December 23, 2019
The high-level issues facing food and beverage manufacturers today might feel like the same challenges the industry has been dealing with for years, but the context in which these challenges exist have changed dramatically. Consumer demand for greater product innovation and transparency, ever-increasing quality and compliance pressures, tighter profit margins, new channel opportunities, and a dynamic workforce are just some of the factors that are shifting market dynamics to the point where food and beverage manufacturers need to take a fresh approach to how they do business.
In this blog post we’ll briefly discuss the top 5 challenges.
1. Innovation and transparency
Whether it’s plant-based protein or CBD-infused foods, food and beverage manufacturers need to keep up with evolving consumer demand for new products to try, in greater varieties, along with healthier and better-tasting foods. But product innovation goes beyond keeping up with trends. It’s also about satisfying consumer demand for detailed information about products—such as where exactly the ingredients come from, or how environmentally friendly the product might be.
While it’s important to label products with easy-to-understand and comprehensive information, there’s only so much that can fit. Food and beverage manufacturers need to use other means to reach consumers, such as mobile-friendly websites and smart labels. Of course, having a consumer-friendly means of information sharing is pointless without also being able to provide the specific information consumers are seeking.
2. Quality and compliance
Just as customer demand for new products and information continues to evolve, so does the landscape of quality and compliance. Food and beverage manufacturers must contend with label requirements that vary by both country of origin and where the products will be consumed. In addition to transforming from region to region, businesses also have to account for how regulations are evolving within those regions.
Customers, consumers, and regulators expect food and beverage manufacturers to take a proactive and responsive approach to quality and recall management. In an age of instantaneous communication, it’s not unreasonable to envision a day when consumers will expect to be personally informed of recalls and outages in a timely manner, and told how to get replacement products.
3. Margin pressures
Due to its low barriers to entry, the food and beverage industry continues to draw new manufacturers to the marketplace. Due to increasing globalization, competition is expanding—leading to greater product proliferation and lower operating margins in many product categories. In addition, unexpected changes in seasonal supply or pricing can wreak havoc on a food and beverage manufacturer’s bottom line. But these new factors—which include customer expectations for faster response times, near-flawless order fill rates, and overwhelming numbers of products and SKUs—can stretch a company’s capabilities to the limits without the right infrastructure in place to keep up.
4. Channel progression
Customer loyalty and profits are heavily influenced by how and where products are sold. Like many industries, food and beverage is impacted by the proliferation of e-commerce channels. Consumers are embracing home delivery of groceries (such as with Amazon Fresh or FreshDirect), and physically picking up groceries from their local grocery store after ordering them online. Today’s food and beverage businesses need to plan around these evolving channels.
5. Dynamic workforce
Modern consumers expect modern shopping experiences, and embracing online channels while offering greater transparency is a wise choice in today’s marketplace. But it’s not just consumers who seek this level of engagement. Today’s employees also hold the same expectations from the companies they work for. They want user-friendly solutions, embedded analytics, mobile access, and artificial intelligence that can enable them to work in the ways they want to work and help them be more effective at their jobs. Leading food and beverage manufacturers recognize they can maximize employee productivity by creating a work environment in line with modern employee expectations.
For food and beverage manufacturers, technology can be friend or foe. ERP systems that were implemented years (and often decades) ago can no longer support the complex demands of this industry. Keeping current isn’t just smart—it’s profitable. From cloud computing and collaborative technologies to mobility and analytics, technology holds the key to competitive advantage and growth.