Food & Beverage Industry Outlook
- Mar 31, 2023
Jim Dorey, President of Inserra Supermarkets, joined our Solutions Insight team in March of 2023 for a discussion on recent trends in the food and beverage industry, including competitive pricing, transportation and logistics, consumer behavior and the outlook of the supermarket industry, as well as to offer actionable solutions for businesses.
Rising transportation and logistics costs were affecting everyday output in the food and beverage industry before the onset of COVID-19, and when the pandemic hit, issues compounded, further disrupting supply chains and causing labor shortages. Many production plants couldn't fill their warehouses with workers and had to start cutting back on producing certain food and beverage items. In addition, unpredictable weather events have been more frequent in recent years, harming the produce sector, while cases of the avian flu impacted meat and egg commodities.
These are just a few factors that caused food and beverage prices to inflate at an unprecedented rate in the last few years, leaving organizations concerned about the impact of inflation on their businesses and consumers concerned about affordability.
Adapting to competitive food and beverage pricing
Recent data suggests that although we're in an inflationary environment, the average order size at the supermarkets has not increased in proportion to inflation. We're seeing consumers react to rising food and beverage prices by purchasing less and seeking alternative products that offer more value.
Food and beverage businesses are adapting to disruptions by rethinking how they can operate more efficiently. For example, transportation costs and weather events are the most significant impacts on produce prices, so many manufacturers are growing crops indoors, which is more sustainable, takes weather events out of the equation, and allows products to be grown closer to the consumer, eliminating some transportation and logistics issues.
Improving the consumer experience with technology
Technological innovations are helping food and beverage companies improve customer experience. For example, Inserra Supermarkets uses artificial intelligence to predict what needs to be ordered based on buying patterns, weather, holidays, or weekend events to remain stocked on products their consumers want. Inserra also uses a robot called "Tally" to scan aisles for potential safety hazards and check that products are stocked and priced correctly. In addition, Inserra created a micro fulfillment robotics center run by their team members to help fulfill orders for shop-at-home customers.
Technology doesn't take jobs away from staff but supplements what they do to improve the consumer experience. While there's always new technology being developed, businesses need to understand what is realistic for their needs and when is the right time to invest.
Outlook of the supermarket industry
Larger players entering the food and beverage industry through mergers and acquisitions are making companies bigger and adding to the competitive environment. Competition only makes businesses better as they step up their game, and it's an opportunity to learn from what other companies are doing. A clean store with reasonable pricing and a moderate selection is simply not enough today; customers will shop elsewhere, so you must try to cater to them and offer a better experience than your competitors so they'll return.
While online shopping will continue growing, the brick-and-mortar retail experience will always be necessary. How we shop constantly evolves and comes with trends, but the key to success in the food and beverage industry is understanding your customers. It's imperative to listen to your customers and watch your demographics change to give you an idea of the products you should provide. The customer will always tell you what they're looking for if you stay in front of them.
Overall, the future of the food and beverage industry is bright; we expect to see prices remain steady this year, and if consumers adapt and the demand for products drops, we will eventually see costs come down. We learned one thing during the pandemic: No matter the state of the economy, supermarkets are havens for consumers.
Solutions Insight: Video Series
Solutions InSight is part of our commitment to providing knowledge, strategies, and resources to grow in the new year and beyond. To help you reach your goals, our team has created a library of action-oriented, industry-specific, and solution-driven video sessions, as well as other curated resources.
What's on Your Mind?
Richard R. Colloca
Richard Colloca, is an Audit Partner and National Food and Beverage Practice Leader, member of the firm’s Manufacturing and Distribution Group as well as a member of the firm’s Profession Practice Group providing audit, accounting, tax and business consulting services to clients.
Start a conversation with Richard
Receive the latest business insights, analysis, and perspectives from EisnerAmper professionals.