The State of Play for the Food Manufacturing Industry

In a perfect world, the process of food manufacturing would be fairly straightforward. Farmers would grow crops, those crops would be shipped swiftly to manufacturing plants where workers diligently produce the myriad products we find on grocery store shelves, and those products would arrive safe and sound to consumers. What we’ve seen in the past, especially in recent years, is that this perfect world does not exist.

The food manufacturing industry has always had to work around its fair share of roadblocks, but “it’s a convergence of a lot of different things going on at the same time,” said Rich Dwyer, senior vice president of corporate affairs and enterprise risk at Kent Corp., that are making things particularly difficult right now. COVID-19 disrupted supply chains and the workforce, a bird flu outbreak damaged chicken and egg production rates, inflation made shipping prices skyrocket and resulted in higher price tags in stores. All of these backto-back challenges mean businesses must remain flexible and adaptable.

“It’s probably one of the most difficult seasons we’ve been in,” said Miriam Erickson Brown, CEO of Anderson Erickson Dairy. None of these issues has one, easy solution. It is a nuanced, unpredictable world we live in. Finding creative and innovative ways to overcome challenges is necessary for success in the food manufacturing industry. As Brown puts it, “it’s going to take grit and sound strategy … and a little grace.”

A LEARNING CURVE

The old adage “expect the unexpected” has never seemed so ubiquitously useful. While the curveballs keep coming, the industry is actively learning to adjust. According to Dwyer, “people dwell on the negative side, but there’s also opportunities.”

New priorities and solutions are what will make food manufacturers more resilient against future challenges. In an initiative to address workforce concerns, Kent plans to match $4 million in funds raised to help establish a new health clinic in the company’s home community of Muscatine, Dwyer said. By focusing attention on building a strong and safe surrounding community, he said they hope to attract and retain a stable workforce, a solution that will not only help the manufacturer, but positively affect residents as well.

In another instance of new opportunity, food manufacturers have been “forced to grow into markets that they weren’t in before,” said Rachel Hahn, food industry account manager at Iowa State University’s Center for Industrial Research and Service. The food service industry is another big component for manufacturers that was devastated during lockdowns, especially areas like hotel breakfast services and airport restaurants. Some manufacturers made a pivot toward retail sales, an area they had not previously explored, in order to make up for the losses. Now, said Hahn, as people are beginning to go back to traveling and eating out, these food manufacturers “have two really strong channels to deploy their product and are doing quite well, so that’s optimistic.”

ADAPTING EXPECTATIONS

Beyond learning new ways to handle current issues, there are additional changes replacing old standards in the food manufacturing industry. With many still seeing supply chain disruptions, plus new added input costs due to inflation, manufacturers just can’t rely on operating with the same consistency they may have been used to. This doesn’t mean lower-quality items, but it does mean product delays and slimmer inventory on store shelves. 

Brown is experiencing this firsthand, making adaptations on the fly as the supply chain ebbs and flows. “Within the past few months we’ve had to quit making our Mexican dip. We were out for about 10 days because we could not get the seasoning. Some of our cottage cheese did not have any print on the lids because it was going to take too long to get. We’re still seeing all kinds of things like that,” she said. AE Dairy, a third-generation family business that began in the Depression year of 1930, is no stranger to adapting to hard times. 

“It’s like playing that game ‘Whack-A-Mole.’ You handle one thing and then something else pops up, and you have to be creative to be able to weather through it.” Hahn said, “Ingredients are a challenge when it comes to the supply chain for food manufacturers, but what I hear more is [challenges with] packaging material.” She explained that while before, there may have been 12-ounce, 16-ounce and 18-ounce options available for products like sauces or dressings, manufacturers are now finding it easier to consistently get only 12-ounce bottles rather than scramble to find all the other sizes. This reduction in offerings may leave consumers with fewer options, but it may become a new normal to adjust to.

WHAT’S NEXT

Unique to the food industry was the expectation during COVID-19 for most manufacturers to continue to supply their biggest customers with what they’ve always supplied. This resulted in some manufacturers having to pivot resources away from research and development and into other staff areas in order to fill the necessary orders. Concerns about product supply, on-time shipments and price increases passed on to customers are in the forefront of manufacturers' minds. But as the industry works to address these concerns, will there be a neglect of product development in exchange for simpy meeting the bare minimum?

“Food is normally a place of some pretty significant innovation,” Hahn said. “We’re all used to seeing new products on the shelves on a regular basis.… I think we’re going to be in an interesting place for new products in the next six months to two years.”

Additionally, the situation in Ukraine is on the radar for many companies. There’s speculation that it could affect grain supply and prices globally this fall, so manufacturers are taking actions now to mitigate possible fallout later. One trend Hahn is seeing is the desire to have dual suppliers, which would stabilize access to a product should one supplier fall through.

While it’s hardly possible to predict the future (see: COVID-19), businesses have learned hard lessons and have come out resilient, and are now making strategic improvements to avoid issues on the horizon. “People still need to eat, we still need to process food,” said Dwyer. “We learn every day from these stressful  environments. … It might be difficult to work through it, but I still think from our end we’re [feeling] positive.”