Food and Beverage Producers Expect Year of Growth
After years of focus on cost reductions and operational efficiencies, executives and producers in the food and beverage industry are feeling confident again.
That's according to the 2013 Grant Thornton Global Food and Beverage study, "Hunger for Growth." “Food and beverage industry leaders were forced to put certain plans for growth on hold during a difficult economic period,” said Dexter Manning, food and beverage practice leader of Grant Thornton LLP. “Now that the global economy is showing signs of improvement, these leaders clearly have the appetite to strengthen their market positions and achieve sustainable growth through increased, focused investment.”
The survey reveals a vast majority (90 percent) of food and beverage executives expect revenues to increase during the next year, and one-third are expecting sales growth greater than 10 percent. Food and beverage companies have their sights fixed on profitable growth, with 82 percent of those surveyed citing that their profits will increase in the next 12 months. Industry executives (56 percent) also expect that employment will increase during the next year.
In addition, more than three-quarters of executives report that their organizations will increase spending on equipment, new product development and information technology in the next 12 months. The greatest appetite to invest in equipment is being shown by business leaders in North America (86 percent), and Australasia (85 percent), followed by Europe (77 percent).
However, for investment in new product development, North America (86 percent) is showing the greatest enthusiasm. Regulatory concerns are atop the worry list of food and beverage processors. Specifically, global executives cite the following types of regulations and the negative effect they may have on their companies: environmental (48 percent), taxes (44 percent), food labeling (38 percent), food traceability (33 percent) and employee health care (25 percent).
In the United States, it’s unclear if proposed rules meant to improve food safety and supply-chain traceability under the Food Safety Modernization Act are enforceable – leaving some executives to wonder if they need to comply.
“Many companies have programs in place, and they’re trying to make adjustments so their programs comply with the rules,” Manning said. “But at the end of the day, some executives look at it and say, ‘Well, Congress hasn’t funded it yet, and so they may not be able to enforce it.’ This means that many companies do not expect much impact, especially given U.S. budget deficits and cost-cutting.”
Other highlights from the survey:
• Nearly half of those surveyed consider expansion via M&A as a viable strategy to strengthen their market position;
• More than two-thirds of food and beverage executives expect costs to increase in the next 12 months, including utility and energy, transportation, labor, raw materials and packaging; and
• Food and beverage processors around the globe are moderately to significantly concerned about supply-chain risks related to product safety (51 percent), quality (50 percent) and traceability (35 percent).
Nearly 250 food and beverage executives from eight countries participated in the survey, which was conducted during May and June 2013. The survey was distributed across a wide array of market segments, including wholesalers, supermarkets, restaurants and convenience stores, and represented companies ranging from less than $10 million in revenue to more than $1 billion.
Grant Thornton will host a public webinar, “A Hunger for Growth: Food and Beverage Looks to the Future,” on Oct. 24 that will discuss the survey’s findings in greater detail.
Chicago-based Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd.