Future of food How technology and global trends are transforming the food industry Uber Eats Limitation of our work General use restriction This report is prepared solely for the use of Uber. This report is not intended to and should not be used or relied upon by anyone else and we accept no duty of care to any other person or entity. The report has been prepared for the purpose of exploring possible scenarios around the future of food. You should not refer to or use our name or the advice for any other purpose. Uber Eats Future of food Contents The state of play 1 Changing tastes 4 Scenario analysis 8 One plate at a time 10 Data driven food 12 Master chef 14 On trend 16 3 Future of food Uber Eats Every day, 7.7 billion people around the world eat, consuming 14.5 million tonnes of food.1 But what, when, where and how we eat varies significantly by country and by consumer. Nowhere is that more evident than in the Asia Pacific. The region is home to more than half of the world’s population – 4.4 billion people, and dozens of cultures. Each country has its own unique food traditions and preferences, from the spices of India to the seasonal flavours of Japan. And each offers a range of ways of eating, from street food to fine dining. The region is home to a diverse and interrelated food ecosystem, from producers to retailers to consumers, which supports the rich food culture. Yet as technology and consumer preferences shift, what and how we eat is changing, sometimes in unexpected ways. The food ecosystem, and the relationship between its players, is evolving to adapt to these changes. This can feel challenging and uncertain for those in the industry. But with this change comes many new opportunities for growth. In this report, Uber Eats has asked Deloitte to explore different possible scenarios for the future of food, and what they mean for food businesses in the Asia Pacific. 4 Uber Eats Future of food The state of play Food is a large – and growing – industry. Sometimes, food Each individual player has an important role in the food is simple; straight from the farm to our plates. But more ecosystem today, but it is through interactions that often, what we eat has been crafted by a range of people the industry creates sustenance, and experiences, – grown by farmers, processed by manufacturers, sold to for consumers. grocers, and finally cooked by restauranteurs. In the following pages, we look at the current state of the As a result of changing technology, consumer food industry. Specifically, we focus on the big picture preferences, globalisation and demographics, the numbers, spending on food and on prepared/ready to industry is evolving. The food ecosystem is becoming eat meals, and we drill down into food delivery. more complex and more interdependent. This is driven by consumers, whose spending on food, and food decisions, are shifting. Before we examine the future of the food industry in the Asia Pacific, it’s important to look at the state of Figure 1: The food ecosystem in the past play today. The food ecosystem Grocer Historically, each player in the ‘food chain’ was distinct and operated independently. There was a reasonably clear linear process to get food from paddock to plate (Figure 1). Producer Processor Wholesaler Restaurant Consumer But, like in many other industries, this landscape is changing (Figure 2). • New technologies are creating a more diverse Figure 2: The food ecosystem today food ecosystem. This ranges from new food manufacturers (for instance, the manufacturers of synthetic meats), to the rise of technology- enabled platforms which connect food Producer businesses to consumers, and online-only players offering convenient food at lower prices. Wholesaler Processor • Changing consumer preferences are blurring the traditional boundaries between players. Grocers are starting to offer prepared meals, for example. Restaurant Deliverer Grocer This increasingly interconnected and interdependent food ecosystem is creating more value and choices for consumers. The price of raw ingredients is fallingi (for example, the global cost of wheat has fallen 35% Consumer in real terms over the past 30 years),2 but the total value of food is increasing; a result of more players adding value through the supply chain. i This is a result of technological advances, globalisation, and increasing competition. 1 Future of food Uber Eats The food budget Convenience is king Food is a part of every household budget, Simultaneously, shifting preferences in It is not just how much consumers spend yet the amount we spend can vary greatly. nations with higher incomes such as Hong that has changed. At the turn of the millennium, household Kong are seeing consumers increasingly spending on food as a proportion of willing to spend on quality food. As Increasingly time-poor consumers have disposable income in the region ranged globalisation and technological advances more options than ever before, and we from 8% (Hong Kong) to over 40% create new opportunities for innovation are witnessing a shift in the composition (Sri Lanka).3 and more competition in the supply chain, of food spending. A greater share of food our food spending is converging.ii budgets is going towards food that is But there are indicators that the share prepared outside the home. Around two in of income spent on food across the Asia This is good news for restaurants. And it’s five Asian consumers say that dining out is Pacific is beginning to converge. As shown not all bad news in countries where spend one of their five fastest growing expenses.5 in Figure 3, countries with relatively low as a share of income is falling, either: incomes are seeing food spending take in many cases this is simply a reflection of This is old news in countries where a culture up a decreasing share of expenses as incomes rising faster than food budgets, of affordable eating out is well established. incomes increase. For example, in India, with total spending on food increasing as In particular, countries with strong street GDP per capita today is almost twice a result. food industries, such as Malaysia and what is was 10 years ago, contributing to Taiwan, have long seen eating out make up a the decline.4 substantial proportion of food expenditure.6 Figure 3: Food spending as a percentage of disposable income in the Asia Pacific5 45 Sri Lanka India 40 China 35 30 Thailand 25 Taiwan Malaysia New Zealand 20 Japan South Korea 15 Hong Kong 10 Australia 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ii Measured as a proportion of income. iii Food spending includes spending on food, beverages, and tobacco. Source: The Economist Intelligence Unit (2019) and Deloitte Access Economics 62 Uber Eats Future of food In other countries, the rise in dining out Close to half of Chinese consumers Ready to eat meals is a more recent development, and is yet (46%) use online ordering and delivery The delivery of restaurant meals to the to reach its full potential. In Australia, for services, almost double the global home has risen drastically in recent example, money spent on meals prepared average. And an even greater share say years.12 One-third of consumers are outside the home has grown from 25% they’ll use these services in the future.9 now using a restaurant or meal delivery in the 1980s to more than one-third of service, and 7% of consumers get delivery household food expenditure today.7 Prepared meals once a week.13 This is driven by the As consumers become more time poor, expansion of online-delivery platforms Convenience is not just about saving prepared meals offer busy households that provide consumers with greater time on cooking. It’s also about getting a convenient way to source their meals. choice and convenience at dinner time. the food you want, when and where you Usually only requiring reheating for Restaurant-to-consumer delivery grew want it. Technology-enabled delivery – for consumption, this delivery category 14% in Asia in the last year alone.14 groceries, prepared meals, and ready to eat is particularly popular among young meals – has increased dramatically over the professionals.10 Industry revenue has also last decade. Rapid urbanisation and low grown in the past five years – driven by labour costs across some markets in Asia a growing preference for personalised are especially well suited to home delivery. meals and increasing economies of scale And consumers are taking full advantage. from larger production volumes.11 Groceries Asia Pacific consumers rely less on brick- and-mortar stores when purchasing groceries than consumers in other parts of the world.8 Figure 4: Online food delivery revenue in the Asia Pacific (exc. China) in 2019, $US billions 7,092 2,028 1,529 939 519 145 73 71 21 India Japan South Australia Hong Malaysia New Bangladesh Sri Korea Kong Zealand Lanka Source: Statista (2019) and Deloitte Access Economics 37 Future of food Uber Eats Changing tastes We know that the way people produce, procure and Controlled systems are facilitating local food consume food has changed significantly over the last production, while significantly increasing productivity few decades. However, eating habits will continue and lowering costs. The vertical farm, for example, to evolve due to technological advances, changing is shifting agriculture from rural locales to high-tech consumer preferences, and our growing population. urban indoor farms. These trends are complex, multi-layered, and interact Next wave technologies such as the Internet of with each other in different ways.