Food and Beverage Industry Analysis Through Procurement Perspective: Overview

By: George Mathew

While sustainability, digitization, and transparency in supply chain are the key trends driving the food and beverages industry, quality assurance, regulatory compliance, and supply chain complexity are the top challenges.

Transparency in supply chain and sustainability in packaging and ingredients are the key demands echoing in the food and drinks industry. Consumers not only want to know from where the ingredients are sourced but also that they are packaged and procured in a sustainable manner. This has resulted in an emphasis on local sourcing and the use of recyclable packaging.

This trend has been a cause of concern for canned food manufacturers as tin and aluminum are widely used for packaging, and these products are non-biodegradable. To overcome this challenge and reduce environmental pollution, canned food manufacturers have started using recyclable tin and aluminum cans for packaging.

Similarly, compliance with regulatory standards, especially related to food safety and labeling, has been gaining prominence in the post-pandemic era.

 

   

Food and Beverage Industry – Recent Procurement Trends

 

Adoption of technology-enabled solutions

 

One of the key packaged food industry trends is the growing adoption of technology-enabled solutions as they enhance security and convenience. Smart solutions such as embedded NFC and QR codes enable customers and manufacturers to track location, tampering, temperature, quality, and compliance with regulatory standards, among others.

The use of technologies such as AI and big data has also improved automation in procurement. These technologies make it more data driven as they improve demand forecasting, supplier management, and price management. Track and trace solutions help companies to identify supply chain bottlenecks, while AI helps to reduce costs and risks.

 

Growing demand for transparency and sustainability

 

A key health food industry trend is the need to collaborate with suppliers that prioritize quality control and testing procedures. Such collaborations are essential to maintain customer trust and to ensure compliance with regulatory standards.

Transparency in the supply chain is gaining prominence as a growing number of consumers are giving importance to production methods and ingredients used. Therefore, letting the consumers know from where the ingredients are sourced, and the production methods will improve their trust. From the supplier’s point of view, by enforcing transparency, drawbacks such as inefficiencies can be detected, and this, in turn, will help improve supply chain efficiency and reduce cost.

 

Major Procurement Problems Faced by the Food and Beverage Industry

   

Supply chain complexity

 

Supply chain complexity, especially in terms of ensuring safe transport and reducing bottlenecks, is a challenge faced by the industry. Even a small business in the food and beverages industry needs to collaborate with a large number of players. Also, the food and beverages industry requires transportation of food ingredients from far away places in a controlled environment. Therefore, ensuring traceability and tamper-proof, controlled transit is essential to prevent contamination. Meeting this need is not only required to ensure customer trust but also to ensure regulatory compliance.

Geopolitical issues, sanctions, and climate changes have led to a shortage of resources. This, in turn, has driven the demand for local or nearshore sourcing of ingredients.

 

Labor shortage

 

The food and beverages industry has always faced labor shortages, and this has only worsened post pandemic. Some of the primary reasons for the industry facing this issue can be long working hours, low wages, and demanding work environment. The industry has a requirement for specialized skilled labor. However, the demand is seasonal, and the competition for recruiting the right candidate is high within the industry. This is because the players in this industry compete from the same talent pool.

Labor shortages will not only increase the cost but can also cause potential disruptions to the supply chain.

 

Regulatory compliance

 

With the F&B industry going global, the players have to ensure adherence to not only local regulations but also national and international norms. This is a challenge as the regulations vary and are frequently updated or revised, thus requiring continuous monitoring to ensure compliance.

These regulations lay emphasis on traceability, allergen control, and other quality control measures. Therefore, the players must ensure accurate labeling and packaging requirements. Ensuring labeling and packaging are consumer friendly while providing accurate ingredient lists, nutritional information, allergen declaration, and country of origin can be a challenge, especially when the product is transported to several countries.

 

Solutions for Food and Beverage Procurement Problems

 

Players in the F&B industry must focus on supplier relationship management, risk mitigation strategies, demand forecasting, and technology adoption such as supply chain visibility tool to streamline their operations, reduce costs, ensure product quality, and improve overall efficiency of the supply chain.

Similarly, the players must keep themselves up breast with the latest updates in the regulatory changes and promote a culture of compliance throughout their operations to avoid penalties, reputational damages, product recalls, or even legal consequences.

To offset labor shortages, players in the F&B industry can invest in outsourcing of functions or incorporating automation, and consider solutions such as offering part-time or flexible work arrangements.

 

Why Choose SpendEdge?

   

Aids in Improving Demand Planning

 

The F&B industry today is highly globalized, i.e., the ingredients are often sourced from far off places. As a result, the players have to deal with ensuring accurate demand forecasting and ensuring optimal conditions are maintained during transit, among others. To overcome these issues, our experts can offer demand planning strategies that aid in improving inventory tracking and real-time updates related to stock.

 

Enabling Cost Reduction and Cost Avoidance

 

The need to cut costs to improve profit margins have been gaining prominence, especially in the post pandemic era. To achieve this, our team of experts can help you manage and evaluate your suppliers and logistics partners based on their performance and not purely on price. This ensures cost efficiency. We also undertake risk assessments such as analyzing regulatory changes and geopolitical risks to alert our clients about potential threats and offer mitigation strategies, thereby enabling them to cut costs.

 

Success Stories: SpendEdge’s procurement market intelligence reports helped category managers in the food and beverage industry to optimize their sourcing goals and ensure efficient value delivery.

 

A leading global F&B company needed a partner that could help in ongoing procurement market intelligence and benchmarking support. The support was required specifically for over 50 indirect categories and subcategories such as marketing, MRO, professional services, and T&L.

The company was looking for a partner with domain expertise as well as regional- and country-specific procurement intelligence capabilities. The partner should have the ability to derive granular insights related to the supply market, suppliers, and pricing, among others. The client was also expecting the supplier to assist them with benchmarking information on industry best practices regarding how these categories are managed by best-in-class market players.

We conducted a detailed review of the current category sourcing and procurement strategy as well as an assessment of gaps and opportunities. Based on these, we delivered detailed country-/region-specific insights. The reports were tailor made and used benchmarking analysis to shortlist the right-fit supplier. In addition, our negotiation strategies also helped the client effectively negotiate for the best deal terms with their suppliers.

 

Want to know the latest consumer trends, demand patterns, or competitor activities, then contact our experts. They will help you identify the latest in technology or make informed strategic decisions.

   

FAQ

 

What is the importance of data analytics in the food and beverage industry?

Data analytics will help players in the F&B industry to optimize procurement and supply chain processes, reduce cost, and enhance customer satisfaction.

 

What are the 2023 Beverage Industry Trends?

Shift toward sustainable packaging and sourcing in a socially responsible manner are the two key trends to look out for in 2023.

 

What Segment of the Beverage Industry Is the Fastest Growing?

Bottled water is estimated to be the fastest-growing segment in the F&B industry due to the rise in health concerns and drinking water scarcity.