In April of 2015, FoodProcessing.com reported $21 billion in budgeted capital spending by 45 of the nation’s largest food and beverage companies. In May, Tom Ryan and Ian Sylvan, investment analysts for MB Financial, advised food processors to find smart ways to use capital to grow their business.
Just before Christmas, Entrepreneur‘s food industry predictions highlighted, among other things, growing consumer demand for supply-chain-transparent, non-GMO, zero-waste products in 2016.
To keep pace with the ever-expanding market and its changing demands, here are five smart investments you can make for your business:
Equipment: Spiral on up
For your equipment to be worth its salt, it needs to be economical, efficient, and flexible without compromising on quality. The story of Wanniassa Wheeler Food in Australia shows what one piece of equipment can do for a small company looking to break into the retail market. For Wanniassa, it was a spiral oven.
The oven, developed by Unitherm Food Systems, provided continuous output and in-cook pasteurization while preserving the restaurant and gourmet quality of Wanniassa’s recipes. The oven’s compatibility with a flame grill also allowed for greater flexibility and flavor retention when cooking both protein products and vegetables, which helped Wanniassa keep up with changing consumer demands.
Technology: Robots don’t have hands or need hairnets
According to Ryan and Sylvan, investing in robotics has a two-fold advantage: Space and safety. Robotic equipment can work at higher output levels than human hands, without the germ-spreading capabilities. Experts Laura Studwell and Dan Dibbern, writing for RoboticTips, list a few market trends in food industry robotics that are driven by consumer demand for variety and individualization:
Smart modularization
The best robotics investments will be in systems where parts are easily moved and interchangeable for a greater variety of product options.
Centralized control software architecture
All robotic components should be controlled by a common software architecture for streamlined communication among operations and personnel.
E-commerce customization capability
As more business goes online, e-commerce systems that communicate with production line software make it easier for you to produce exactly what individual customers ask for.
Business: Let’s make a deal
At the forefront of current food industry business discussions is the decision whether or not to merge. Acquiring a competitor may expand your market, but unless you can preserve a level of personal engagement, which includes local supply-chain transparency, consumers may trust you less the larger your corporate presence becomes.
McKinsey & Co. experts in their article, “Growth in the Packaged Food Industry (*pdf),” advise a granular approach to growth in order to gain competitive advantage. Success in M&A will depend on “mechanisms that allow [companies] to regularly and swiftly move resources—not just capital spending but also personnel, marketing dollars, and other expenditures—away from low-growth areas and toward high-potential markets and segments.”
Organization: Go niche or go home
In that same article above, McKinsey & Co. advise “data-driven methodology for identifying the categories and geographies with the highest growth potential. Essentially, food industry success is going to depend on identifying niche markets and satisfying a specific, geographically-located customer base. These customers are concerned with knowing where their food comes from and being certain it’s of the highest quality available for the price.
Forbes in 2014 suggested that thriving in a niche market may be easier for very small or very large companies because of current agricultural and distribution systems. Middle-sized companies with growth potential may have more difficulty catering to niche consumers, but that also makes them ripe targets for investment or acquisition.
Education: FIT certification
With the passage of FSMA, there’s a paradigm shift in food safety from recalls and warnings to prevention. “But,” say Ryan and Sylvan, “the procedures, process controls and information management now required to comply with FSMA can come with considerable costs – both in equipment and workforce training. As standards change, technological complexity increases, and an aging workforce begins to retire, there’s no smarter investment than in the education of highly skilled technical professionals.
Enter the FIT certification. Partnering with master technicians, employers, and students, the FIT certification program is sponsored by the Food Processing Educational Consortium (FPEC) and is supported and recognized across the food manufacturing, processing, and packaging industries.
From technology to equipment to education, considering how to invest your capital can make the difference in your 2016 bottom line.
*”Growth in the Packaged Food Industry” is a download-only article in the Autumn 2015 issue of McKinsey & Co.’s Perspectives on retail and consumer goods.
