EDITORIAL

2021 food and beverage industry trends

What to expect in compliance, labor, transparency, trade, digitization and more, both during and after National Ag Day

March 2021 | Food and Beverage

BY LANCE REEVE

KEY HIGHLIGHTS

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More than 1.6 million people are employed in food and beverage manufacturing, and there are more than 48,000 food and beverage manufacturing establishments across the United States

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Approximately 48 million people get sick each year due to preventable foodborne diseases

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Transparency is important or extremely important to 81% of shoppers — both online and in-store

According to the U.S. Bureau of Labor Statistics,1 more than 1.6 million people are employed in food and beverage2 manufacturing, and there are more than 48,000 food and beverage manufacturing establishments across the country.


Given the diversity and breadth of the food and beverage industry, many organizations (e.g., manufacturers and distributors) are significantly impacted by the latest trends, challenges and innovations affecting this space. This article will examine these trends in more detail, arming both insurance agents and their business owner clients with the knowledge they need to successfully navigate industry changes that could redefine how they operate and manage risks.


Ongoing compliance considerations


At any point in production, food can become contaminated with bacteria, viruses, parasites, chemicals, undeclared allergens or harmful materials such as glass or metal fragments. If an unsafe food product leaves the control of the manufacturer or is in violation of safety legislation, the product must be removed from the market in a recall.


These recalls can be expensive, with many leading to class-action lawsuits that easily cost six figures or more. Food safety issues and expensive recalls are increasingly common. According to one PwC report, hundreds of companies recalled products over a five-year period, with losses ranging from $10 million to $30 million.3 Further, approximately 48 million people get sick each year due to preventable foodborne illnesses.4 Despite these facts, many food manufacturers are unprepared to mobilize quickly following an incident.


To ensure food safety, prevent recalls and prepare for potential third-party audits, it’s crucial for businesses to understand various compliance requirements outlined by the Food and Drug Administration (FDA)5 :


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48 million

people get sick each year due to preventable foodborne diseases4


Labor trends


For food and beverage manufacturers, the availability of labor is a significant, ongoing challenge. This trend isn’t simply limited to producers and distributors of food and beverage products either, as the manufacturing industry as a whole has struggled to attract and retain qualified candidates. One estimate found that as many as 4.6 million industrial jobs might go unfilled over the next decade. There are many reasons for this skills gap, but trends related to an aging workforce are prime contributors.8


In general, more employees are exiting the workforce. At the same time, organizations aren’t able to connect younger workers with open positions. While it’s true that the COVID-19 pandemic has, unfortunately, put many individuals out of work, recruiting is still challenging — especially when it comes to finding skilled technical workers (e.g., maintenance workers and technicians who run and maintain automated or specialized equipment).


To complicate matters, food and beverage manufacturing is, historically, a low-margin industry. Businesses are continually pressured to keep prices and production costs down, which can counteract upward pressure regarding employee wages.8


While businesses may have to scale back their hiring criteria to fill open positions, this should not be done at the cost of workplace safety. Less experienced workers will need thorough training, and employers should not overlook continued safety education when bringing on new talent.


Food transparency


Transparency is important or extremely important to 81% of shoppers — both online and in-store — according to a 2020 report from the Food Industry Association (FMI) and Label Insight. That’s up from 69% in 2018.9


Consumers want to know where their food comes from, a fact that makes food transparency and traceability increasingly important for manufacturers. Consumers want food manufacturers to provide a complete list of ingredients, in-depth nutritional information, details regarding product sourcing, and more.


People also expect food manufacturers to be open and honest about their environmental and social impact. One global survey from DNV-GL found that consumers want more transparency specifically around these categories10:


  • Sustainable packaging (67.8%)
  • Greenhouse gas emissions during production (50.6%)
  • Water consumption (40.9%)
  • Food waste (61.3%)
  • Working conditions in fields and factories (56.3%)

In response, food and beverage manufacturers should listen to consumer preferences and evaluate the level of product information they provide. Additionally, it’s important to remember that sustainability extends all the way down the supply chain. To ensure sustainable practices, manufacturers are now measured by a number of metrics, including greenhouse gas emissions, product recyclability and waste generation (e.g., water contamination).


Trade


Food and beverage manufacturers have always been particularly susceptible to trade disruptions.8 These days, American tariffs on imported steel and aluminum have resulted in retaliatory tariffs on food exports. These tariffs have resulted in lower sales and profits for food and beverage manufacturers.


The tariffs have also affected imported food and beverage products, as many manufacturers depend on aluminum and steel for their packaging. In the face of tariffs on these materials, increased import costs are passed on to domestic businesses by manufacturers of aluminum cans and other packaging.11


Digitization


Digitization of the food and beverage industry is primed to give businesses in the space the ability to capture critical data and optimize their operations.12 For proof, you need only look to Internet of Things (IoT) devices.


Through the use of IoT devices, manufacturers can install sensors on individual pieces of equipment, which in turn promotes interconnectivity and easy access to real-time data. Using this data, manufacturers can identify bottlenecks in their supply chain, giving them opportunities to find efficiencies and garner significant savings.


Additionally, IoT devices can be used to monitor individual pieces of equipment, ensuring they’re running properly. This is a considerable benefit, as, in many cases, production may be brought to a halt should a key piece of equipment break down.


Beyond the use of IoT devices, technology related to microbiological testing and high-pressure processing could improve food safety initiatives:


  • Microbiological testing provides a detailed method for tracking pathogens. Using this process, businesses can track a pathogen through the supply chain and determine where food or beverages were first contaminated.

  • High-pressure processing is a method of preserving and sterilizing food. Through this process, a product is processed under very high pressure, leading to the inactivation of certain microorganisms and enzymes in the food.

Responding to trends and managing risk


The food and beverage industry is both fast-paced and dynamic. If businesses are to effectively navigate challenges and manage risks, they need to stay abreast of trends impacting this space and respond accordingly. While no two operations are the same, and every organization has its own set of unique challenges, there are general risk management steps to consider.


For one, in order to respond to exposures related to the supply chain, food transparency and other issues, businesses need to be prepared. Firms should perform a risk assessment to determine what risks are most likely to threaten their operations. Then, with a general sense of potential losses, businesses should run practice drills to see how well they respond to common scenarios such as packaging issues, cyberattacks, logistical concerns or natural disasters. Organizations should also evaluate how specific business disruptions or events could potentially impact consumers and determine how they will ensure continuity following a loss.


Additionally, the importance of employee training can’t be overstated — particularly as labor trends continue to force businesses to bring on younger, less experienced workers. Above all, employees should understand any and all relevant safety procedures. This would require employers to provide training on food handling, food storage, emergency response, equipment usage, heavy machinery, safe lifting, housekeeping and similar topics that can lead to health and safety concerns.


Consider creating a general workplace safety policy that outlines hazards and required training. Training procedures should be reviewed and updated regularly. Refresher training is also important when employers introduce new equipment, technology or processes into their operations.


key takeaway light bulb icon

KEY TAKEAWAYS

Given the diversity and breadth of the food and beverage industry, many different organizations are significantly impacted by the latest trends, challenges and innovations affecting this space

If businesses are to effectively navigate challenges and manage risks, they need to stay abreast of these trends and respond accordingly

While no two operations are the same, and every organization has its own set of unique challenges, there are general risk management steps to consider

TAKE THE NEXT STEP


Learn more about Nationwide’s food and beverage solutions, along with our farm and agribusiness insurance resources. If you're an agent interested in growing your commercial book of business, please go to nationwide.com/agents.


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about the expert

Lance Reeve, Senior Risk Management Consultant of Loss Control Services

Lance Reeve headshot

Lance specializes in food safety, food defense training and program development for the food industry. Prior to joining Nationwide, he spent ... 21 years with AIB International and was responsible for organizing their food defense programs.

Lance co-developed the food defense seminars that AIB International has provided around the world, co-authored “The AIB Guide to Food Defense” and co-authored AIB’s Food Safety and Sanitation Distance Learning Course.

During his 26-year career, Lance has taught food safety and food defense seminars within the U.S. and abroad. He has also authored articles for technical bulletins and trade journals on food safety and food defense, and has presented at dozens of technical conferences.

Lance is a graduate of the University of Wisconsin-Eau Claire with a degree in Environmental and Public Health. He is also a certified HACCP instructor through the International HACCP Alliance, a Lead Instructor for the Food Safety Preventive Controls Alliance for Human Food, and a Lead Instructor for the Produce Safety Rules.
Read more


1 "Industries at a Glance: Food Manufacturing: NAICS 311," bls.gov/iag/tgs/iag311.htm (accessed March 10, 2021).

2 "Industries at a Glance: Beverage and Tobacco Product Manufacturing: NAICS 312," bls.gov/iag/tgs/iag312.htm (accessed March 10, 2021).

3 “Three keys to food and beverage manufacturing compliance,” Mike Lorbiecki, plantengineering.com/articles/three-keys-to-food-and-beverage-manufacturing-compliance/ (May 5, 2017).

4 “CDC Reports 1 in 6 Get Sick from Foodborne Illnesses Each Year,” cdc.gov/media/pressrel/2010/r101215.html (Dec. 10, 2010)

5 “A food manufacturing compliance checklist for US companies,” Tom Miller, erpfocus.com/food-manufacturing-compliance-checklist.html (Aug. 16, 2017).

6 “The Essential Guide To HACCP: (Almost) Everything you need to know,” safefoodalliance.com/food-safety-resources/haccp-overview (accessed March 12, 2121).

7 “Food Safety Modernization Act (FSMA),” fda.gov/food/guidance-regulation-food-and-dietary-supplements/food-safety-modernization-act-fsma (Jan. 4, 2021).

8 “2020 Food and Beverage Industry Outlook,” Pan Demetrakakes, foodprocessing.com/articles/2020/industry-outlook (Jan. 7, 2020).

9 “Demand for Transparency Continues to Increase,“ Carol Wiley, foodindustryexecutive.com/2020/08/demand-for-transparency-continues-to-increase (Aug. 4, 2020).

10 “Global Consumers Trust Food Brands, But Seek Greater Transparency, DNV-GL Finds,“ Krista Garver, foodindustryexecutive.com/2020/07/global-consumers-trust-food-brands-but-see-greater-transparency-dnv-gl-finds (July 15, 2020).

11 "Kick ’em while they’re down: Tariffs hit struggling US food, beverage companies Pepsi, J.M. Smucker, Campbell Soup," cnbc.com/2018/07/02/tariffs-kick-food-beverage-companies-that-are-already-down.html (July 3, 2018).

12 https://www.foodengineeringmag.com/articles/97170-how-the-industrial-internet-of-things-is-affecting-food-processing

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