Three Challenges that Require F&B Manufacturers to Innovate

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Food and beverage producers have been innovating for more than a century; the industry has consistently improved by creating innovative flavours, improving shelf stability and reducing production costs to make food available for more people than ever before. Now, as the industry faces more significant challenges than ever before, the food and beverage industry is under pressure to step up.

It’s a difficult time to own a business in the food and beverage space. Profit margins are low even as consumers’ disposable incomes reach all time highs. Competition is intense and is showing no signs of abating. Regulatory frameworks are becoming more complex than ever, although regulators are not the only group that’s become more demanding; consumers are increasingly pushing food and beverage producers to source fair trade, GMO-free and organic ingredients. Food producers have a clear choice: innovate or lose market share to companies that can. Let’s look at some of the innovative ways that food producers are responding to these challenges.

A Focus on Health

In the early 2000s, consumers focussed on their increasingly busy lives, but failed to address the impact of increasingly stressful routines on their health. Sales of snack food skyrocketed as consumers looked for nutrition in between meetings or on the way to a second job. Since then, our lives haven’t gotten any less hectic, although consumers have wised up to the health effects of a snack food diet. Consumers are increasingly looking towards convenience food that is not just fat, sugar and carbohydrates. Equally, concerns about specific ingredients or farming practices are leading the charge for gluten free, dairy free and organic products. For small producers, keeping track of a wide range of recipes and production processes can be trying. Food manufacturing software makes it simple to produce a wide range with features like a bill of materials making it easy to record recipes and then bring all the ingredients together during the production process.

Complex Supply Chains

Food producers operate in a globalised world. Unless your business is targeting a specialised market (such as consumers who demand 100% New Zealand or Australian ingredients), you are likely to deal with suppliers from multiple corners of the globe. This can bring costs down and add flexibility, but it also adds a degree of complexity. Finding and auditing suppliers across multiple continents is an upfront challenge, while managing suppliers across multiple borders is an ongoing pressure. In the past, food producers may have been exposed to one or two currency markets; in 2017, a typical manufacturer might be exposed to 10 or 20. Keeping track of all these moving parts requires specific skills and specialised food manufacturing software; innovative producers are spending more than ever to upskill their teams, hire top talent and invest in customer relationship and supply chain management tools.

Tight Margins

As the grocery price wars continue to rage, large scale customers are increasingly looking to offshore suppliers, particularly in the house brand space. Food manufacturers are finding that unless they can take advantage of a premium image, they need to tighten their belts and do more with less. Many food manufacturers have utilised food manufacturing software to implement lean manufacturing and procurement processes, allowing them to reduce waste, cut inventory carrying costs and keep lead times low.

Although food and beverage manufacturing is becoming increasingly competitive, forward-looking manufacturers should see industry challenges as an opportunity. Manufacturers who innovate will continue to grow, while those that fail to shape up are likely to fall behind.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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