Each new year carries a fresh set of trends, opportunities and challenges. To celebrate the start of 2015, I’ve forecasted five trends I expect to drive food manufacturing in the months ahead.
1. Innovative Solutions to Drive Down Costs
With the advent of the Internet and pricing transparency for consumers, pressures are rising for food manufacturers to be low cost. They are trying to find ways to drive more value, looking for:
-
Innovations that can help maintain profitability
-
New products to bring to market
-
Modifications to product categories
Food manufacturers are also on the hunt for more cost-effective means of manufacturing, standardizing equipment and exploring automation to minimize labor costs.
For example, take Southwest Airlines’ business model. Southwest has kept its costs down by only flying Boeing 737s, which reduces spending in areas such as training and spare parts. This same mentality can be applied to food processing.
Food manufacturers can move towards innovation and the standardization of certain product categories to drive down their own costs. First, food processors must rethink their manufacturing strategies, optimizing what makes sense and developing a new cost model. In the long run, they need to have the flexibility to run products with higher margins without taking away from their companies’ “bread and butter.”
Companies are trying to get better visibility into the true cost of manufacturing products. Whereas before they may have looked at the profitability of a plant, they’re now diving deeper, examining the profitability of a product category, manufacturing line or even a particular stock keeping unit (SKU).
2. Energy Efficiency
Energy efficiency has been buzzing for a while among consumers, and in 2015, it continues to attract the spotlight in the food processing realm. This is driven in large part by a shift in consumers who are concerned with the environment and what they’re putting into their bodies.
At Stellar, we’ve been able to help our clients examine sustainability programs and how they can reduce energy consumption to not only appeal to consumers, but to drive costs down, as well. By reducing energy consumption, food manufacturers are reducing costs and increasing margins.
3. Healthier, Natural Foods
Along that same vein, because consumers have become more aware of what they’re eating, there’s been increasing interest in organic and natural foods. From a manufacturing standpoint, this presents more challenges in terms of equipment types and how materials are processed. The handling is different for these products, impacting how lines are set up and operated.
If a bakery is gluten free, for example, the processing is entirely different than if you were to use standard ingredients due to concerns over ingredient separation and cross-contamination.
4. A Refrigeration Strategy
Another area that’s been generating a lot of interest is refrigeration compliance. Companies want to take an active role in developing a refrigeration strategy for 2015, driven by Occupation Safety and Health Administration (OSHA) mandates. Due to its damage to the atmosphere, food manufacturers must phase out R-22 refrigerants and move toward natural options such as CO2 by the year 2020.
Right now, food manufacturers are making plans for the shift. There are new technologies and developments emerging around refrigeration and distribution such as skid-mounted refrigeration systems that embrace CO2 instead of ammonia. While ammonia is an environmentally friendly refrigerant, we’ve noticed clients asking for ways they can reduce their ammonia charge to below 10,000 pounds to reduce costs associated with process safety management (PSM) compliance.
However, to respond to food manufacturers utilizing 10,000 or more pounds of ammonia, Stellar has continued to focus on digital PSM services. These help food processors keep a finger on the pulse of their compliance efforts. Because it’s digital and cloud-based, it allows food manufacturers to monitor and manage their compliance efforts from one, central point.
5. China: A Potential Growth Vehicle
Due to the emergence of its middle class, large food and beverage companies are now seeing China as a potential growth vehicle. This can also be attributed to the Chinese population’s food safety concerns, including fears about contamination and ingredients from Chinese companies. Because U.S. companies have respected reputations regarding food safety and product quality, Chinese consumers are willing to pay premiums for their products. Many multinational companies are now capitalizing on this opportunity to move into the Chinese market.
If you’d like to discuss emerging trends in the food and beverage industry, email me at foodforthought@stellar.net.