With the new millenium approaching and the world anticipating its arrival, I think it’s a fitting time to talk about the transformation beginning now in the food and consumer product industry. We’re beginning to grapple with some of the most challenging issues that will be with us well into the next century – here are a few trends I see for the industry in the coming year.

Despite media hype predicting widespread disaster when Y2K hits, the food and consumer products industry is well positioned to make sure food is on the table in 2000. With a critical segment like the nation’s food supply at stake, the industry is taking no chances with the Y2K problem. The vast majority of manufacturers and retailers have been quietly tackling the Y2K problem for the past five years, putting their best technology experts to work on Y2K compliance within their own companies and within the systems of their suppliers and distributors. Yes, there will be a few glitches. But consumers should see no difference in the way they shop for food on January 1, 2000.

While technology may cause some glitches worldwide with Y2K problems, it will also be the tool that creates the most opportunities to change the way we do business in the next millenium – both with our trading partners and with the consumer. The new world of electronic commerce is upon us, but many questions remain as to how the industry will practically use the Internet to do business. What’s happening now?

For starters, we’re already seeing companies begin to experiment with Internet-based applications that go beyond EDI transactions. Look for the development of the first-ever industry Extranet in 1999, which will allow us to move from the current system of one-on-one communication between trading partners, to an open and interactive environment among manufacturers, distributors and consumers.

This new model will enable the industry to conduct traditionally "offline" activities like Scan Based Trading and Collaborative Planning Forecasting and Replenishment in an instant and interactive online environment. The Extranet may eventually include electronic item catalogues where item UPC numbers, price, sizes, product availability and other key information on manufacturer products will be instantly accessible to buyers. It may also allow companies to complete secure financial transactions and provide a common format for exchange of information.

On the consumer front, the Internet is quickly changing the way consumers think about how they gather information and make purchasing decisions. Just five years ago, only devout "techies" used the Internet. Today, few of us let a day go by without checking our e-mail, exploring our stock portfolios or searching for the day’s news online.

As we continue evolving into a "point and click" society, with instant and infinite information at our fingertips, consumers are becoming more savvy shoppers, comparing prices and looking for anything that delivers convenience and value. Internet use is increasing by the minute, and we can expect the "consumer direct" channel to comprise 8 to 12 percent of the market by 2005.

With the new digital economy will come new online alliances between trading partners, offering targeted solutions and valuable services to help consumers navigate the traffic jam on the information superhighway. One thing is clear: consumers will place just as much value on the relationships we build with them, as they do with the products we sell them.

They were on the horizon last year, but functional foods will find a solid place in the supermarket aisles in 1999, to the tune of some $15 billion in sales. Moving beyond providing basic nutrition, these new foods – from cholesterol lowering margarine to psyillium-enhanced frozen dinners to reduce the risk of heart disease – are the biggest innovation by the food industry in decades.

Before functional foods can carve out a viable market niche, brand marketers and retailers need to work together now to ensure a fair and reasonable regulatory structure is in place – one that permits responsible manufacturers to communicate validated product claims in a clear, timely and truthful manner without running the risk of enforcement action. Once we cross these hurdles, we’ll begin to see manufacturers develop new partnerships with physicians and the health care community to educate consumers on the benefits of these wonder foods. They will also forge alliances with their retail distributor partners to explore new ways of marketing health to customers.

With U.S. markets becoming more saturated and the rest of the world population set to grow by three billion in the next 25 years, globalization will be a major buzzword for food and consumer product manufacturers. Asia will continue to weather the ups and downs of its roller coaster economy, but forward-thinking U.S. companies may find opportunity for expansion in the region. With most of the world population growth occurring in developing markets, long-term strategies for globalization should include expansion into the emerging markets in Asia and Latin America.

Opportunities to expand free trade may take an upturn in 1999, as the World Trade Organization prepares to meet and negotiate further tariff reductions, elimination of export subsidies and tighter disciplines of barriers to biotechnology. The food industry is pushing to make processed foods a major priority in these negotiations, hopefully opening the door to new world markets for U.S. companies.

Barring unforeseen weather disasters like El Nino, consumers can expect food prices to remain at or near their current levels. Experts say oil and commodity prices should continue to drop, which will likely ensure that food will continue to be a solid value for consumers.

Thanks to improved productivity in the food industry, consumers are spending a record low 6.6 percent of their disposable household income on food. Competition will continue to flourish and raising prices will not be a viable option for most manufacturers. Instead, we can expect manufacturers to continue to look for new ways to drive costs out of the supply chain and streamline efficiencies within their own companies.