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Challenges that will define the dynamics of Food & Beverages Market in 2023 and beyond

The humongous outbreak of the dreaded coronavirus has brought about a groundbreaking change in what the world perceived as ‘normal’. With an estimated 280,391,189 positive cases globally, as claimed by Worldometer, the COVID-19 has sent ripples of fear across the masses, destroying not only lives, but also the economies of most countries, given the stringent enforcement of lockdowns across the globe.

Major industry verticals have been adversely affected on account of the pandemic, as manufacturers strive to keep their businesses afloat amid what is being hailed by financial analysts as ‘a situation far worse than the economic upheaval of 2008-2009’. Among the many sectors that have witnessed a downfall, the food & beverage industry seems to have taken one of the worst hits. The years 2020 and 2021 depicted the long-term impact of COVID-19 and its many variants on the industrial sector, something that will continue to remain one of the major challenges of food and beverage market.

Tagged as one of the largest marketplaces of the 21st century, the food and beverage sector, in the last couple of decades, has truly come into its own. The last ten years specifically chart out a rather distinguished portrayal of the F&B space – the industry having undergone a spate of changes owing to ever-changing consumer demands and massive innovations. What comes to notice here is the rapid increase in the number of challenges of food and beverage industry.

A behemoth in itself, this consumer-driven, multi-billion-dollar business vertical industry, while showing a commendable, excessive growth pace, is also plagued with a series of obstacles. While some of current issues in the food industry have been rather commonplace for a while now, many other challenges of F&B market that have cropped up in recent times can be attributed to the changing demands of customers, the sudden onset and the presence of a stringent regulatory landscape.

A paradigm shift has been observed in the perspective of the masses with respect to the food and beverage industry. People are now more nutrition-friendly, prefer fat-free and sugar-free products, and are generally more inclined towards maintaining robust health. Supporting this school of thought is the fact that food products are judged based on not just the quality, but also the nutritional content. This dynamic thought process has coerced food producers to bring about surplus changes in the existing manufacturing process and efficiently tackle some of the major challenges of food and beverage market.

1. Plastic Elimination & the Impact of the pandemic on the same

The enforcement of the ‘plastic ban’ is rooted in an ideology that has lasted several years amid discussions on international platforms and has now come to fruition. The consistent growth pace of industrialization, of which the F&B sector is a major arm, has had a disastrous impact on the environment, and has led to eco-friendliness becoming the next big mantra out there. Knowingly or unknowingly, the excess consumption and improper disposal of plastic has come up as one of the major challenges faced by food and beverage managers today.

In this scenario, a product that is tagged as ‘eco-friendly’, quite naturally, has more of a consumer connection and is likely to accrue lucrative sales than a product that is popularized to harm the environment. Food and beverage manufacturers and retailers are now striving toward making the food manufacturing process highly conducive to the environment through the adoption of numerous recycling practices. The deployment of green business practices – right from the production to the packaging and supply chain management is a crucial solution to tackling the current issues in the food industry.

Another environment-related constituent that forms a part of the present challenges of food and beverage industry is the issue of waste management. Undeniably, the food industry generates a considerable amount of waste, right from sourcing the raw material to food retailing and distribution. The negative impact of the same has been identified as one of the most crucial environmental issues in food and beverage industry that needs to be dealt with as soon as possible. In response, manufacturers have been striving to bring about eco-friendly manufacturing practices, waste management programs, recycling techniques, and more.

A major example of how F&B industry contenders have been complying to the plastic ban is that of Nestle. In 2020, Nestle, Coca-Cola, Unilever, and PepsiCo reiterated their earlier commitments to a creating a circular economy, eliminating plastic waste, and using 100% recyclable/reusable packaging. Additionally, retailers such as Asda, Caf? Coffee Day, and McDonald’s have also announced their commitment to go plastic-free and bring about sustainable practices in production and packaging.

The consistent reoccurrence of COVID-19 and its variants has had a considerably negative impact on the global plastic ban. Pertaining to hygienic reasons, the usage of single-use plastic considerably increased during the pandemic, nearly ruining the careful efforts made so far to get rid of excessive plastic consumption. To that end, F&B companies would have to work considerably more than usual to ensure that plastic usage continues to reduce, even in the event of another pandemic like situation.

2. Increasing health-consciousness amid rising cases of COVID-19 & its variants

The increasing incidences of food-related disorders have prompted consumers to bring about vital changes in their diet and lifestyle, making them more health-conscious than ever. Automatically, the train of thought is diverted towards purchasing foods without added preservatives that might hamper one’s health. The demand for products that do not carry the ‘healthy’ label is then bound to reduce, and to stay at the top, the need to eliminate artificial constituents from products has come to the fore as one of the major challenges faced by food and beverage managers.

One of the major factors that has led to increased diabetes prevalence is obesity, linked to a major intake of sugar via processed foods and cereals. This realization has, since the last half a decade, led to consumers shying away from products containing artificial sweeteners and other added preservatives.

Thus, one of the biggest challenges of food and beverage industry is for manufacturers to come up with healthy products that provide ample nutrients; yet, at the same time, do not take away from the aesthetics of the brand. This has led to a variety of nutrient-rich foods making it to supermarket aisles, labelled ‘gluten-free’, ‘dairy-free’, ‘sugar-free’, and the like. The widespread expansion of food supplement ingredients market is an apt example justifying the aforesaid.

As consumers tend to purchase products with value addition, food products reinforced with proteins, vitamins, and other nutrients have better chances of a massive sale, fueling food additives market, which is slated to register revenues over USD 115 billion by 2024. Adding value to food products without diminishing their quality or compromising on taste, and yet maintaining the cost-effectiveness, adds to the long list of current issues in the food industry.

The pandemic of 2020 led to nationwide lockdowns and a sudden increase in health awareness. Nearly overnight, consuming health-conscious food became a priority even for most middle-class households. A massive upsurge was observed in foods labelled ‘gluten-free’, ‘sugar-free’ and more importantly, for health powders and formulations that claimed to protect against coronavirus and its variants. While a lot of these didn’t exactly persist in the running, it certainly brought to light the fact that health-conscious food choices are here to stay, and food and beverage managers are required to take note of the same.

Yet another trend that forms the crux of the challenges faced by food and beverage managers is the rising demand for organic food. The drastic reduction in the demand for processed foods has fueled the organic food market, increasing awareness levels regarding natural foods and their positive health impact. This has favored the demand for natural, healthy, food products, pushing organic rice protein market trends.

The dramatic no-show of consumers from the ‘center of store’ aisle products also demonstrates that consumers prefer to stay away from packaged goods, which is why brainstorming strategies to combat the increasing demand for organic products is one of the major challenges faced by food and beverage managers today. A recent example of how beverage manufacturers have been tackling this challenge is that of Coca Cola, which has recently launched the first sugar-free flavored water in Japan, under the brand “I LOHAS”.

3. The rising concerns about product traceability

Traceability is one of the pivotal challenges in food and beverage industry, not just for record management but also to fulfill the bottom line – generating revenue for every sector. Of late, consumers have been taking increasing interest to know what goes into their food, that has led ‘ingredient labelling’ forming a major part of the packaging process. With public trust in food supply chains reducing drastically and awareness pertaining to glitches in the F&B supply chain since the last decade or so, end-to-end traceability has emerged as one of the latest trends in food and beverage industry.

Having recognized the significance of maintaining precise data records, food processing companies are now on their way to deploy advanced technology, such as IoT, AI, and the blockchain, for tasks such as supply chain analysis, weight measurement, temperature monitoring, etc. Say for example, global retail giant Auchan, toward the end of 2018, planned to expand TE-FOOD’s blockchain solution in a bid to improve food transparency.

4. The ascent of the veganism trend amid the pandemic

The growing concern toward animals is ushering in a change in the food patterns of the masses. With more and more consumers vying for vegetarian and vegan products, the demand for meat and other products has observed a significant decline, posing as one of the major challenges in food and beverage industry. Social platforms and online information portals have paved the way for animal abuse awareness, and people prefer purchasing products with labels such as “humane-certified” and “cage-free”.

In August 2019, nine Japanese companies vowed to end testing on animals, post discussions with the PETA U.S. Manufacturing products that vouch for animal safety has become one of the prime challenges for food and beverage industry, as food manufacturers must maintain their reputation with regards to ethical treatment of animal concern. On this note, companies have come up with meat-free alternatives to keep the retail chains running. Say for example, Sainsbury, Aldi, and Nestle have recently come up with the idea of launching meat-free products at retail outlets.

The onset of COVID-19 and its recurring mutations have reiterated the significance of a vegan diet. During the lockdown, a few studies seemingly indicated that people following a vegan diet were less prone to getting afflicted with COVID-19. Although there has been no conclusive proof of the same, veganism is likely to gain more precedence than ever before, nutritionists claim.

5. The optimum level of stringency in the regulatory landscape

While it may be construed as stating the obvious – the fact is, that the F&B space is very stringently governed by regulations. Organizations such as the FDA, EPA, OSHA, and FTC have been rather diligent in enforcing norms pertaining to the launch of healthy products, regulating food labels, maintaining a clean, hygienic environment, and the like.

Most companies are known to perfunctorily adhere to the norms; despite that, the periodic changes subject to waste disposal, food quality, raw material, surplus production, documentation, etc., have cropped up to be one of the major challenges faced by food and beverage managers. Often, the continuously changing reforms have led to companies recalling food products from their stores.

Say for instance, Tyson Foods recently recalled over 190,000 pounds of ready-to-eat chicken fritters post order from the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS), while grocery store chain Kroger recalled three frozen berry varieties after the FDA discovered that some of them tested positive for hepatitis A. In order to deal with the same, companies are required to bring about utmost accuracy and precision in their business operations – right from the manufacturing to the distribution processes.

6. The increasing complications of inventory management

Given the limited shelf life of food products, inventory management has come up to be one of the current issues in the food industry. The perishability factor is responsible for fact that F&B inventory is highly susceptible to foodborne pathogens and more, if not stored hygienically. This has prompted manufacturers to adopt new software to alleviate these issues, given that the presence of foodborne bacteria may have a disastrous impact on the company’s reputation. Amid this backdrop, food pathogen testing market will stand tall as one of the most profitable arms of the global F&B industry.

The F&B space is also highly machine-controlled, given its expanding growth pace, and is likely to continue adopting advanced technology to keep up with consumer trends and latest innovations. The demand for enhanced inventory management software in food processing, canning goods, and packaging products forms a vital part of the challenges of food and beverage market, and numerous companies are making efforts to help the F&B sector deal with the crisis. Say for example, toward the end of 2018, United Overseas Bank declared that it has upsized UOB BizSmart – its cloud-based, integrated digital solution to help small business in the F&B industry.

7. The pervasive presence of eCommerce

An online presence is one of the major challenges of food and beverage industry, considering that consumers are more tech-savvy and socially informed, thanks to the Internet. While core industries, like appliances, electronics, textiles, and other domestic products have already established their presence in the commerce domain, this sector has been relatively slow on the upkeep.

Of late though, wholesalers and retail companies have already begun to invest in grocery e-commerce, however, it is important that most manufacturers have a presence on the World Wide Web, in order to tackle what seems to be one of the most crucial challenges of food and beverage industry. Citing an instance of the same, Reliance Industries’ retail arm, Reliance Retail Ltd., has made it to the headlines for planning to test its food and grocery app prior to the venture’s commercial launch.

8. The current impact & forecast aftermath of the COVID-19 pandemic

The F&B sector has faced the worst brunt of the coronavirus so far. Right from the manufacturing and supply chain and restaurant sector to food service companies and food delivery firms, the F&B industry has been wearily coping up with the pandemic. Countrywide lockdowns prevented employees from working in factories, severely impacting the supply chain. With farming and agricultural activities taking a hit, the fear of food shortage looms large. Petrified with the extended lockdowns, it was observed the masses resorted to panic buying, creating further food shortage and a major disparity between the ones who can afford to stockpile on items and the ones who cannot.

Back in 2020, the general consensus was that this grim scenario might last until a treatment/vaccine for COVID-19 is found. While most countries have successfully carried out vaccination drives, there hasn’t been a pathbreaking progress for the F&B industry yet. This is because people are likely to practice social distancing for a while now, in lieu of what is considered the ‘new normal’ as well as the consistent onset of newer COVID-19 variants. Restaurant businesses are thus anticipated to take a hit, while the meat industry is also expected to experience a downturn, given the change in consumer eating habits. Food & beverage managers will need to keep these issues in mind and chalk out strategic initiatives to keep their business afloat.

Undeniably, the challenges faced by food and beverage managers are dime a dozen, owing to the ridiculously fierce competition and the fact that a single change is bound to affect the entire supply chain. Newer markets, changing consumer spending, increasing food prices, global appetite, and advanced technology are slated to bring about extensive changes in this sector in the next few years. The onslaught of the COVID-19 pandemic is expected to continue for a while, as is proved by the recent discovery of the Omicron variant.

Despite the consistent challenges of food and beverage industry, it is predicted to show healthy gains in the future. It remains to be seen how the global F&B market will fare in the forthcoming years, driven by disposable income levels, changing lifestyles, and favorable government reforms.

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