Is there light at the end of the tunnel for the food and beverage sector? Certainly our new report on the health of the sector – ‘Hunger for growth: Food and Beverage looks to the future‘ – suggests so. This follows a tough few years in which businesses have had to grapple with falling demand even as transport and energy costs rise, and public scrutiny and the regulatory burden increases.
Based on a survey of 250 food and beverage businesses in six economies, the report finds that three-quarters of businesses are planning to ramp up investment. Increasing R&D activity, bringing new products to market and designing more efficient practices will allow businesses to capitalise on emerging trends. Likewise, developing digital platforms and a social media presence is becoming increasingly necessary for the sector as it looks to engage with younger audiences, build trust in its supply chains and demonstrate ethical credentials.
This is as is important as it is welcome. Those producers which invest resources in improving the quality, productivity and efficiency of their inputs will be best placed to latch onto growth opportunities.
How businesses finance this investment is another matter. Those without the requisite cash reserves (around half those in our survey) will need to be resourceful in finding funding and look at a range of options from bank lending through to private equity investment. M&A to build capacity, or to acquire key skills or processes is another option and could help generate economies of scale.
Another key takeaway from the report is that globalisation continues in the sector. While global trade has stagnated since the financial crisis, the average food and beverage business expects exports to double as a proportion of sales in the next few years. Large emerging markets like China, India, and Southeast Asia are the obvious targets as businesses look to diversify revenues. However, working across borders always entails risk, especially in this sector. I would advise businesses to research local rules and regulations thoroughly before making any major decisions.
An increasingly global outlook and a commitment to investing in the long-term growth potential of businesses can only be good news for the sector. And it’s important to remember that the strength of the food and beverage sector is a good gauge of the health of the wider economy. If consumers are starting to ramp up purchasing then a more sustained recovery should not be too far away.
Jim Menzies is Global leader Food and Beverage sector at Grant Thornton.