The food industry is constantly evolving and adapting to new trends or regulations. Following a tumultuous election season and the continued rise in customer demands, 2017 is set to be an impact year for the food and beverage industry. Both are anticipating various unfolding regulatory or legislative mandates, while still trying to stay afloat in a highly competitive marketplace.
Despite the introduction of new products or business models, Food Processing wrote that many food and beverage companies saw declining sales and profits in 2014. In response, they significantly cut their overhead costs in 2015 to be leaner. As a result, the magazine explained that as sales went down, their profits improved. This was because they weren't burdened with hefty employee costs or other forms of overhead.
To continue earning profits in 2017, experts expect food manufactures and the industry as a whole to further cut excessive costs and redirect these savings toward improving operations across the board. For example, to tighten up national supply chains, many manufacturers are turning to mobile technology.
"Customers demand higher quality ingredients."
Forbes wrote that 81 percent of CEOs stated that mobile technology is strategically important for their company. They are turning to this technology to improve supply chain visibility, productivity and order management. This way, they can more effectively connect with consumers and improve workflows to improve profit margins. However, to do this right, they must first begin listening to what their customer bases want before they make any changes.
The rise of consumer demands
Long gone are the days where food manufacturers and restaurants told consumers what they wanted – now it's the other way around. Customers demand higher quality ingredients, label transparency, better prices and more convenient menu items or products. Much of this rise of consumer demands stems from competition differentiation in the food industry.
Due to new technology and innovative approaches, customers can take their pick from a seemingly endless number of brands on the market. What is interesting, however, is that consumers are no longer simply driven by price points or ease of access, Food Dive revealed. Shoppers now demand better tasting food made from all-natural or healthy ingredients. Additionally, humanely sourced food materials are on the top of many consumers' minds today.
"In the marketplace, rising consumer demand for products that are grown sustainably, minimally processed, ethically sourced and made with natural ingredients is creating instability within the global food and agricultural supply chain," Sean McBride, founder and principal at DSM Strategic Communications, explained to Food Dive. "Food companies and their trading partners must create a new supply chain framework that allows them to serve the needs of consumers without sacrificing price, product availability, convenience and efficiency."
"Consumers are no longer simply driven by price points."
So how do manufacturers rework their existing supply chains and products to better align themselves with consumer desires? The real issue is that food manufacturers are facing increased market competition, making it essential for them to earn high profit margins. Yet, to do so, they must first focus on sustainability and organic food options. As a result, many major brands are offering "simple" or "all-natural" product lines to better cater to this growing consumer base.
"The challenge for manufacturers moving forward will be to create healthy, eco-friendly and humanely produced foods that deliver on taste and are cost-competitive," Bruce Friedrich, executive director of The Good Food Institute, told Food Dive. "Luckily, the plant-based foods that meet these criteria are also trending with consumers, and there are enormous opportunities to innovate with new ingredients and products to capture consumers' palates while connecting brands to a greater mission."
What about labeling and food safety standards?
With the new administration and rumblings in the Food and Drug Administration, Lexology reported that 2017 is likely to be a monumental year for food labeling and product safety standards. On one hand, the FDA is still deliberating on how to legally define terms such as "healthy" or "natural" on food labels. The agency had opened up the debate to the general public up until May 2016, where they received over 7,500 comments. The FDA is expected to release definitions for these terms at some point this year.
Meanwhile, the National Bioengineered Food Disclosure Standard, which President Obama signed this past August, still stands as one of the most influential labeling decisions in recent years. While the USDA has two years to work out the specifics of this legislation, the foundational message behind it is that it requires food manufacturers to reveal whether their products contain genetically modified organisms (GMOs). States such as Connecticut and Vermont had already passed statewide GMO labeling laws, yet this legislation is set to replace them.
"Food manufacturers need durable labels."
Despite its benefits, the legislation is also controversial, as it allows food manufacturers three options by which to disclose their GMO status. The first is that they must explicitly reveal that their products contain GMOs. Then, the second option is they can use the preset GMO label created by the USDA. Finally, they can use the SmartLabel QR code. This last option is the most controversial, as not every consumer owns a smartphone or has access to QR code scanners.
Last year was also fraught with various class action lawsuits targeting food labeling manufactures over false or misleading claims. Lexology stated that these court battles will likely continue throughout 2017, especially in light of the new administration's uncertain position on labeling or food safety, in general. As President Trump is a businessman first and foremost, food manufacturers might not have to worry about significant changes in the future. However, many industry experts are unsure about how his administration intends to proceed.
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