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% over the previous year, while food service centers saw a corresponding dip of 27%. More cooking at home meant 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 companies, including resellers and distributors, have been running finely balanced and optimized supply chains. Once upstream orders came in, inventory levels were measured against a forecast of downstream orders going out. As a result, revenue and margin largely depended on a steady flow of transactions in both directions.
The rapid shift in spending pattern brought about by the pandemic changed all of that. Consumers and intermediaries were upended with upstream and downstream orders coming to an abrupt halt. Restaurants closed, customers stayed home, and upstream shipments stopped, with workers ordered to stay home or work with restrictions.
Shipments from farms, food-service producers, and processors were all delayed – some were abandoned or left to spoil in the ensuing transportation shortage. This disruption in logistics chains also led to inventory accumulations in other areas. Like in no other time in history, there were shortages as well as excesses – food products were stranded upstream, leading to food-security risks for the most vulnerable consumers.
Food distributors were also taken by surprise as quick-service and casual-dining outlets switched to takeout or curb-side services. Many were forced to close entirely, while some adapted to a restricted, online services menu. The use of single-service and individually wrapped products was a major shift from the bulk-product approach, which had previously been a mainstay of their operations.
In some cases, products were re-routed for additional processing and packaging to accommodate the new pick-up and delivery services requirements. All this made supply chain transformation broader and more challenging than it had ever been.
Gearing Up for the ‘New Normal’
F&B distributors who managed to rebalance their supplies and survive are, in some cases, still dealing with shortages and overcapacity in their supply chains, storage facilities, and distribution networks. But they have learned some very powerful lessons from the pandemic about maintaining reliability of supply even at the cost of partnership or price.
Consumers have grown more comfortable with the ‘new normal’ and will continue to save trips to the store given increased domestic responsibilities like monitoring school age children and working from home. While panic buying has abated for the most part, digital will only continue to increase.
This is evident from Amazon’s latest figures, as the online behemoth reported another 27% increase in net sales in the second quarter of 2021. Many buyers who preferred shopping locally and in-person prior to the pandemic are now using digital channels more than ever, having realized the convenience and relative safety that online ordering provides.
Many F&B organizations continue to increase production of certain items in response to shifts in demand to maintain their presence on retail shelves. Others are scaling up their direct to consumer and e-commerce presence. But they still face choices, obstacles, and, in some cases, the means. They need to address demand peaks, while reassuring employees and consumers about their safety, maintaining a high quality supply chain, and avoiding elevated costs, all at the same time.
So F&B distribution companies must develop creative solutions and integrate their collaboration channels to ensure reliable supply chains. And innovative digital solutions could make the difference between surviving and thriving in the new normal.
Supply Chain Integration for Collaboration and Insights
A supply chain that is both flexible and agile can help F&B companies effectively respond to the ongoing challenges of the new normal. F&B operators also need to increase visibility, transparency, and traceability.
Despite widespread disruption, regulatory change is still on schedule and a reason of concern for F&B operators. So how do they manage both threats as market instability reigns? How do budgetary concerns mesh with threats to their very survival?
To achieve this, F&B operators need exposure to data from every node of their value chain in order to generate actionable insights. A lack of transparency brings unnecessary risk, which is only exacerbated by outdated systems, traditional paper processing, and manual data collection.
Fragmented information and lack of communication leave parties in the network with little to no knowledge to pass along, leading to a deficit of information – information that is critical to gain insights into each other’s actions and activities. Information gap leads to more inefficiency and generates misgivings among partners. And this keeps worsening as organizations begin to expand partner networks.
Increased visibility, transparency, and traceability go a long way in keeping operational costs in check and maximize customer retention. While some less complex supply chains may be able to optimize using spreadsheets, more complex ones are far better served by an integrated network solution that does not require customization for every channel or individual supplier.
Modern B2B integration solutions make a business more efficient, more attractive to partners and customers, and less vulnerable to competitive forces. They enable seamless connections to network partners and customers alike, and are deployed within a single solution.
Harnessing the Cloud: The Smarter Approach to B2B Integration
PartnerLinQ ensures a simple and robust cloud deployment that minimizes infrastructure costs and provides visibility, transparency, and traceability. Powered by Microsoft Azure cloud computing, a scalable event-processing engine, and an infinite scheduler, it is designed for business success and quickly enables connections with new partners, customers, and sales channels.
PartnerLinQ seamlessly integrates with smart devices and enterprise. 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 multiple on premise or cloud-based legacy systems.
Customer and regulatory mandates demand more visibility into all aspects of a transaction, and the need for simplified and end-to-end B2B integration could not be more urgent. Now is the time to move out of work silos and actively engage your supply chain.
So F&B organizations need smarter, cloud-based, modern B2B integration, which can quickly adapt to change, reduce time-to-market, and optimize costs with standardized, industry-specific integration processes. Such a solution can accommodate a multichannel approach and deliver on demand. With PartnerLinQ, we make it easy, we keep it simple, and everything is in one place.
About PartnerLinQ: Enterprise Connectivity at the Speed of Business
PartnerLinQ is an innovative, process-centric, easy-to-use integration platform that enables API-led, cloud native integrations. It easily handles both standard and proprietary file-based formats, including custom integrations. The solution is well suited for retail, e-commerce, wholesale, transportation, 3PL, as well as distribution, digital, and analog partner ecosystems and helps your team achieve operational efficiency and gain real-time visibility.
PartnerLinQ was designed by a team with more than 25 years of deep integration experience, providing industry-focused leadership in technology and consulting and in the development of innovative solutions that drive global supply chain transformation from the factory floor to the consumer doorstep. It integrates natively with Microsoft Dynamics 365, while also providing robust support for more than 71 ERP systems and ecommerce platforms, and is delivered as a completely integrated solution that consigns Big VAN and iPaaS solutions to the past.