The year 2023 has posed countless challenges for food and beverage companies in the FMCG industry. However, rather than focusing solely on the difficulties encountered over the past 12 months, industry leaders are preparing for the upheavals to come.
So what trends and developments will impact the food and beverage industry in 2024? How are food and beverage companies preparing for change? Are they confident to continue growing in a challenging market?
Let's Bizzi Find out about FMCG trends in 2024 in the food and beverage sector in the article below!
Trend 1: Food and beverage businesses need to have a growth mindset
The food and beverage industry has endured another difficult year. Companies face rising inflation, higher operating costs and volatile material shortages while trying to meet changing consumer demands.
However, many companies are still optimistic about their performance in 2023 and they will maintain growth in 2024. Due to constantly adapting to changes, companies in the industry have become more agile and flexible. to deal with instability. Many food and beverage processing, production and distribution units in FMCG expect revenue to be higher than expected.
Some key challenges facing the industry:
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High inflation: This leads to higher raw material and transportation costs, forcing companies to increase selling prices, which can affect consumer demand.
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Higher operating costs: Rising energy and labor prices are also putting pressure on companies' profits.
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Material shortage: Supply chain disruptions due to the pandemic and geopolitical conflicts are making securing raw materials more difficult.
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Changing consumer preferences: Consumers are increasingly interested in healthy, sustainable and convenient food, forcing companies to adapt to these changing needs.
Despite the challenges, the food and beverage industry has a positive outlook:
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Essential food needs: Food is an essential need, so the industry will be less affected by the economic downturn compared to other industries.
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Product innovation: Companies are developing new products that meet consumer demand for healthy, sustainable and convenient food.
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Ecommerce: E-commerce is an increasingly important food sales channel, allowing companies to reach new markets and increase sales.
Trend 2: Automation is the key to overcoming growth barriers
Currently, many businesses are in the process of digital transformation and are seeing some significant benefits, especially when it comes to business revenue and profits.
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Higher revenue growth: Food processors, manufacturers and distributors using automation technology grew revenue by 1.3% compared to companies relying on manual operations, equivalent to a difference of 20%.
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Significant impact of specific solutions: Some specific solutions, such as enterprise asset management (EAM) software and electronic data interchange (EDI), delivered revenue growth of up to 45%.
(As reported by Aptean)
This shows that automation can be a powerful tool to improve operational efficiency and drive revenue growth in the food industry. Besides, it emphasizes the importance of choosing solutions that suit the specific needs of the business.
When applying automation, cost optimization is a priority in 2024 for FMCG businesses. Online payment, supply chain management (SCM) and customer relationship management (CRM) platforms are in common use. This shows the importance of strong cash flow, strong customer relationships and a flexible supply chain to ensure business resilience.
The economic impact of automation becomes even clearer when we compare companies using industry-focused software with companies using industry-wide solutions. Aptean's research shows that, in 2021-2022, industry-focused technologies deliver higher revenue growth than peer-to-peer and in-house solutions. In the case of some solutions, such as ERP software, this difference goes up to 32%.
With many food companies at an advanced stage of digital transformation, automation priorities in 2024 will focus on cost optimization in specific areas of operations. For example, using software that improves transportation management and route planning to reduce fuel and vehicle maintenance costs. Or apply cost management solutions to manage spending as well as strictly control business budgets.
Trend 3: Automated environments drive BI tool adoption and interest in AI
While automation helps optimize individual processes, food and beverage companies are also looking to explore the overall benefits of digital transformation in 2024.
Digital systems in food processing, production and distribution generate huge amounts of data. Industry leaders want to leverage this information to make faster and smarter decisions. However, many businesses say they are having difficulty accessing and analyzing data on business performance and efficiency. Therefore, many FMCG companies revealed that they plan to invest in BI tools in the next 12 months.
According to Aptean research, BI tools deliver the biggest difference in revenue growth. Food and beverage companies using specialized BI solutions achieved 66% more revenue growth in the latest fiscal year than companies using no BI software at all.
Similar to the interest in BI tools, the FMCG leadership team wants a detailed plan to drive AI adoption. Although AI adoption is still in its early stages, there is already an interesting correlation between investment in the sector and financial performance. The initial performance in revenue and profits is a positive signal for the development of AI in the food and beverage industry.
On the other hand, FMCG businesses face the challenge of being able to build ecosystems that integrate technologies that create inclusiveness. Many businesses admit that today's complex system integration is a barrier to development.
In fact, we are already seeing pioneering brands use artificial intelligence to innovate faster. For example:
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Unilever is using AI to work smarter in new product development; AI played a central role in the development of Knorr salt-free soup capsules.
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HELL energy drinks has created a whole new flavor using artificial intelligence and even used AI to design its packaging.
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Nestlé is collaborating with AI technology company Nuritas to find bioactive peptides in foods that help improve conditions such as diabetes and support animal and plant health.
Trend 4: Supply chain recovery is a top priority in 2024
2023 continues to be a difficult year for supply chains, with labor and skills shortages, geopolitical conflicts and extreme weather affecting global commodity flows.
Improving supply chain resilience to manage these disruptions is a top priority for food companies in 2024, especially large enterprises.
The current strategy of many application companies is to add new suppliers. Some larger brands are even investing directly in agriculture to increase supply chain stability. For example, PepsiCo and Walmart invested $120 million to help US and Canadian farmers improve soil and water quality to increase productivity.
Many businesses have a strong interest in optimizing their internal supply chains to build sustainable relationships with suppliers by:
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Improve production schedules to utilize inventory more effectively
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Enhance forecasting capabilities to better predict demand
Organizations that have invested in supply chain capabilities are growing faster than organizations that have not addressed weaknesses and vulnerabilities.
Trend 5: Economic goals drive the sustainable development agenda
Environmental impact is a major concern in the food and beverage industry, so many companies are making significant efforts to become more sustainable. Many large organizations have set ambitious sustainable development goals. For example, Danone, Mars, Nestle, General Mills and Mondelez International all aim for net zero emissions by 2050.
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Sustainable development brings dual benefits to both the environment and businesses.
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Companies can reduce operating costs and carbon footprints through sustainability programs.
Many brands are already using sustainable methods to reduce operating costs:
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AB InBev reduced water usage by 14.3% since 2017.
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Danone reduces energy use by 46% in 20 years and aims to increase energy efficiency by 30% by 2025.
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Nestle Waters saves 62 million USD/year thanks to its plastic bottle design that reduces 25% of plastic.
Sustainable development also creates new revenue streams:
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Ben & Jerry's improved its ice cream formula to preserve it at higher temperatures, in line with the store's need to reduce electricity costs.
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Many new brands use leftover food to create products, such as beer from old bread (Toast Ale) or beverage from orange peels (Dash Water).
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Innovative agricultural methods save costs, such as hydroponic fish farming, vertical farming and lab-grown meat.
Trend 6: Building the workforce for the future
Labor and skills shortages have been a burning problem for the food industry in recent years, affecting daily operations and growth plans. Therefore, many food and beverage companies have now implemented initiatives to solve the problem of human resource shortage.
Automation also plays an important role in helping food processors, manufacturers and distributors manage labor shortages. Using technology helps prevent knowledge loss—reducing the impact of employee turnover.
Therefore, investing in workforce enablement tools not only addresses the immediate challenge but is also part of a growth mindset.
The food industry is in a period of transition, with the retiring older generation of employees being replaced by a younger generation with different expectations of the working environment. On the other hand, the new generation of employees values digital accessibility, reinforcing why FMCG businesses need automation and data analytics.
Businesses need:
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Apply a growth mindset to every area of business.
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Invest in technology that improves supply chain, operations and workforce over the next five years.
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Find specialized software and complementary solution implementation partners to drive digital transformation without adding technical complexity.
Overall, 2024 is expected to be a tumultuous year for the food and beverage industry. However, the FMCG 2024 trends mentioned in this article also show development potential and new opportunities for businesses in the industry.
To capture these opportunities, businesses need to proactively innovate, apply technology and build appropriate strategies. That way, they can overcome challenges and achieve success in this competitive business environment.
In addition, cooperation and information sharing among businesses in the industry also play an important role in promoting the overall development of the food and beverage industry. Hopefully this article has given you an overview of the key trends that will shape the food and beverage industry in 2024.
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