Thought Leadership

Ideas that design the supply chain of the future

Trends from the Food and Beverage Industry that you cannot neglect

At the beginning of 2020, Food Marketing Institute (FMI) revised their previously estimated online food and beverage sales to rise to the scale of $143 billion by 2025. But the Covid-19 situation has left all the past numbers even further behind and in a recent article Mark Baum, senior vice president at FMI was seen quoting “Obviously, we will have to revise that projection again,” when speaking about the sales estimate projections based on recent market trends related to the 'New Normal' in Food and Beverage industries.

The impact of the COVID-19 pandemic on the global food supply chain has been quite noteworthy as there have been lot of emerging trends in this industry which are disrupting the way most firms operate today. And experts say that many of these trends are not just a phase that will pass by but are part of the pillars of this 'New Normal'. The industry is seeing dramatic changes in the buying patterns as well as the channels being preferred, consumers are shifting more and more towards online grocery shopping and direct-to-consumer (DTC) delivery of food and beverage products.

DTC becoming the 'New Normal'

As DTC becomes an emerging segment of the 'New Normal' based food supply chain, many global firms are rethinking their product aspects to smoothly navigate this new emerging territory. Many of them are taking important decisions on this front, from choosing the right packaging for perishable products to taking aids of digital systems to create a more connected network to improving their customer experience with highly improved UI for their order placement platforms to focusing on technological improvements to their last mile integration.

As for food deliveries, quick service restaurants are showing quite booming figures in this latter half of this year with consumers preferring more takeouts and parcels. The figures for dinning-in at restaurants is expected to continue its dull stretch for even post-Covid era as a latest whitepaper by the International Foodservice Distributors Association (IFDA) suggested.

The case of vanishing SKUs

While the retail grocery segment has been booming in these times with showing almost the highest figures of improvement in this food and beverage segment, still there has been in the past few months a lot of reduction in the SKUs for major food product firms.

Though the pre-Covid times were more focused on SKU proliferation and giving the consumers more choices, the pandemic situation and the scenarios created have given firms the idea that keeping the SKUs to minimal actually reduces the confusion for consumers and are actually getting benefited with higher volume sales.

Mondelez International, for example, in April end announced that they are going the conservative way and reducing their SKUs significantly and also slowing down on few of their innovation projects for now. As their CEO Van De Putt mentions in one of the articles mentioned that they felt they have too many flavors and too many sizes, which needed to be reduced. Similarly lot of firms like Coca-Cola also have decided on putting a pause on smaller project innovations right now.

Even for retailers it has been a bumpy ride with distribution network issues, changing habits of their customers and higher costs associated with taking their business online. So they have also agreed on this theory of less SKUs and high sales to compensate their challenges as well and many of them have already started implementing it.

But this is something we need to again recheck after the pandemic situation is under a lot of control and consumers start to go to physical grocery retail outlets more. Will this trend continue even then? Time will tell but my guess, this streamlining of the SKUs might be something that stays at it benefits all.

The lack of food supply chain visibility that needs to be addressed immediately

The current times have challenged all our pre-conceived notions about the logistics operational models that we were accustomed with. It has created more questions than answers on what is the right way to go for achieving a highly resilient supply chain of the future. But among all that, there were few major concerns that affected the Food and Beverage industry, the boom in demand for online deliveries (through ecommerce and direct-to-consumer platforms), which in turn affected the cold chains as the need for better management of frozen goods delivery to ensure minimized wastages came to the forefront and all in turn pointed towards the biggest challenge of all – tackling supply chain disruptions effectively.

A recently published survey conducted by The Global Cold Chain Alliance (GCCA) found that even stronger demand for data, visibility and predictive analytics is expected in the future from the international Food and Beverages communities. Recent study by Sapio Research showed 79% of the business leaders of the food and beverage industry felt that improved visibility would have a material effect on cutting wastage. And in the same research a staggering 94 per cent of organizations surveyed said they lacked transparency throughout their supply chain. Critical time-dependent food and beverage shipments require better planning, smarter order consolidations, real-time visibility and tracking to ensure on-time deliveries and to reduce wastage. Shipment exceptions that occur in delivery chain is unavoidable most of the times but immediate recognition of the exception, leads to timely actions to ensure that the ETAs are still met and necessary actions are taken.

And it again boils down to the same answer, food and beverage logistics needs to be digitalized even more. They need to rethink their operational models to integrate digital systems and leverage the benefits of increased real-time visibility, enhanced process insights, smarter optimizations and automations to help them reduce the challenges associated with their inventory management to managing their distribution networks more efficiently.

We have been associated with the Food and Beverage industry for a more than 12+ years now and have been featured in the Food Logistics annual list of top technology providers for the industry for four years in a row. Our cloud based logistics suite has helped our clients streamline their processes, improve visibility multi-fold and reduce major portion their logistics costs. If you are interested in knowing more about this, we have a success story from one of the US's established beverage distributors that you might want to have a look at.

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About the author :

Srini Vaidy

President and CEO, Highway 905

Srini Vaidy is the President and CEO of the award-winning, cloud-based logistics technology provider Highway 905. He is an established innovator in the Supply Chain & Logistics space, with an ever-dying passion for coding and technology. For more than 30 years he has been ideating customer-centric and efficiency-driven supply chain execution solutions for the Fortune 500 to help them optimize their logistics costs and strengthen their competitive market position. With one eye on technological trends and the other on the happenings in the logistics space, he likes providing readers with an interesting perspective on the future of logistics industry.

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