Global F&B companies optimistic on growth; regulations top worry list

By Maggie Hennessy

- Last updated on GMT

Related tags Social media New product development

Global F&B companies optimistic on growth
A vast majority of food and beverage executives (90%) expect revenues to increase during the next year, with a third of them believing that growth will be in double digits, according to a global survey of 250 F&B companies by Grant Thornton LLP.

“Food and beverage industry leaders were forced to put certain plans for growth on hold during a difficult economic period,”​ said Dexter Manning, Food and Beverage practice leader of Grant Thornton, the U.S. member firm of Grant Thornton International Ltd. “Now that the global economy is showing signs of improvement, these leaders clearly have the appetite to strengthen their market positions and achieve sustainable growth through increased, focused investment.”

More than three quarters (82%) of those surveyed said they expect that their profits will increase in the next 12 months, with 56% saying they expect that employment will increase during the next year.

In addition, more than three-quarters of executives report that their organizations will increase spending on equipment, new product development and information technology in the next 12 months. The greatest appetite for equipment investment is being shown by business leaders in North America (86%), and Australasia (85%), followed by Europe (77%).

Social media represents a ‘seismic shift’ in business strategy

When it comes to new product development, North America (86%) is showing the greatest enthusiasm. Manning added that the shortened timeframe from R&D to product rollout has played a role in innovation in the US in particular, due in large part to social media.  

“Certainly in the US, the whole cycle between R&D and product launch has shortened dramatically because of social media,”​ Manning said during a call announcing the survey results. “Companies are more often reaching out to consumers directly rather than data through retail channels. Consumers are helping formulate and solidify where companies spend their R&D dollars, enabling them to provide products faster to market, when and where consumers need them.”

He added that social media represents something of a seismic shift in business strategy, as companies now have access to more consumer data than ever.

“We now have an unprecedented amount of data on consumers, but not all businesses are prepared to take advantage of this big data,” he said. “Businesses​ losing customer data or inadvertently exposing it to the public is a real challenge of social media and process improvement. Consumer interaction will be a mandate for the future. Companies need to understand the risks of using social media and the internet out how to use all that data for better predictive results.”

Healthcare, FSMA concerns top US list

Regulatory concerns top the list of worries for food and beverage processors. Specifically, global executives cite the following types of regulations and the negative effect they may have on their companies: environmental (48%), taxes (44%), food labeling (38%), food traceability (33%) and employee healthcare (25%).

The US is in the process of implementing the Affordable Care Act, so it’s “not surprising to see that in US, employee healthcare regulation is second only to tax regulation in the US for concerns of F&B companies,” Manning noted.

In addition, it’s unclear if proposed rules meant to improve food safety and supply-chain traceability under the Food Safety Modernization Act are enforceable—which leaves some executives to wonder if they’re required to comply.

“Many companies have programs in place, and they’re trying to make adjustments so their programs comply with the rules,” said Manning. “But at the end of the day, some executives look at it and say, ‘Well, Congress hasn’t funded it yet, and so they may not be able to enforce it.’ This means that many companies do not expect much impact, especially given U.S. budget deficits and cost-cutting.”

A bigger challenge still is labeling, as there are no global standards for organic or GMO labeling. The industry’s biggest concern is getting the right labeling requirements out there,” ​Manning said. “There is concern that some specialty groups would like to see labeling that may mislead consumers—GMO comes to mind. These groups would like to see the public being scared off these types of products, many of which are better for you. The population of the world is expected to double in the next 30 years, and we can’t feed the population on organic products alone.”

Looking ahead, the trends F&B executives believe will positively impact business are not new, and include demand for premium and healthful products, ethnic foods, local sourcing and sustainable production. One relative surprise was private label, which half of US businesses see as positively impacting business, compared to 36% globally.

“Private label has seen tremendous growth over last several years, which started during the recession for obvious reasons,”​ said Jim Menzies, partner at Grant Thornton Canada. “Consumers are finding that the quality of private label has risen. It’s no longer perceived as the cheap option.”

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