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Food Industry Develops an Appetite for the Internet
By Michael Pastore

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The food industry has taken a giant leap forward in adopting electronic methods for locating products, according to a survey sponsored by Thomas Food Industry Register and American Express.

The FoodTRENDS® 2000 examined three market segments -- restaurants with fewer than six units, wholesalers/distributors, and food processors -- and found that the food industry is keeping pace with the surging world of e-commerce in terms of electronic sourcing/purchasing.

"The majority of food industry executives are sourcing via the Internet," said Linda Rigano, publisher of Thomas Food Industry Register. "With wider product selection online, the ability to buy direct, and the convenience of shopping during non-business hours, more than 80 percent of respondents expect their online purchases to increase over the next two years."

According to the survey, food processors and restaurants have more than doubled their use of e-mail to communicate with their suppliers (from 30 percent to 61 percent and from 9 percent to 20 percent, respectively). There has also been a 50 percent increase of e-mail usage among wholesalers/distributors, growing from 38 percent in 1999 to 58 percent this year.

Restaurants show the most significant increase in online sourcing via the Internet and proprietary software, almost doubling from 23 percent to 51 percent. In 2000, 65 percent of food processors source electronically, compared to 42 percent in 1999. Among restaurants and wholesalers/distributors, more than three-quarters cite the ability to source outside of normal business hours as the most important advantage to electronic sourcing. Locating hard-to-find products is paramount to 82 percent of food processors.

Nearly half (49 percent) of restaurants now order electronically. Food processors have also increased their electronic ordering from 21 percent to 40 percent in 2000. One-third of food processor order via the Internet, up from 14 percent a year ago. More than 80 percent of the respondents in each market segment is anticipating electronic purchases to increase over the next two years.

All of the market segments surveyed use Web sites, but they are most prevalent among food processors (69 percent), a one-third growth from 51 percent a year ago. Restaurants have seen the greatest increase, rising from 30 percent in 1999 to 56 percent this year. The number of wholesalers/distributors maintaining Web sites remains steady (52 percent vs. 51 percent in 1999).

Data for the FoodTRENDS 2000 survey was obtained via nationwide interviews with 800 food executives responsible for overall management decisions, including 300 restaurants with more than six units; 250 wholesalers/distributors; and 250 food processors. The research was conducted by Magnet Communications. September 20, 2000

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