6 Hot Growth Markets to Watch in 2018

6 Hot Growth Markets to Watch in 2018

Predicting the next big thing is no simple task. Sometimes, a new product’s disruptive force is clear – like when smartphones first appeared on the market. Other times, sudden developments can yield abrupt and sweeping changes. For example, it wasn’t until after Amazon announced its acquisition of Whole Foods that grocery retailers set out to expand their online presence and pilot delivery service programs – massive shifts in course few in the industry were considering before the bombshell dropped.

Yet even titanic trendsetters like Amazon are susceptible to surprises. Incremental progress over time – technological innovation, government regulation, evolving cultural trends – can creep up on markets previously thought mature and stable and upheave the status quo. From natural sweeteners and synthetic lubricants, to luxury vinyl tile (LVT), security drones, and robot lawnmowers, the industries expected to boom the most in the next year are also some of the least assuming.

Below, the expert analysts at The Freedonia Group weigh in on six hot growth markets that are projected to soar in 2018.

1. Natural Sweeteners: Cleaner Labels, Sweeter Possibilities

It’s no secret that millennials favor clean labels, or that they comprise the largest generational demographic in the world. So it’s no surprise that experts say going ‘clean’ is crucial to stay competitive in the packaged food and beverage industry. Organic, all-natural, non-GMO, and other variants on labels help consumers better understand where their food comes from; in fact, many consumers are willing to spend more for the peace of mind such labels provide. In few markets is this trend more evident than the natural sweeteners industry, which is forecast to grow nearly 7% per year through 2021.

“As more information comes out tying sugar intake to health problems beyond obesity and diabetes, more people are looking to reduce the sugar in their diets, but still want sweet products,” says Christine O’Keefe, author of the recent Freedonia Group study Natural Alternative Sweeteners Market in the US.

Perceived as healthier and, well, more ‘natural’ than synthetics like sucralose, natural sweeteners have been around for some time but various barriers have kept them from mainstream use. For example, some natural sweeteners have an unpleasant bitter or licorice aftertaste, rendering formulation to hit the sweetness sweet spot difficult. Furthermore, raising sufficient amounts of feedstock plants for some natural sweeteners, like monatin, can be prohibitively expensive. Government regulation has also blocked some natural sweeteners from entry to certain national markets; for example, in China, one of the few places where the versatile natural sweetener feedstock plant monk fruit grows abundantly, suppliers are banned from exporting the seeds or genetic material to the US.

But producers of natural sweeteners are adapting to these challenges. Having refined the means of production to neutralize the bitter taste of stevia, for example, Coca-Cola has announced plans to release a new stevia-based Coke product. And up-and-coming natural sweeteners still pending approval by the FDA (keep an eye on brazzein) will keep the competition lively going forward.

2. Security Drones: A Bird’s Eye View

Following Hurricane Harvey, the skies over Houston hummed with drone activity as insurers surveyed the damage and emergency crews searched flooded streets for victims. Once thought strictly the purview of the military, drones are being used more often in safety and security applications as regulations on their use lift and companies discover novel ways to apply them to their operations.

“While military and consumer uses for drones have already experienced widespread adoption, the market for commercial drones is only just beginning to take off,” says Katherine Brink, author of the recent study, Safety & Security Drones in the US. “Drones provide a wide array of advantages in safety and security operations, including a bird's-eye view at significant cost savings to traditional aircraft, while also keeping operators out of harm's way.”

While still at a rather early stage of developments, innovations in drone technologies are expected to drive significant gains going forward. As major manufacturers of security systems and equipment announce plans to add drones to their product lines, other industry leaders are taking notice. In fact, Stanley Black & Decker recently announced a partnership with Sunflower Labs, a leader in drone technology innovation, to grow its security division – a large scale investment that may prove an indicator of the technology’s potential to disrupt the industry.

Before drones can truly take off, however, manufacturers must address the shortcomings of the current generation of products, such as narrow flight range and a limited ability to support heavy payloads like cameras and GPS equipment. With so many potential applications, however, drones have the potential to revolutionize a variety of markets. The extent and timing of the impact depends on the capacity of drone manufacturers to make the technology more practical to end users.

3. E-Commerce: The Digital Future of Grocery Shopping

In June 2017, Amazon announced its purchase of upscale grocery chain Whole Foods, forcing online and brick and mortar retailers alike to reckon with the rapid convergence of their markets and reimagine their place in the game. Prior to the announcement, e-commerce grocery sales weren’t expected to post growth in excess of 10% per year. Given the response from Amazon’s competitors, however, a much faster rate of expansion is now expected in the short term, with annual increases near 30%.

But according to Matthew Rolfe, Operations Manager of Freedonia Focus Reports, who published a study on e-commerce, the rapid growth is not without caveat.

“As a mode of grocery sales, e-commerce is expected to see explosive growth, yes. But it’s an inefficient cannibalization,” says Rolfe. “Consumers are less likely to add impulse purchases to their cart as they shop online than they are when navigating product-lined aisles and checkout stands in brick-and-mortar stores.”

Since news of Amazon’s acquisition dropped, Aldi, Costco, and Kroger have all developed partnerships with Instacart to spearhead home delivery programs. Furthermore, Walmart announced 40% projected growth in its e-commerce sales by 2019. The company is also developing a program that will enable groceries to be delivered directly to customers’ refrigerators, a plan redolent of Amazon’s newly launched Amazon Key service.

Smaller grocers are following the example of their big box competitors as well. By the end of 2018, for example, Albertsons says it will expand home delivery service to eight of the top ten markets in the US.

No longer a merely brick and mortar business, the grocery industry’s expansion into e-commerce stands to transform the way consumers shop for food.

4. Robot Lawnmowers: Taking Over (and Good Care of) America’s Yards

It is a fact all but universally acknowledged that automation is expanding in virtually all spheres of life. Consider the growing number of autonomous vehicles on America’s roads. Though Elon Musk may have a few more wrinkles to iron out before his Teslas are viable for the mainstream, robot lawnmowers – the Roombas of lawn care – are positioned to take the power lawn and garden equipment market by storm, with unit sales in the US expected to more than triple between 2016 and 2021, according to analyst Elliot Woo.

“Robotic mowers are one of the most promising growth areas for producers of power lawn and garden equipment,” says Woo, author of The Freedonia Group study Power Lawn & Garden Equipment Market in the US. “Manufacturers are rapidly developing new products, and the high levels of product differentiation possible in this area present a tremendous opportunity for innovators.”

Robot mowers, the core technology of which is similar to robotic vacuum cleaners, have been available to consumers for some time. However, various design flaws, such as the inability of many robot mowers to scale steep slopes and other precarious terrain, stifled adoption in the past. As manufacturers developed solutions to increase their product’s user friendliness or refine its performance capabilities, they began to discover other promising applications for the technology.

In the consumer market, for example, some robot mowers feature value-adding smart technology that enables communication with related equipment, such as irrigation systems. On the commercial side – which Woo forecasts to be the hottest growth segment going forward – suppliers are introducing specialized products targeted at niches like golf courses and roadside maintenance. In addition, the development of products with supplemental functions like weed maintenance and leaf blowing is broadening the scope of lawn and garden robots beyond mere mowers.

5. LVT: Luxury Vinyl Takeover

Among all types of flooring products, LVT is far and away the fastest growing, with sales more than doubling since 2009 and growth projected to accelerate sharply in the near term. Something of an albatross to carpet and rug manufacturers, LVT is a major force in the flooring industry, acquiring an ever greater share of total demand and inspiring market leaders to diversify their product mix.

Industry expert Matt Zielenski associates the LVT boom with its low price, simple installation, strong resilience, and overall ease of maintenance, which produce a higher return on investment over time. Propelling gains for LVT will be the rapid acceleration in demand for even sturdier multilayer flooring (MLF), a sub-type of LVT, in commercial applications.

“LVT flooring has established itself as one of the US’s leading hard surface flooring materials due to its ease of installation, favorable aesthetics, and moderate cost.  Like the LVT products on which it is based, MLF often features surfaces that closely resemble natural stone or hardwood flooring for far less cost.  But, MLF features a core layer – often composed of wood-plastic composite lumber or PVC resins – that imparts stiffness and enables the flooring to better withstand heavy foot traffic and general wear and tear,” says Zielenski.

Flooring manufacturers are taking heed. For example, market leader Shaw Industries’ December 2016 acquisition of USFloors – the first company to offer MLF in the US – indicates a strategy to capitalize on the popularity of MLF in the commercial market. And in August 2017, Shaw announced plans to expand an LVT production facility in Ringgold, Georgia to add MLF operations. Shaw’s move will help insure it maintains its position at the forefront of the US flooring industry, but moreover it indicates the importance market leaders are placing on a diverse product mix in order to stay competitive.

6. Synthetic Lubricants: Gliding to New Heights

Seeing lubricants on a list of rapid growth industries may come as a surprise to some, especially given the maturity of the market for conventional lubricants. But a recent analysis of the world automotive lubricants industry shows significant gains for unconventional alternatives such as re-refined, bio-based, and synthetic lubricants, according to industry analyst Cory Bretz.

Although pure synthetics cost significantly more than conventional lubricants, the synthetic blends now available on the market are more price competitive, supporting rapid growth globally but especially in developing nations like China and India, where rising incomes are yielding higher standards of living – including for vehicle performance.

“The growth in middle classes among developing nations is not only increasing the amount of lubricant needed in those countries – it’s also affording consumers the ability to purchase longer lasting synthetics.” says Bretz.

The performance of synthetic lubricants bests that of their mineral counterparts, especially in extremely high or low temperatures, helping engines run better and reducing carbon dioxide emissions. Stricter environmental regulations stemming from the Paris Climate Accord is expected to bolster demand as a growing number of automotive manufacturers switch to synthetic lubricants. This is especially the case in countries like Germany, where high performance and low environmental impact are crucial considerations for manufacturers.

Want to Learn More?

For more information, check out the following publications from the Freedonia Group and Freedonia Focus Reports for information on market environment factors, industry structure, company market share, and leading companies:

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