Happy New Year! During the last weeks of 2021 we shared some insights into what we see as important areas to focus in 2022. To get the year started we will summarize them for you. When the vaccine started to roll out in 2021, I think many people felt like the pandemic would be a memory as we got into 2022. People were planning trips and thinking about ‘getting back to things’. Then we had the next wave spread very quickly and many places are really feeling the impact of this new variant. We have been challenged by the pandemic for part of 2020 and all of 2021. As we continue to deal with it, impacts of the pandemic are influencing our trends for 2022.
1) Cost of goods-There is a lot of pressure on input costs, labour efficiencies, ingredient costs, logistics and it all adds up. There has also been a lot of noise in the media about food inflation. This is both positive and negative. It is positive in that the entire value chain, right through to the consumer understands there are increases. Conversations about cost increases will not be a surprise and people should be expecting them. It is negative because some retailers will assume suppliers are trying to take advantage of the situation.
Producers and processors must think about how they manage this and position their customers to get the right price for their product. Share information as early as you can and educate your customers. Be fair and realistic. Retailers also respect suppliers who push back on their own input suppliers. If you can decrease the cost increase on packaging from 15-12% tell the retailer you were able to do that.
2) Service level-Retailers and suppliers in the food industry need to drive sales. Inventory is required at the right time, in the right place to deliver sales. Many producers and processors are challenged with this right now. It is also an opportunity to differentiate from your competition.
There are a lot of areas to focus on when delivering service level. You should start with forecasting sales, have the inputs and capability to produce and deliver. Labour continues to be a significant challenge. The right skilled labour available to do what needs to be done is a real win.
Discuss sales forecasts with customers and agree on a number you are able to produce. Report back on the results because they might miss your 95% service level which is an accomplishment in this environment.
3) Supply of inputs-There are many challenges to getting everything required to produce your products. Supply chains are challenged around the world and they will continue to be in the near future. Producers that have ample supply of all inputs could be at an advantage over other suppliers. We see different countries reacting to the pandemic with their own strategy. If you depend on another country for packaging check to see what they are doing.
Producers should review everything from inputs to packaging to equipment parts to ensure they are ready for upcoming production runs.
4) E-commerce-We know a significant amount of volume has shifted to e-commerce. More producers and processors are selling direct to consumers. Retailers have invested in online shopping and even delivery. Any business that has devoted resources to e-commerce in the last two years will be looking for a return. Consumers are much more familiar with buying food online.
Producers and processors need to consider three segments of e-commerce: selling direct to consumers, an online marketplace such as Amazon and retailer’s websites. E-commerce should be a consideration. One, all or none of these options might be right for your business. Remember if you decide to ignore the e-commerce options, your competition might be there and satisfying the needs of your consumers.
Check out the Walmart in home program. If a consumer is using this they probably are buying close to 100% of their groceries from Walmart. They even put the food in your fridge!
5) Buy ‘local’-The demand for ‘local’ food has been influenced by the pandemic. When consumers went into grocery stores in March of 2020 and found empty shelves it was a shock. In Canada people just expected there would always be food to buy. This forced people to think about food and they want to know more about where it comes from. Retailers also want more ‘local’ to satisfy consumer demand and because the service level can be more reliable.
This is an opportunity for many Canadian producers and processors because consumers and customers both want it. This does not happen often. Producers and processors should tell their story better than ever and find opportunities to expand their distribution while there is demand. Now is the time!
6) Creating demand-There is a lot of competition out there. Producers and processors need to create demand for their products. Food service will gain momentum and retail will be under pressure to deliver same store sales growth.
Social media, public relations and mass media can all be used to create demand for your products. You cannot just produce great products and hope they sell. Suppliers need to figure out how to support trade spend and marketing spend.
7) Efficiencies-Since the pandemic we all operate in a very different market. Labour is a challenge and many businesses are looking for efficiencies. Some large consumer packaged goods companies are even producing fewer SKUS because it is all that they can accomplish. Retailers are also exploring fewer SKUS to deliver the same sales.
Efficiencies and doing business differently could present opportunities for suppliers.
8) Sustainability-Despite the challenges of the pandemic concerns about the environment are still important to consumers and customers. Impact on the environment, packaging and food waste are three areas for businesses to focus on.
This can be a valuable point of differentiation on the shelf, within your category. Compare the impact of your product to your competition. Tell the story!
9) Products designed for segments of the market-Products designed for consumers who want plant-based protein, gluten free, lactose free, upcycled products, sustainable packaging are more popular than ever. Consumers want to see products that meet their needs.
Suppliers need to prove it with certifications or declarations on packaging. Similar to sustainability you should look at your competition to understand where you fit. Retailers might need an offering in the category that is lactose free but they probably do not need two.
10) Relationships with customers- Suppliers need to adapt to the new working world. Retailers are still working remotely and virtual presentations are common. Trade shows and other opportunities for interaction with customers have all changed.
Suppliers need to figure out how to interact in this new world. Talk to customers to understand how they want to work together and interact. There are advantages to the new working world.
If you have any questions or require help with any of these trends in 2022, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
As we start into the new year we are going to focus on some terms in the food and beverage world for upcoming weeks. I am going to select a different term each week and give you a good definition and also some insights into why it could be important for your business. If there are any terms you would like me to focus on just let me know.
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
2022 trends
We do our best to provide you with our perspective on trends and insights for the upcoming year. There are other opinions out there to consider. We try to take a total value chain approach and others focus on one segment. When you are looking into the crystal ball there is no right or wrong. We wanted to share some other insights on trends to help you food business be better in 2022
When is Peter speaking?
Food & Beverage Atlantic Masterclass
Sales & Marketing for your food business Jan 12-Feb 16
A weekly course with Norm Purdy and Al Archibald