Food processing trends and factors for success in North America

The report, called Benchmarking for Success 2009, also noted the increasing prominence of food safety – both as a concern for consumers, as well as a way for companies to leverage it as an engine for growth and differentiation within an increasingly competitive market place.

Closing the gap​

Carried out by financial consultants Deloitte, the research looked at 76 publicly listed food and beverage processors head-quartered in North America – a third of which were Canadian. One headline finding of the study is that the Canadian industry is catching up with the US in terms of efficiency – now performing equally at around 10 per cent on Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) as a proportion of sales. The same research conducted in 2002 showed US companies enjoyed a bigger advantage in this respect.

“The findings…are encouraging for Canadian processors in that they have closed a long-standing efficiency gap with their American counterparts,”​ said the report authors.

Consolidation ​

There has been a major trend towards consolidation in the North American food and beverage processing sector in recent years, the report also noted. In 2002, there were 147 publicly-traded companies whose primary business was food and beverage processing. But by 2009, this number had dropped 17 per cent to 122. This fall came despite an almost 50 per cent jump in total industry revenue.

The decline was even more noticeable in Canada, said the report, where the number of processor with annual revenues of at least $10m decreased by 30 per cent from 35 to 25. The authors added that the while publicly-listed companies tended to attract headlines, their number is dwarfed by the number of probate firms; over 1,000 in Canada and 6,300 in the US.

Food safety ​

The research identified that several recent, high-profile food safety incidents the US and Canada had pushed the issue to the forefront of customer concerns. In Canada, this had already fed through to food and beverage processors, with 50 per cent saying they had undertaken “concrete measures towards improving food safety – either through process improvements or working towards a recognised safety certification”.​

The annual Top of Minds Survey – a survey based on a sample of almost 600 decision makers in 54 countries - also backed up this concern that “food safety has gained prominence across the globe”.​

The authors forecast the confluence of high-profile food safety incidents and the global food supply chain to “result in continued attention being devoted to product safety among consumers, organisations and governments worldwide”.​

Key success factors​

The report highlighted three issues as a way of promoting success - with the first being the aggressive management of costs.

“Volatile input costs and currency exchange rates, an increasingly cost-conscious consumer and competition with low-cost regions make cost containment more important than ever,”​ concluded Deloitte

The authors urged companies to take food safety seriously as a string of contamination incidents has raised consumer anxiety on this.

Thirdly, food processors should look for growth opportunities abroad, especially during recessionary periods. The study noted that while the US remained the largest foreign market for Canadian firms, the economic downturn and “rising calls for greater protection from foreign competition,” ​meant it may not be as reliable as previously.

“Organisations that pursue growth beyond US borders may well end up in a better competitive position than those which do not”,​ it said.