As consumers, we have high expectations when it comes to our favorite food brands. But do we really appreciate the complexities of making the products we know love and demand? And how/why have things changed so much, particularly during the past 2 years? In the first of 2 blogs I’ll take a look at the challenges of planning and forecasting in today’s fast-paced food & beverage manufacturing environment.
The Impact of Consumer Power and COVID-19
Consumers have always been a strong driving force in the food and beverage industry, literally shaping the market based on their constantly and rapidly changing demands and preferences. And with the rise of tech-enabled consumers (particularly during the past decade) who can’t live without their smart phones, we’ve also seen them become incredibly information-hungry and influential. After all, they simply need to head across to social media to get their voices heard and elicit a response.
The COVID-19 pandemic, even though it feels like we’re looking at it in the rear-view mirror, has thrown yet another curveball at the industry. Apart from the skyrocketing and unforecastable demand manufacturers saw during 2020, consumers also had a lot more time at home to contemplate their nutritional habits and food choices. This naturally sparked an appetite for trying out new products, especially those demonstrating health benefits.
What did this do to the competitive market?
For one, we have seen a proliferation of products in “healthier” ranges. Just think of the all the meat alternative/plant-based options you can find nowadays. The choice is almost overwhelming from a consumer’s perspective. Milk alternatives is a great example – soya, rice, oat, hemp, cashew, coconut, the list goes on…
Something else we saw during the pandemic was the availability of more fresh food products. Think of packaged salad bowls, bite-sized fruit of any sort, or the perfectly mixed combination of vegetables for your dinner stir-fry. A number of options already existed, but we’ve certainly seen a lot more on offer since the start of the pandemic.
Another interesting development has been the increasing popularity of fresh-food recipe subscription boxes like Gousto, HelloFresh and SimplyCook all catering to the convenience of the consumer, without compromising the freshness and quality of the ingredients. In fact, as reported by the Grocer, Gousto – a UK company founded before the pandemic – was one of the fastest growing food & beverage companies in 2020, with a two-year compound annual growth rate of 89%.
Facing the shortage economy
As much as the pandemic has created new opportunities for the food and beverage industry, it also created a host of new challenges, especially shortages across logistics, labor and materials.
To begin with, the demand for truck drivers in some countries has reached boiling point. In the UK for instance, industry bodies estimate there is a shortfall of about 100,000 workers, as reported by BBC News.
For food and beverage retailers, who are dependent on trucks for distribution, missed or delayed deliveries mean missed sales opportunities. Equally, the lack of truck drivers and dockworkers has directly affected the freight market, creating even more logistical problems such as port congestion and soaring freight and container rates.
On top of this, as if the pandemic and its far-reaching impact weren’t already enough to deal with, the next ‘unprecedented event’ has hit food and beverage manufacturers out of the blue, namely the war in Ukraine. Being a key exporter of agricultural products, ranging from sunflower seed, corn, barley to what and meslin, Russia’s invasion of Ukraine has a caused another serious supply chain threat. One of many impacted companies, Edible Oils, which supplies sunflower-based cooking oils for 75% of the UK’s retail market, has had to ramp up supplies of alternative oils. And many other companies are also having to rework their recipes.
These trends don’t show any signs of slowing in 2022, and not surprisingly, are bound to drive up the cost of food.
It’s not as though planning and forecasting were easy to begin with …
In pre-pandemic times, forecasting and planning were challenging enough for food & beverage manufacturers, given factors such as seasonality, moveable holidays, weather and other external events. But during increasingly volatile times the pressure mounts and food producers may find themselves no longer competing on price, but on speed-to-market instead.
However, while dealing with quickly changing market dynamics and volatility could be a manufacturer’s worst nightmare, it might also be the biggest opportunity for those companies with the right capabilities in place. And these capabilities are not built on legacy technology, spreadsheets or other productivity tools, but on modern, digital technology.
In my next blog I’ll take a closer look at how technology can help solve some of these issues and what manufacturers should expect from their ERP solution providers.
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