Despite rising inflation, supply chain bottlenecks, and labor challenges, the food industry should be looking forward to 2022. Additionally, collaboration, communication, and developing personal connections will be critical growth drivers.
These were some of the key messages from the 2021 Food & Beverage Forum, presented by BMO, Plante Moran, and Nixon Peabody.
Michael Gregory, Deputy Chief Economist and Head of U.S. Economics at BMO Capital Markets, said annualized growth in the third quarter was lower than expected, and that it was mostly due to supply chain bottlenecks connected to motor vehicles and associated parts shortages. He outlined three major “speed bumps” hampering recovery: COVID-19, supply chain bottlenecks, and labor.
Gregory projected that inflation would likely ease by Spring 2022, but supply bottlenecks in the near term would continue to drive prices higher. He also sees the Federal Reserve raising the prime rate in September 2022 and GDP growing at an above-average rate for the coming year.
Building a Resilient Supply Chain
Industry leaders, including KeHE EVP of Supply Chain Geoff Goetz, Market Fresh Produce CEO Mitch Rader, and CHOMP co-founder and COO Rashid Ali, explained how they had adjusted and reimagined their supply chain strategy amid recent disruptions to global shipping. In short, collaboration and communication were key themes.
Goetz noted in conversations with other industry stakeholders that it was clear that trucking, port, material, and other shortages were all connected to the current labor situation. Without workers to contend with these bottlenecks, he expected the “bullwhip effect” would continue to affect the U.S. supply chain.
He also said that current demand was not indicative of true demand as consumers and retailers attempted to stock up on supplies. Ali backed the claim, noting that his team would often look at independent data sources to try to determine if retail partners were placing larger-than-normal orders in hopes of just getting 50% of the supply.
To contend with the labor shortage, Ali said Chomp was finding success in specializing operations on a regional basis. He said the employment situation was not uniform across the U.S., and diversifying manufacturing and distribution operations could provide some protection from supply chain breakdowns.
Rader championed technology, and said automated technologies were helping to keep operations going in refrigerated warehouses. He argued that replacing human jobs with automation could help warehouses operate more efficiently, even with a lowered employee headcount.
Additionally, he outlined a data feedback loop where point-of-sale data visibility could be shared among stakeholders. He argued this ecosystem would be collaborative to create a visible supply chain, and that it would benefit consumers, retailers, suppliers, and manufacturers as they all had a view into real-time analytics of product sales.
Goetz offered a piece of advice for technology: make sure you know what you are trying to solve. He said many food industry executives often invested in cutting-edge technology without a true sense of why it was needed. Instead, he noted, partnerships with specialists that already have the technology could be a more cost-effective solution.
The Changing Face of Retail
Industry experts also reviewed the changing face of retail operations and how the pandemic affected business. Tampico Beverages VP of marketing Marta Gerdes and Festival Foods CFO Kirk Stoa led a panel focused on omnichannel solutions, functional foods, and more.
Stoa noted Festival Foods has a “boomerang principal” which guides decision-making and strategy. In essence, all decisions had to help customers return to the store. In general, he said the company aimed to be clean, in-stock, and helpful, and even offered “want cards” that served as order forms for customers to find products not currently stocked in the store.
Gerdes explained that Tampico Beverages leaned into culture and the role it plays in maintaining customers. She said in order to build brand equity, a company must to go beyond brand awareness to foster a deeper relationship with consumers. Marketing has to be inspirational and benefit-driven, but grounded in reality, in order to attract consumers. Additionally, she argued brands have to meet the consumer where they are by using familiar language.