How has the food industry managed the tumult of 2020? We pulled aggregated and anonymised performance data from Unleashed to get an early look at the types of business navigating the disruption successfully – and what they’ve done.
Why use Unleashed to gain a food industry snapshot?
Because Unleashed is used by many in the industry as their primary food manufacturing software platform, the data processed by the cloud SaaS product can be mined for valuable insights. What profit margin does the industry make? Which business models are growing their sales and adding customers? By examining data from several hundred food businesses worldwide we’ve been able to answer these questions and more, gaining a snapshot of how the food industry is responding to what has been a highly unusual year.
Setting a benchmark: 2019 in the food industry
To set a benchmark against which we can measure 2020’s results, it’s worth looking at how the food sector performed the year before. And what a year it was.
2019 saw impressive results in the food industry as a whole, with businesses of all types growing across all metrics:
- The average profit margin for food business in 2019 was 46%, up from 42% the year before
- Total food industry transactions grew 91% YOY
- Gross profit for the sector grew 34% YOY
The year of the retailer
In 2019 it was retail businesses that stood out in particular: manufacturers with an online retail presence grew gross profits by 57% YOY, the number sales by 156% YOY, and enjoyed an average profit margin of 48%, up 5 percentage points YOY.
While pure retailers grew their number of sales 140%, improved revenue by 32% and lifted profit margins by 2 percentage points, up to 38%.
2019 was a bumper year for the food industry.
Why the dramatic growth?
The stand-out growth in sales volumes can be explained partly by online activity. What we’re measuring with this figure is the number of transactions processed. So a food processor selling, say, macadamia nuts by the 10kg sack who begins offering 50g packets online may make thousands more sales, without necessarily seeing a commensurate leap in revenue. Similarly a brick-and-mortar retail store that expands online may see a similar growth in sales volumes.
With this explanation in mind it becomes important to note that this expansion in sales volumes may not be reflected in the wider sector – nor limited to 2019. The cohort of food companies examined here differ from the overall food industry in that they’ve all taken the step into digitising their business by adopting Unleashed. It follows then that they may be more likely – or more able – to move online, for example through an integration with a B2C app such as Shopify or Amazon.
It’s a note of caution in interpreting this data that’s worth making – especially as online sales are so critical in understanding the major trends affecting 2020.
The year so far: 2020 in the food industry
2019 was always going to be hard to match – and of course 2020 has had a few surprises up its sleeve.
Naturally the impacts of Covid have been most heavily felt by pure retailers who were unable to trade through lockdowns, or who may have suffered from general consumer reluctance to shop in physical stores.
However one type of food business had bucked the overall negative trend, with growth in all metrics: manufactures with an online retail presence.
To date manufacturers with an online retail presence have best navigated 2020’s disruptions.
As of June 2020 manufacturers who also trade online have enjoyed a remarkable average profit margin of 52%, which was up 2 percentage points YOY.
With an overall 127% increase in the number of sales, they also grew revenue by 30% and gross profits by 69% on average – and all against a backdrop of the greatest economic disruption in living memory.
Resilience, diversity and the shift to online
Reading into these results we can extrapolate some potential trends.
Firstly, the demand for food products hasn’t faltered through the various national and regional lockdowns – in fact it appears to have grown. However the way that customers are accessing those products has changed dramatically, with a shift to doing business online.
Whether that trend will persist, and if so for how long, are a moot point. However it seems clear that the ability to sell direct-to-consumer (D2C) through the internet, or having access to online sales channels that reach other companies, has been critical to success in 2020.
The lesson here for the food industry seems to be one of resilience through diversification – and caution around over-reliance on limited numbers of channels.
This can be seen most clearly in the difference between pure manufacturers and manufacturers with an online store. In 2020 many of the former have suffered from relying on wholesale or retail partners for access to consumers hungry for their products. While the latter have stayed afloat – and even grown their customer base and margins – by owning at least part of their route to market.
Why using food manufacturing software matters
Using Unleashed as a food manufacturing software platform gives industry users a clear advantage during disruptive trading conditions.
With a B2B eCommerce platform built in, companies are able to trade online with B2B partners – and with easy integrations to all the most popular B2C apps companies yet to launch a D2C channel have been able to pivot online, managing quick-turnaround launches of online stores in order to keep cash flow moving during the trickiest periods.
- If you’d like to learn about using Unleashed as a food manufacturing software platform, you can read more on our Food Manufacturing page
- To learn about building an online sales platform for your business read How to set up an online store for your business in one week
- Or watch the recorded webinar here on pivoting into online sales
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.