The fastest inflation rate in a generation is hitting the food and beverage industry hard, with 53% of U.S. adults saying they’ve changed their eating and drinking habits due to rising costs.
Most manufacturers have raised prices at least once this year, but business leaders must strike a delicate balance with cost-conscious consumers.
Improving operational efficiency, increasing productivity, and managing costs can help offset inflationary pressures while minimizing price increases.
These actions make good business sense regardless of the current volatile environment; however, they’re especially important considering today’s supply chain shortages, rising raw material costs, and challenges to meet quality requirements.
Packing materials in particular are more expensive and difficult to source due to higher energy prices.
For example, one report found that since the COVID pandemic in 2020, U.S. corrugated containerboard has experienced five price increases. As a result, some paper mills have shut down because it’s no longer economical to produce.
While today’s inflationary environment isn’t unprecedented, this is a new experience for many managers, who are grappling with the worst inflation since the 1980s.
Prepare your food and beverage business for inflation
Significant uncertainty surrounds most economic outlooks. Inflation could ease in 2023, or we may face several years of rising inflation. Regardless, an inflation-driven risk management plan for the food and beverage industry should focus on areas your business can control.
Improving efficiency and increasing productivity
For food and beverage manufacturers, energy efficiency isn’t a buzzword—it’s a necessity. Better data visibility empowers you to pinpoint where and how much energy is used. This requires digging into your operations to pull the data together and analyze it constantly.
It’s worth the effort because as energy costs soar, every kilowatt-hour saved can have a big impact on your bottom line.
Inflationary impacts on the agribusiness industry is having downstream impacts on food and beverage suppliers through increased costs and decreased supplies.
At Proudfoot, one of our multinational food and beverage clients is experiencing this specific challenge, facing shortages of raw materials, including wheat, which in turn has driven up production costs.
To mitigate supply chain shortage risks and ensure flexibility, line up alternative supplier sources.
Initiating a digital sourcing impact analysis can empower even small procurement teams to quickly discover and evaluate new suppliers, increasing the likelihood of finding higher-quality and lower-cost material sources.
Continuously evaluating your supply chain can also help you reduce waste and lower your carbon footprint through increased efficiency.
Managing costs and analyzing profitability
Carefully examine your portfolio to identify the customers and products that drive the most value. It’s critical to understand your True Profitability to manage high inflation.
When you know the real cost to serve every customer and produce every product, you can better prioritize them, either by product or by client type – depending on what the data tells you.
This supports stronger portfolio rationalization and key account management, which helps you stay profitable with the right pricing strategy. The data that you require to understand your True Profitability is all there; however, it’s scattered and difficult to obtain.
A True Profitability assessment can stitch that data together to create the right picture and the right strategy to drive your business.
Cost management should never sacrifice product quality or customer and employee health and safety. But by leveraging big data and artificial intelligence (AI)—and then, more importantly, truly understanding what that end-to-end data value chain is explaining—you can uncover process improvements and even solutions that enhance quality.
Implement changes at speed with the right partner
Since nothing moves until people move, you have to engage your employees in any kind of transformation you embark on. The good news is that because rising prices are affecting everyone’s day-to-day lives, your people should see the need for the business to take action as inflation persists.
A partner like Proudfoot creates sustainable change by helping you understand efficiency opportunities, prioritizing them, and developing an agile plan that brings your people together to reduce operating costs and improve throughput.
That plan is backed up by our True Profitability approach, which untangles your data so it can be viewed holistically to pinpoint the greatest areas of impact, whether that’s in operations or how your price and manage customers.
In today’s uncertain economic environment, food and beverage business leaders must make changes—and then act on them quickly. With Proudfoot, you can be prepared for the short- and long-term impacts of inflation.
Book a meeting with Proudfoot to analyze your business and prioritize the changes that combat inflation.