five years as consumers come to see these as unhealthy food choices. By contrast, the growth in craft beers and craft breads, artisanal cheeses, coffee shops and organic stores reflect the intersection of craft and mass marketing. At the same time, recognizing these changes, government regulators, non-governmental organizations, suppliers of goods and services, and even potential employees are more proactive and outspoken than ever.

Welcome to the era of the prosumer.

Consumers who can easily research ingredients, processes, and companies to make more informed decisions regarding food safety and nutrition are driving the pace and imperative for change in the food industry. According to Forbes’ contributing author Susan Gunelius, these prosumers are “product and brand advocates,” who now significantly affect the success or failure of companies, products, and brands through their involvement on the social web.

Consumer priorities are changing rapidly, and their ability to make these priorities heard in the broader marketplace can force even large corporations to reflect those changes in their product offerings and production processes. In turn, these changes have important implications for the farmers and producers that supply the food and beverage manufacturers. The rise of the prosumer challenges the food chain to change sourcing practices, operational processes and marketplace relationships, all of which can be expensive to execute.

In interviews with 12,000 people in 37 countries, 20% of the participants were seen as having the characteristics of prosumers. The study concluded that relationships with food brands are weakening: “Whereas in the past, consumers felt strong connections with beloved food brands, today the industry is rife with disruption and distrust.”

Specifically, prosumers

1)   Seek foods that address concerns of sustainability of the planet.

2)   Are shifting their focus from organic to food grown locally.

3)   Prefer “nature-made foods” as healthier and as conferring pleasure and a sense of status.

The challenge for traditional food companies ("Big Food") and agriculture is clear. The New York Times summarized the challenge, saying “Consumers are walking away from America’s most iconic brands. ...Food companies are moving in the right direction, but it won’t be enough to save them. If they are to survive changes in eating habits, they need a fundamental shift in their approach. …The food movement over the past couple of decades has substantially altered consumer behavior and reshaped the competitive landscape.”

How can farmers and food companies respond? Future proofing.

50 top-global food and beverage organizations (identified by information from sources such as Forbes and Food Processing magazine) were examined. These included companies such as Wal-Mart, PepsiCo, General Mills, Kraft, Tyson, Smithfield, and Nestlé, to name a few. The goal was to identify the underlying demands of the prosumer, now and in the future. The research started with their websites and other public media, then continued with in depth interviews with leaders of 25 of those organizations. We asked them to identify what they felt their consumers want from them now and what they are likely to want in the future. Their responses can be summarized into eight categories: Competition, Changing Consumer Demands, Supply Chain, Market Structure, Food Safety, Nutrition/Quality, Labor and Data Security.

1. Competition: Aside from the familiar competitive challenges (staying ahead of/differentiating from competitors, fluctuating prices, failure of new products and the emergence of new competitors), the big prosumer challenge noted was "Guilt by association." This is when one company tarnishes their category – whether by bad luck or bad acts –and other companies in that sector suffer from consumer reaction. For example, recently Greenpeace activists blocked palm oil imports from IOI Commodity Trading from unloading at Rotterdam harbor until the Malaysian trader signs a statement committing its supply chain toward sustainable practices.
2. Changing Customer Demands: The influence of social media was a big concern. Prosumers are pushing hard for healthier options, animal welfare, variety and less processed food. Staying relevant, anticipating changing tastes and changing consumer priorities were seen as big challenges.
3. Supply Chain: Prosumers expect integrity from participants all the way up the food supply chain. They are also looking for security of supply, efficiency within the chain and they expect to be able to trust the relationships between partners in the chain.
4. Market Structure: The way that prosumers see market structures is increasingly different from the way food organizations are used to seeing them. Increasingly, there is a blurring of the lines between branding and own label, shifts from traditional retailers to discounters and changing retail relationships.
5. Food Safety: Safety- and consumer confidence in food safety- is a particular issue for food organizations. Prosumers are voluble about concerns such as food borne illness and food recalls, and are happy to make legal claims about contaminants (directly from that company, or upstream contamination from suppliers). Food producers have to be mindful of generalized consumer fear and consumer expectations of food safety.
6. Nutrition/Quality: Prosumers are on the lookout for unhealthy ingredients (whether real or perceived). Food producers have to be conscious of the image of ingredients and products, and learn how to address negative perceptions, while meeting the growing preference for healthier alternatives.
7. Labor: The food companies noted that finding and keeping labor is a growing concern. More advanced work practices- from farm to the table- required more skilled workers. Prosumers will expect the companies that they buy from to ensure that all workers get reasonable pay, no matter where they live.
8. Data Security: Food companies are keenly aware that protecting the integrity and security of both customer data and supplier information is essential, and they expect it to get harder to do so in the future.

So what does it all mean for me?

If you are in the business of dealing with consumers the development of prosumers is a big deal. Today’s expectations will become tomorrow’s minimum standards. Nutrition, food quality, freshness and taste will become givens, that is, they will be viewed as the minimum requirements of doing business and no longer points of differentiation between food competitors.

The Havas report suggests that prosumers represent 20% of consumers, but this 20% disproportionately influences the behavior of businesses. Their demands are changing all aspects of the food ‘value chain’ and inserting non-price and non-availability constraints into the products and services they consume. Our research has identified 8 factors leaders in food organizations, caught between the pressures of prosumers and the changing nature of competition, can use, to future-proof their business. We also have a set of 80 questions you can use to find out how future-proof your organization is- just contact us!

Acknowledgements: Thank you to Corey Johnson for his help with the research, Prof Damien McLoughlin of Smurfit School of Business, University College Dublin, and Mary Shelman of Harvard Agribusiness.

A full paper including this research is in review for publication in the near future.

References available upon request.