Three trends disrupting the food processing industry

The food processing industry is ever-changing, and it is important to stay competitive. Learn about three trends in the industry and how you can adapt your business to keep up.

Regardless of where your food company falls along the spectrum—from field to table—there are a variety of crosscurrents at play which add to the challenge of remaining competitive. The speed of this disruption has opened the door to new sources of competition. From start-ups operating free from legacy technology, systems, and labor commitments, to larger, consolidating competitors with generous capital expenditure budgets, the pace of change is not expected to slow any time soon.

What you are up against

In addition to the growing regulatory and media focus on food safety—not to mention the shift in consumer preferences toward healthier ingredients—here are three trends that make now a good time to review your operations with an eye toward upgrading sooner rather than later.

#1: The Fresh Food Movement

Not only are more consumers determined to make healthier choices when dining, they also want to eat fresher foods. This growing preference is driving toward “just in time” delivery. It’s a change that may upend operations for many suppliers, resulting in a changed approach to frozen storage policies, refrigeration alternatives, and the logistics involved in transporting products. Some firms, such as the meal kit companies, are already investing in data systems that will help anticipate when packaging needs to be altered for weather conditions to ensure freshness at delivery. Other processors are incorporating more fuel-efficient vehicles into their fleets—including electric vehicles— as shorter supply chains take hold. Investing more heavily in logistics is also receiving more focus to address shifting consumer preferences.

#2: Interest Rates

The economic environment is also experiencing what may feel like a seismic shift of its own. After years of operating in a steady-but-slow growth and low-interest rate environment, U.S. companies are starting to enjoy bottom line recovery, but rising interest rates as well. For example, 3 Year SWAPS have increased 1.25% since June 1, 2017. Five additional Fed fund rate increases are expected before the end of 2019, according to Fed Chairman Jerome Powell. For many firms, this could mean equipment purchases that require financing will be more affordable now, rather than later.

#3: Automation and Labor Trends

To address a tight labor market, many firms are already investing in state-of-the-art automation and robotic equipment. Robotics and machine learning offer improved cost efficiencies and can boost quality and productivity when applied to repetitive tasks. It’s expected this emerging technology can also help address food safety concerns. The fast-growing meal kit industry, which depends on quality and quantity consistency in the ingredients it ships, is incorporating automated processes to sort, weigh and bag ingredients. According to a recent Wall Street Journal article, a Blue Apron executive discussing the move to automated sorting and packaging processes reports “things that took us hours, now take minutes.”

Choosing the right response to disruption

Whether your company would be helped by reducing your frozen storage costs, replacing your fleet or introducing robotic elements to your assembly line, keeping up with the pace of change necessitates taking action soon. This is especially important given the current economic forecasts.

For help determining your options for funding any changes, review the pros and cons of each with your banker to consider the potential impact they may have on your cash flow.