Consumer spending on food had been remarkably consistent in the US from 2016 to early 2020. As per McKinsey’s study, growth hovered around 4% annually, while total spend was almost evenly split between retail outlets like grocery stores and supermarkets and food service organizations like restaurants, fast-food locations, coffee venues, and school and office canteens. While the COVID-19 pandemic drastically impacted margins for almost all business segments, the food & beverages (F&B) segment rode the storm better than most. From $6196.15 billion in 2021, the industry is expected to reach $8163.61 billion in 2025 at a CAGR of 7%.
Yet, March 2020 upended the distribution of consumer spend dramatically. Amid lockdowns and the perceived health risk in public places, people preferred staying and eating at home. Sales in groceries and supplies grew 29% compared to the previous year, while food service centres saw a corresponding dip of 27%. More cooking at home led to more staples sales, while consumers increasingly turned to comfort food to cope with heightening anxiety. Canned soup sales were up 200% year on year, frozen food 40%, potato chips 30%, and popcorn 48%.
Rebalancing Supplies to Address Changing Demand
Over the years, F&B distributors have been running a balanced and optimized supply chain where upstream orders come in based on the forecast of downstream orders going out. As a result, revenue margins were also largely dependent on a steady flow in both directions.
But with the rapid shift in consumer spend pattern brought about by the pandemic, the previously balanced system was completely upended. Downstream orders came to an abrupt halt with restaurants closed, but upstream orders kept coming in from the farms, food-service producers, and processors. This led to a clog in the logistical chain as well as shortages in storage space. As distributors cancelled incoming shipments from farmers, food products were stranded upstream, leading to food-security risks for the more vulnerable consumer segments.
Food distributors have also been by quick-service and casual-dining outlets switching to takeout-only modes of service. Some have partially adapted by taking the online route and initiating delivery services. But those that do not supply to retail channels have had to completely overhaul their sales routes, making their supply chain transformation even more challenging.
Gearing Up for the ‘New Normal’
F&B distributors who managed to rebalance their supplies are now left with overcapacity in their storage facilities and distribution networks. But the pandemic has also taught them a very crucial lesson – about maintaining reliability in supply even at the cost of price. As consumers grow more comfortable with the ‘new normal’, they will continue to save trips to the store given the increased domestic responsibilities they have picked up. While panic buying has ceased, using digital will only continue to increase. Many buyers who preferred to shop offline before the pandemic are now using digital channels having realized the convenience that online ordering provides.
So F&B organizations are increasing production to maintain their presence on retail shelves, while others are scaling up their e-commerce presence. But dilemmas still remain about the means to address demand peaks and the future demand scenarios to prepare for. In addition, consumers need to be reassured, employees protected, and high quality supply maintained even at elevated costs.
For F&B participants from farm to shelf, it is imperative to come up with creative solutions and integrate their collaboration channels to ensure a reliable supply despite intermittent plant closures and demand disruptions.
Supply Chain Integration for Collaboration and Insights
A flexible and agile supply chain can help F&B companies effectively respond to these ongoing challenges. But they also need increased visibility and data from every node of their value chain to generate actionable insights. Lack of transparency exposes supply chains to unnecessary risk; this is exacerbated by using outdated systems or traditional paper tracking and manual inspections. Fragmented information and lack of communication leave parties in the supply network with little to no knowledge of each other’s actions. This leads to inefficiency and waste and generates mistrust among suppliers and their customers. And the problem gets much worse as organizations begin to expand their markets and partner networks.
Increased visibility will also go a long way in keeping operational costs in check. While simple supply chains can optimize costs using spreadsheets, more complex ones are better served by an integrated network solution that does not require customizations for each individual supplier. Modern B2B integration solutions make a business more efficient, more attractive to customers, and less vulnerable to competitive forces. They enable seamless connection to all your network partners, while deploying multiple supply chain solutions within a single implementation process.
Harnessing the Cloud: The Smarter Approach to B2B Integration
The complexities of the post-pandemic landscape are acting as a trigger as more and more industries feel the push to go digital. Only a cloud-based, integrated solution can provide the convenience, scalability, and reliability that food service organizations need for managing data exchange, workflow, and transactions.
Visionet’s PartnerLinQ ensures a simple and robust cloud deployment that minimizes infrastructure costs and enhances analytical reporting powered by Azure’s serverless, scalable event-processing engine. PartnerLinQ is designed to guarantee business success by quickly setting up connections with new partners, customers, and sales channels and seamlessly integrating with smart devices and appliances. It minimizes repetitive processes and works across all data formats and transaction protocols. With PartnerLinQ, F&B enterprises can automate end-to-end workflows, achieve elasticity and scale, and enjoy a hybrid architecture that also integrates with on-premise legacy systems.
As regulatory mandates demand faster and more extensive reporting, customers want more visibility into all aspects of a transaction, and new business models start being formulated, the need for simplified and end-to-end B2B integration becomes more urgent. F&B organizations can no longer afford to work in silos – a smarter B2B integration on cloud can quickly reduce their time-to-market, optimize costs with standard, industry-specific integration processes, and take an omnichannel approach to order fulfilment.