A growing middle class; customers demanding nutritious, locally-sourced foods; and the need for healthy “fast food” alternatives that fit into hectic city life. These are key megatrends in megacities according to Selling Across Cities: Vademecum on Food and Beverage Markets 2017.
The fifth edition of the annual industry report analyzes the economic and social climate of 25 major global cities — some of them megacities, with populations north of 10 million — to help executives identify high-potential export markets. Written by lead researcher Júlia Gifra — working with industry consultants at Deloitte and supervised by IESE’s Jaume Llopis — this handbook offers timely information on urban standards of living, prices, and key industry players. Regional experts break down the data, adding a clear-cut summary of major trends and business opportunities that food executives can easily digest.
Food for Thought: How Tastes Are Changing
Consider: half the world’s food consumers currently live in cities. By 2050, an estimated 70 percent of the world’s inhabitants will be urban dwellers.
What’s more, the main cities in a country are “the best testing ground” to understand the market, the authors explain. Cities bring many opportunities for today’s food and beverage vendors: they are highly connected, mobile and have access to digital services. But they also present challenges. Cities tend to concentrate inequality, containing wildly varying income levels. They house aging populations. And they may have problems integrating the cultures — and cuisines — of multiple nationalities.
To overcome these obstacles, international companies must stay attuned to the intense new transformations that are shaping city life. Certain trends are evident across all 25 cities studied. Regional specialists throughout the globe point to increasing numbers of middle-class customers demanding information about where their food comes from and what’s in it. Green or premium “fast food” alternatives are also in demand — for healthy, sustainable and quick meals. Knowing these wider trends will help companies to identify niches where they might offer a competitive advantage. But to avoid pitfalls when expanding internationally, companies must understand the specific culture of the cities they target.
Here’s a brief look at the cities profiled around the globe.
Eight European cities — Barcelona, Berlin, Frankfurt, London, Madrid, Milan, Moscow and Paris — are notable for their large (and expanding) middle class interested in organic, sustainable and convenient produce. Urban Europeans tend to be ahead of the curve on trusting and using technology as a tool for shopping for food.
For the Spanish cities (Madrid and Barcelona), local experts highlight untapped opportunities presented by tourism — for example, combining ecologically produced foods with the traditional, local flavors popular with visitors.
Berlin stands out for having the largest middle-class population of the cities studied. This creates demand for online ordering solutions, healthy and sustainable foods, and “authentic” or unique food experiences. Milan, Paris and London show similar patterns, while the Moscow expert points to opportunities for new players in low-cost food. For London, the jury is still out on Brexit effects.
Eight Asian cities are profiled: Beijing, Delhi, Honk Kong, Mumbai, Seoul, Singapore, Shanghai and Tokyo. In Beijing and Shanghai, the rise of millennials (born 1980-2000) is changing the market dramatically and imported foods are very popular. Millennials have strong purchasing power, which opens up niche markets in high-quality, unusual food, and in convenience-based solutions.
Delhi’s demographics are especially interesting: consumers in Delhi spend almost twice as much on food as their counterparts elsewhere in India, and are attracted to local, unique food experiences. Food festivals and street food are increasingly popular. Other Asian cities — namely, Hong Kong, Seoul and Tokyo — highlight trends in eating for wellness and opportunities to tap into the nutritional needs of the growing senior population.
Africa and Middle East
Just two cities are analyzed here: Lagos and Riyadh. Regional experts in Lagos advised companies to consider the needs of the large low-income population. Customers with limited cash are more likely to stick to trusted brands and purchase either small, single-serve foods (due to little available cash) or large value-packs when possible. The experts note that smart companies in these spaces are working to give customers bargains, and consolidate their market position ahead of an economic upswing.
Meanwhile, Riyadh consumption trends are closely related to those of wealthier millennials elsewhere, with increasing demand for healthy, international, and specialty foods.
Analyzing Los Angeles, Miami, Mexico City and New York, experts point to an increased interest in health and wellness as well as e-commerce in the U.S. cities. While simple, natural foods are trending, glamor still sells food. Products associated with celebrity chefs remain especially popular in Miami.
Mexico City also follows food trends associated with a large middle-class, but the regional experts warn that the capital city is a socially unequal space with various different market segments. Mexico City “provides access to many different Mexicos,” as one local expert notes.
Bogotá, Lima and São Paulo are analyzed for the report. Here regional specialists emphasize the socio-economic variance in major Latin American cities, with broad markets for both low-cost and luxury food. In Bogotá and Lima, healthy foods and convenient food solutions are more popular than ever. But both cities also have price-sensitive markets, and there is demand for economical brands and discount stores.
For São Paulo, José Antonio do Prado Fay — former CEO of BRF, one of the biggest food companies in the world — highlights emerging opportunities in e-commerce and in catering to the city’s immigrant population with ethnic and internal foods. But he also cautions that there are challenges in Brazil — including the volatile exchange rate, bureaucracy and infrastructure obstacles.
For food companies keen to expand internationally, it’s clear that an appetite for success must come with an appetite for knowledge. Insider tips from regional experts are meant to help companies understand the opportunities presented by big cities — and to avoid the pitfalls.
The representation of the city we need is a mystery to us; now, without that vision, we mutilate urban value. The novel Frankenstein written by the English author Mary Wollstonecraft Shelley describes the creation of a poor wretch. The premise is that a sum of organs could create a human being. Shelley wanted to write the best horror story and she succeeded.
“Smart” buildings, “intelligent” transportation systems and “smart” airports are all isolated projects (managed by independent departments) which leverage the use of technology to create new urban value in a city being modernized and often called a smart city. Like Frankenstein, the sum of isolated smart urban projects creates a so-called smart city!
A city is not a sum of things. Vibrant cities are a complex system of systems (and not a set of sets) which relies on economic, social and environmental interconnected values with the goal to support urban sustainability.
In the history of ideas, Aristotle was probably the first to point out that the whole is more than the sum of its parts. Blaise Pascal wrote in Pensées 72, “since everything then is cause and effect, dependent and supporting, mediate and immediate, and all is held together by a natural though imperceptible chain, which binds together things most distant and most different, I hold it equally impossible to know the parts without knowing the whole, and to know the whole without knowing the parts in detail.”
Our traditional urban management fails (congestion, pollution, waste of energy) and urban governance struggles (siloed urban organisations and operations, economic pressures) because they rely on an incorrect model of representation of a “city”. Urban leaders ask the wrong question, “What is a city?” when no unequivocal answer exists and then design their city as a set of independent organisations. To find the next model for our future cities, we need to answer different questions.
What does the city do? Cities are characterised by activities, including the planning of new districts to face growing urbanisation, the reorganisation of the transport network to ease congestion, the distribution of public water and electricity to all inhabitants, environment management and providing law enforcement. These examples show that goal-directed collective actions in a city (or an urban area) cannot be managed by a single department or agency. It is a collaborative work between silos such as security and safety, transport, utilities, city mayor’s administration, government agencies and ministries, involving non-governmental organisations (NGOs), citizens, businesses, tourists, etc.
As such, the modelling, design and implementation of a collective effort in a city can be perceived as a complex process. Le Moigne says, “a phenomenon is said to be perceived as being complex when it has the following property: no single finite model, no matter how large, how complicated, how stochastic, etc., it may be built, seems capable of representing exhaustively that phenomenon.” Edgar Morin, in his work on complexity, explains that reducing the complexity of a situation (as we do when applying a Cartesian approach to solve urban challenges) will mutilate its understanding and make it even more complex (so that it will no longer be possible to understand the situation and solve a challenge).
How is the city organized? Experience shows that if the context in which the action takes place is not properly considered during the design process, its implementation will fail (such as satellite cities and many Greenfield cities launched since 2007 in Asia and Middle East). For example, when designing a city platform (like a few cities are currently planning) only the selection of an appropriate methodology adapted to complex system modelling will provide the conceptual tools for modelling in the context of the environment of the city. For cities, the holistic approach needs to be replaced by a systemic approach. Such new approach in the urban environment reveals that the governance of the city of the future needs to change to include co-operation and collaboration between departments and so, the design of a systemic urban management system. Cities need to innovate their governance (the Leipzig Charter on Sustainable European Cities recommended in 2007 to develop integrated urban development) or they will stagnate (cities continuing with a silo approach).
What will the city become? Each city needs to do its own analysis and modelling. All the axioms defined along this analysis will constitute the new paradigm of the systemic urban governance of the city. It will show that the current organisation is based on segmented decision centres and a more efficient one should rely on a collaborative and systemic governance to support urban sustainability. Because you cannot manage what you cannot measure, thanks to forthcoming technologies, the management of cities can be improved using ICT solutions and an urban digital transformation strategy.
China wants to finds its typical Chinese city. Each city has its own culture and heritage, and is shaped by international trends and local challenges. When defining its strategy to create future urban value, the city shall consider what it wants to become. Cities are unique and need a unique vision based on national strategies like the 2020 plans in Europe, India and China, or the 2030 plan in the Kingdom of Saudi Arabia.
Industry has business objectives and the way the industry models the city will determine its ability to design and develop urban value solutions and products. For example, the ICT industry has its proprietary models of a city (based on set of sets, puzzles of IoT trees and layers like fog, cloud, applications), so the manufacturers have designed different types of city management platform. We understand that if the manufacturers used a holistic approach or a Cartesian approach they have mutilated the representation of the city: like Frankenstein “seeing” the human body as a sum of parts and not as a person with interconnected parts. In “smart” models, the city is represented as a sum of departments and not understood as a whole. The “smart” cities as designed nowadays are like a “Frankenstein city” where networks of networks are forgotten, where happy citizens are replaced by “happy sensors”. The model of the “city of the future” is not yet defined and will not be unique like “one fits all”.
To become sustainable and human centered, the model of our future city should be analyzed from a systemic perspective and not built from as a sum of siloed projects and departments. Just ask yourself in which city you would like to live and why.
In the fictional world of the video game Watch Dogs, you can play a hacktivist who takes over the central operating system of a futuristic, hyper-connected Chicago. With control over the city’s security system, you can spy on residents using surveillance cameras, intercept phone calls, and cripple the city’s critical infrastructure, unleashing a vicious cyberattack that brings the Windy City to its knees.
Watch Dogs is just a game, but it illustrates a possible “what if” scenario that could happen in today’s increasingly smart cities. Advancements in artificial intelligence and Internet of Things (IoT) connected devices have made it possible for cities to increase efficiencies across multiple services like public safety, transportation, water management and even healthcare.
An estimated 2.3 billion connected things will be used in smart cities this year, according to Gartner, Inc., the technology research and advisory company. That would represent a 42% increase in the number of connected devices since 2016. But the rise of digital connectivity also exposes a host of vulnerabilities cybercriminals are lining up to exploit.
On April 8, hackers set off 156 emergency sirens in Dallas, Texas, disrupting residents and overwhelming 911 operators throughout the day. The number of attacks on critical infrastructure jumped from under 200 in 2012 to almost 300 attacks in 2015. As smart cities move from concept to reality, securing their foundation will become a top priority to ensure the safety of our digitally connected communities.
Simply put, smart cities rely on interconnected devices to streamline and improve city services based on rich, real-time data. These systems combine hardware, software, and geospatial analytics to enhance municipal services and improve an area’s livability. Inexpensive sensors, for example, can reduce the energy wasted in street lights or regulate the flow of water to better preserve resources. Smart cities rely on accurate data in order to properly function. Information that has been tampered with can disrupt operations — and constituents’ lives — for days.
Several cities have adopted smart technologies, applying artificial intelligence to accelerate their transition into the future. In Barcelona, smart water meter technology helped the city save $58 million annually. In South Korea, one city cut building operating costs by 30% after implementing smart sensors to regulate water and electricity usage. With the global IoT footprint expected to surpass 50 billion connected devices by 2020, urban communities will need to strengthen existing cybersecurity protocols and disaster recovery methods to counter hackers searching for opportunities to wreak havoc.
As smart city infrastructure proliferates, the stakes for protecting these digital foundations will only get higher. While investment in smart technology has gone up, many of these innovations are deployed without robust testing and cybersecurity is often neglected.
For example, cities currently using a supervisory control and data acquisition (SCADA) system, are particularly susceptible to frequent hacks due to poor security protocols. Though SCADA systems control large-scale processes and unify decentralized facilities, they lack cryptographic security and authentication factors. If a hacker targets a city’s SCADA system, they could threaten public health and safety, and shut down multiple city services from a single entry point.
Simple computer bugs can also cause significant glitches in control systems, leading to major technical problems for cities. Once hackers invade smart city control systems, they can send manipulated data to servers to exploit and crash entire data centers. This is how hackers gained access to an Illinois water utility control system in 2011, destroying a water pump that serviced 2,200 customers. Not only do these breaches disrupt daily operations for residents, they can be costly to remedy. A hypothetical hack that triggers a blackout in North America is estimated to leave 93 million people without power and could cost insurers anywhere from $21 billion to $71 billion in damages.
The inevitability of cyberattacks is a lesson the private sector has learned the hard way. As cities adopt smart initiatives, they’d be wise to make data security a priority from the outset. In addition to physically securing facilities controlling power, gas and water, city planners should also implement fail safes and manual overrides in all systems and networks. This includes forcibly shutting down potentially hacked systems until security experts have the opportunity to resolve vulnerability issues. Encrypting sensitive data and deploying network intrusion mechanisms that regularly scan for suspicious activity can also protect against hackers trying to breach control systems remotely.
Smart cities can increase productivity and efficiencies for citizens, but they have a serious problem when security is underestimated. As local governments pursue smart initiatives, realizing the full potential of these digitally connected communities starts with implementing cybersecurity best practices from the ground up.