We’re currently being bombarded from every angle with news about the latest crises and challenges facing businesses. Amidst all this noise, it is important for food manufacturers to remain focused on their goals and have a strategy with which to navigate changing circumstances.
In this blog we’ll consider the top 5 trends expected to have a big impact upon the business climate in 2023 and give tips as to how food manufacturers could respond.
Trend 1: Economic uncertainty
The good news is that commodity prices have been easing in the past few months, especially when seen in relation to inflation. Economists also believe the worst of the inflation rises are now behind us, thanks in part to the EU’s new energy price cap.
But the war in Ukraine, post-covid inflation, China coming out of lockdown, and government policy are clearly huge economic forces at play. As it remains to be seen how much impact these factors still must make and for how long, economic forecasts are very uncertain.
Consumers are far more price conscious than they were and this isn’t going to change overnight. These spending habits mean more demand for no-frills and private label product lines. The food manufacturers best placed to succeed are those who can switch product lines and have the insight to make the right decisions. So, it’s vital food manufacturers fully understand their cost price per recipe/ product. This means including energy used during production, spillage, and wastage in the overall cost price.
Getting a grip on cost prices also means ensuring that production is as efficient as possible. Waste in all its forms becomes an economic concern not just an ethical one. This can best be monitored as part of the industry standard KPI: Overall Equipment Effectiveness (OEE).
Trend 2: Supply chain re-evaluation
The disruption caused by the Covid-19 pandemic has shaken confidence in the global Just-In-Time supply model. Additionally, government trade policy, such as the US-China trade war, and sanctions against Russia have further highlighted the risks of doing business with certain countries. A particular example for the food industry is that Russia and Belarus were significant suppliers of fertilizer. If Russian and Belarus remain unable to supply this, an alternative supply will need to be found if world food shortages are to be avoided in the next few years.
This has led to a trend in so called ‘Friend-shoring’, whereby supply chains are relocated to friendly countries. This goes hand in hand with increased demand from consumers for greater supply chain transparency.
Trend 3: The Sustainability carrot
Regardless of the economic uncertainty and pressure on prices, the long-term trend remains the focus on sustainability. The many facets of this trend on business form two categories. On the one hand, there are the opportunities presented by new market segments as consumer habits change. And on the other, there is government policy encouraging and forcing change to be made (see next section). This is the carrot and a stick of sustainability.
Consumers are increasingly aware of food-miles, which ties into the re-evaluation of supply chains, bringing them closer to market to reduce the environmental impact of extended logistics. Ethical considerations, such as the conditions livestock are kept in, whether producers have been paid fairly and how crops have been grown, remain hot topics. But increasing scepticism of companies ‘greenwashing’, means there is a desire for hard facts and data, such as the energy required to produce a particular recipe.
But whilst the change in consumer habits has been epitomised by the plant-based meat industry, the rush to get a piece of the action has led to the market becoming overcooked. Whilst this new sector is undoubtedly here to stay, it has quickly become a very crowded marketplace, not justified by the actual demand. Clearly an industry shakeout is to be expected. The lesson here is that there is a danger in the herd instinct of chasing every new trend.
Trend 4: The Sustainability stick
The Dutch Government’s nitrogen crisis has been well publicized. As the number of livestock raised in the country is significantly reduced in the coming years, this will undoubtedly impact the meat industry, which is one of the biggest in Europe.
Regulation directly forcing food manufacturers to have more regard for sustainability is also on the increase. Take for example the EU’s Energy Efficiency Directive, which requires energy monitoring and steps to be taken to reduce energy usage. Then there is the new Corporate Sustainability Reporting Directive (CSRD), which as part of the European Green Deal, requires large companies to report on the sustainability impact of their operations. The future may even be that consumers have to live within a CO2 budget. Solutions will be required to accurately calculate how much CO2 is produced throughout the entire supply chain.
Trend 5: The tight labour market will drive automation
Many western countries are currently experiencing a tight labour market. Technical roles are being particularly hard hit by the shortage, as the more experienced staff reach retirement age. In food factories this is being borne out in the maintenance departments.
Automation, or the technology to replace manual tasks, is going to be an increasingly important part of the solution. In the past automation was largely seen as a threat to people’s jobs. But especially in the current labour market, this has changed as robots replace boring repetitive jobs, freeing them up to take on more creative roles which robots can’t replicate. This is of course a generalisation, and automation cannot solve every type of labour shortage in every factory. However, the effects of this trend are already being seen in the increased rate at which robots are being used on production lines for example. As manufacturers it is important to consider the following advantages of automation:
- Increased production efficiency.
- Less reliance on the labour market.
- Consistent operating costs regardless of the day of the week or time of day.
- Consistent quality & safety.
- Predictability in terms of resource use, product output, and waste.
In changing times, the food producers best placed to succeed are those who can switch product lines to meet consumer demands, tune recipes, optimise production processes and supply chains. The key here is to ask the right questions, gather the appropriate data, analyse it for answers and implement the required changes. At Innius we believe Industrial IoT has a major role to play in this process.