By Bob Grote, chief executive officer of Grote Company
As 2021 draws to a close, we evaluate what lessons we can learn to take into the new year – and we look ahead to 2022 to see what trends those in the food processing industry should be keeping an eye on.
Yes, there continues to be uncertainty in the market – but we can manage some of that by understanding what forces are at play. Knowing that will help those in the industry plan strategically for what lies ahead.
Here are five trends to watch in 2022.
1. Supply chain struggles
The supply chain delays have impacted nearly every business and industry as they struggle to get what they need in order to deliver goods to consumers.
As some resources are tougher to get than others, the supply chain causes shortages that may be unpredictable. Why, for example, are pork chops available in abundance while chicken wings seem harder to come by?
This unpredictability may help explain why some processors choose to act as their own suppliers. They source their own needs. As a result, we may see the rise of vertical integration, which was prevalent a century ago.
Thinking through the inventory conundrum can also help processors stay ahead of the demand. While the conventional wisdom may be to keep inventory down, in this climate, it may be wiser to purchase more. Processors can’t get the revenue if they don’t have the inventory, so thinking and planning ahead to order and buy what’s needed from suppliers to continue to produce can be vital to a successful 2022.
While the supply chain presents a challenge, it’s most likely a short-term issue. Yes, it may take some time for the situation to be resolved, but we may see this particular challenge coming to an end in the next 12 months or so.
2. Inflation will continue to have an impact
Unlike shorter-term supply chain issues, inflation is a trend currently gaining attention that may be with us for a while. Looking ahead, we could foresee a few years of prices going up.
Just about every company is watching prices rise. The inflation rate is currently higher than we’ve seen in some time.
This has the potential to change the market dynamics in significant ways. Inflation affects everything. It has a circular impact. As processors spend more to manufacture products, they pass those costs along to consumers.
Does inflation impact the labor shortage? While the COVID pandemic may have caused workers to leave their jobs, will inflation force them back to work?
3. Labor shortage adds to production issues
Related to inflation, the labor market also presents a challenge for businesses. A lack of workers creates bottlenecks in production. This contributes to supply chain issues.
A key to solving this issue can be paying higher wages. As you raise your prices due to inflation, the higher labor costs can be passed along to your customers.
4. Automation to the forefront
As manufacturers struggle to find labor, automation is coming to the forefront as a solution to help address this challenge. The lack of available labor is going to push automation as a solution. Processors need to follow the dollar, and if automation can enable more output, it should be a priority.
Of course, there’s been talk of more automation for years – Europe is ahead of the U.S. here – but the perfect storm formed by the labor shortage, inflation, and supply chain issues is bringing this to the top of the list for many in the food processing industry.
Investing in food contact robotics has come of age. While the market recognized the opportunity years ago, the food processing industry wasn’t ready. The past 18 months helped prepare more processors for this change. Now that they can’t find the people to stock their line, automation can be one solution to help. As a result, processors may find the need to buy automation solutions sooner than they’d planned.
Processors are among the last in the food industry to embrace automation. On both ends, the technology has been adopted. Farmers, for example, have been using it for years. The use of automation satellites enables them to farm 50 times the acreage with fewer laborers. Of course, on the other end, delivery services are leveraging it as much as possible. It’s in the middle – the processors – who have yet to adopt these solutions. My prediction is we’ll see that change.
Keep in mind, automation doesn’t result in layoffs, as it won’t be replacing anyone. It will simply be there to help fill in the gaps where human labor isn’t available. Using robotics can also mean more sanitary conditions.
Then there are the jobs people don’t want to do. For example, standing on a sandwich manufacturing line means working in a cold, damp environment. Demand isn’t going away, but workers aren’t as keen to sign up for these jobs any longer. Automation can be the answer. There’s no risk of COVID, and none of the other issues processors face with a human workforce.
5. Shifts in consumer behavior
Changes in the way people eat will continue to impact the industry in 2022 and beyond.
Consumers are making healthier choices when it comes to their diets and nutrition. The meat alternatives market has benefited from these trends, growing 45% in 2020 – twice as fast as conventional meats. These alternatives are more environmentally friendly and the market growth is driving down prices, further increasing their adoption.
However, people’s income often determines what they buy to eat, so with the cost of living on the rise while wages remain flat, a segment of the population will be watching their wallets when making choices about what to purchase. The supply chain also impacts these decisions. What’s available to buy at the grocery store? And what does it cost?
The pandemic led many more people to buy food at the grocery store and cook it at home. This trend is going to stay with us, even post-pandemic. It may take a lot for people to go back to eating in restaurants the way they once did. Behavior has changed. This means processors have to consider how they package their offerings. They may have to portion them differently, for example.
2022 challenges also present opportunities
One of the best things about working in the food industry is that people will always need to eat. Our industry may weather the current storms better than others. As you can see, these issues are all interrelated. Addressing one may help solve another.
While the form in which processors need to supply their products may be shifting – which may cause temporary challenges and drive change – the need for the products will always be there. And that should help those in the processing industry rest assured that we will persevere regardless of challenging market conditions.
Bob Grote, chief executive officer of Grote Company, is an engineer by schooling, a salesman by nature and a businessman by practice. He joined Grote Company in 2000, became CEO in 2008, and now spends his time developing industry partners and seeking the latest food technologies. He currently serves as Director at Large of the FPSA (Food Processing Suppliers Association) and Chairman of the MISA (Meat Industry Suppliers Alliance) Foundation.