- In a collective vote of confidence, more than six out of 10 food and beverage executives envision their companies enjoying revenue and profit growth in the near future, according to a recent survey conducted by assurance, tax, and consulting provider McGladrey LLP.
- Of those executives, about three quarters believe new products will fuel their companies' successes, particularly those that fit in with the emerging trends the companies identified among consumers. In other words, companies are looking to find "the next kale or quinoa," said Cristin Singer, a McGladrey LLP partner and national leader of the firm’s food and beverage industry practice.
- However, executives also face significant challenges and risks in focusing on these trends in terms of product development and innovation. Some of these concerns include increased competition, food safety issues, and the development of more effective approaches to marketing and sales as well as technology security and the risk of product recalls and their effects on the company's reputation.
The emerging trends driving the new products that executives expect will thrust their company into success in the coming years land in four categories: "adding a health and wellness focus, using natural or organic foods, introducing ethnic foods or beverages, seeking locally sourced products, and enhancing convenience and simplicity," according to the report. The future is now for many food companies that are already introducing new products or redeveloping products with these trends in mind, such as General Mills' recently retooled cereals, which will no longer contain artificial flavors or colors.
While new product innovations led executives' plans for the future, some of the strategies at the bottom of the pile included mergers and acquisitions, new IT infrastructure and business systems, and acquisitions of a brand or product. The lack of confidence in acquisitions is an interesting find in the survey considering the food industry has seen many significant mergers and acquisition announcements in the past year, including Heinz and Kraft, Hormel and Applegate, and this week's McCormick and Stubb's, though this could be due to an initial potentially rocky transition period.
The survey also found that operational factors are a focus for executives, particularly product quality, operations' cost management and efficiency, and distribution speed and accuracy. Cost management and efficiency particularly stands out as a strategy already being implemented by food companies across the board, particularly in the realm of processed foods. Just earlier this week, General Mills announced it would shed about 700 jobs as part of a restructuring plan. Kellogg has shaken up several of its factories to better improve efficiency and production as part of its cost-cutting initiative Project K, and Campbell is pursuing its own "zero-based budgeting" strategy and cost-cutting program over the next three years.