By Bob Grote, Chief Executive Officer, Grote Company
Key Takeaways:
- Food safety is becoming increasingly critical for processors, with an emphasis on sanitary equipment design and thorough cleaning procedures to prevent outbreaks and costly recalls. Companies are focusing on equipment that’s easier to clean and maintain.
- Industry consolidation and automation are major trends, driven by M&A activity (like Mars acquiring Kellanova) and an ongoing worker shortage. These changes are expected to accelerate after the 2024 U.S. presidential election.
- Consumer behavior is evolving, with continued demand for both at-home dining and prepared foods. Key trends include smaller portion sizes for 1-2 person households, meal kit services, and a split between wellness-focused products and more affordable processed foods, all while food prices remain elevated.
As we head into the end of 2024 and get ready for a new year, what are the most pressing topics for food processing companies?
There are always challenges, but the outlook for U.S.-based processors remains positive. Let’s look at some takeaways from this year that will help the industry prepare for 2025.
1. Food safety is front and center
One major trend on every processor’s radar is an increasing emphasis on food safety. Not that plants weren’t already focusing on it, but with recent news headlines capturing consumers’ attention, awareness is heightened. No processor wants consumers to become ill, and recalls can be costly on many fronts.
While procedures to sanitize equipment before, during, and after processing food are established, the design of the equipment also makes a difference in keeping a processing facility clean and running smoothly.
Sanitary equipment design should be a factor in every processor’s plan. Making the whole plant sanitation-friendly is the goal. Processors and suppliers need to collaborate to ensure they have equipment designed for sanitation, as well as thorough training on the procedures. Taking every possible precaution creates less of a risk of an outbreak occurring.
Equipment designed with sanitation in mind results in higher productivity and less cleaning time. Machines designed with toolless parts and open access are easier and faster to clean, require less labor, can be cleaned more thoroughly, and necessitate fewer supplies and water.
2. Economic uncertainty evens out
Overall, the market has been active, although there was much discussion this year about how the U.S. presidential election might impact the economy.
As I write this, we don’t yet know the results, but whatever the outcome, it will remove some of the uncertainty that has seemingly existed. Once the outcome is determined, decision-makers will likely feel more ready to move forward with their plans. Expect Q1 activity to be robust.
Looking at interest rates, more cuts seem to be on the horizon. Those may take time to trickle back through the system but could help processors wanting to purchase capital equipment.
3. Industry consolidation continues
As companies merge or acquire other players, watch for consolidation to continue to change the food processing space.
While M&A may be softer in other industries, it’s been steady in ours. Examples include Mars acquiring Kellanova, PepsiCo acquiring Siete, and JBT acquiring Marel. Another is our own Grote Company Family of Brands, which acquired two companies in 2024, ProFab and SPI Automation.
Expect M&A to heat up even further post-election, which will also help drive economic activity.
4. The move to automate isn’t slowing down
While not new, the trend toward automation isn’t going anywhere. Processors know they need to automate to keep production levels high. There aren’t enough workers to fill open roles, so automating processing lines will continue to be the trend.
5. Talent remains hard to find
As mentioned above, the shift toward automation is due in part to a lack of human workers.
One trend that could affect hiring is the uptick in M&A activity. We see major players merging. Layoffs often come with M&A. That means more talent may be available as those who are let go search for new roles.
The job market has settled a bit, with workers seeming less likely to leave their secure positions. However, a portion of the workforce continues to age out, which remains a topic of industry-wide discussion. The mix of employees is largely comprised of Gen X and boomers, but attracting younger workers is on leaders’ minds. Workers with less experience value mentorship, which is easier when employees are face-to-face, so the push for employees to return to the office benefits this need.
6. The impact of international affairs continues to be felt
Continuing unrest in the Middle East and Ukraine affects European business. While there seemed to be more optimism in the spring, that has dissipated somewhat. Activity in Europe tends to slow when we have a major election here in the U.S., so while we may see a shift post-election, the economy there feels sluggish.
In addition, oil prices could be affected by international turmoil. While currently stable, prices might increase if any developments impact supply.
7. Meal trends to watch
The trend toward eating at home continues to grow. At the same time, people are busy, and many are too frazzled to cook meals from scratch, making prepared foods an attractive option.
As a significant part of the population is now composed of households with either one or two people, smaller serving and portion sizes are in demand. Processors need to address this market as well.
Services that provide meal kits are becoming more popular as they save time while helping home cooks reduce waste by providing the right portions to prepare a meal.
An increased focus on wellness is also driving the market for healthier options. At the same time, those who are struggling to afford grocery prices may be buying more processed food. Both trends need to be on processors’ radar.
8. Food prices remain high
As consumers seem to have adjusted to higher prices, don’t expect them to come down. Even with inflation slowing and prices stabilizing, they’ll remain higher than they were previously.
Meat will be priced higher for the foreseeable future. The impact of natural disasters like Hurricane Helene, which devastated many poultry farms in Georgia, as well as various pathogens affecting the health of livestock, may also be felt by consumers, at least in the short term.
Food processors should head into 2025 with confidence
If 2024 was strong, 2025 should be even more robust. We always anticipate challenges along the way, but the need for people to eat will forever be a constant.
By monitoring the industry trends and the economic outlook while continually revisiting their plans for the future, food processors can expect demand for their products to be there.
