FOOD and BEVERAGE | AGENT RESOURCE

Food and Beverage: industry outlook and trends to watch

What to expect with trade, employment, innovation and more

food and beverage

Food & beverage industry operations


For food and beverage manufacturers, their main focus is on packaged food, and less on fresh meat and produce. Specifically, packaged food can include pasta, canned fruits and vegetables, baked goods, cereals, condiments, frozen foods and snacks, among others. Often, when preparing these goods, businesses will start with fresh food and then process it, most often by cutting, seasoning, flavoring, cooking, freezing and packaging it.


Generally, the size of the manufacturer will range from a small, manual operation with few employees to a large, international organization that uses highly automated plants across multiple locations. In addition to production lines, food manufacturers will typically have significant storage and warehousing needs. This may include a cooler or freezer for housing raw goods or finished products. Finished products will be transported to a distributor or a final customer.


For beverage manufacturers — which are also referred to as bottlers — their focus is often on nonalcoholic drinks such as soda, juice and water. These goods can be packaged in glass bottles, aluminum cans, plastic bottles or similar containers. Bottlers may make their own beverages or have a franchise contract to manufacture certain brands of beverages.


Food and beverage manufacturers consist of many industry groups, including but not limited to the following1:


  • Sugar and Confectionery Product Manufacturing - NAICS 3113
  • Fruit and Vegetable Preserving and Specialty Food Manufacturing - NAICS 3114
  • Dairy Product Manufacturing - NAICS 3115
  • Seafood Product Preparation and Packaging - NAICS 3117
  • Bakeries and Tortilla Manufacturing - NAICS 3118
  • Beverage Manufacturing - NAICS 3121
  • Other Food Manufacturing - NAICS 3119

Food & beverage industry outlook


According to the Bureau of Labor Statistics, in the United States there are2:


  • 1,593,000 people employed in food manufacturing

  • 93,440 people employed in beverage manufacturing

  • 35,026 establishments for food manufacturing

  • 13,377 establishments for beverage manufacturing

Additionally, the United States Department of Agriculture reported that food was a $1.7 trillion industry in 2019, broken down as follows:


  • $799 billion for food at home (e.g., packaged food)

  • $969 billion for food away from home (e.g., food from fast-food establishments and traditional restaurants)

In the U.S., more than
1.6M
people are employed in food and beverage manufacturing.

Trade and tariffs


Of the various industries, food manufacturers have been especially impacted by trade disruptions.3 American tariffs on imported materials such as steel and aluminum have resulted in retaliatory tariffs on U.S. 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 aluminum can and other packaging manufacturers.4


Employment trends


As of July 2020, the unemployment rate in food and beverage manufacturing was 8.7% compared with 10.2% for all other industries.1


Like many industries, food and beverage manufacturers are dealing with significant worker shortages. There are many reasons for this, but trends that affect manufacturing — including the aging workforce — are significant contributors.3 Many employees are retiring, and businesses are having difficulty recruiting younger workers. Recruiting is particularly challenging when it comes to finding skilled technical workers, such as maintenance workers and technicians who run and maintain automated equipment.


As a result of recruiting challenges, more companies are being forced to get creative with their hiring and onboarding practices. Many have invested significant time and money into training programs to ensure that new, inexperienced workers have the education and skills necessary to complete their jobs safely.


Additionally, food and beverage manufacturing is historically a low-margin industry that struggles with rising wages. The industry has also traditionally relied on immigrants when it comes to filling vacant roles. However, continued immigration issues are impacting the industry’s ability to secure talent.


Consumer trends in the food and beverage industry


The manufacturing industry has long been one to embrace changes in consumer preferences and new technology. The following are some examples of trends impacting the food and beverage sector:


  • Food source transparency — Consumers of today are more interested in where their food comes from. Food and beverage manufacturers that claim to offer organic, regional and cruelty-free foods may be challenged to prove this. Blockchain technology, which uses encrypted data at every stage of the production process, can help businesses verify claims they make regarding their food and beverages, improving consumer confidence overall.

  • Sustainability5 Younger generations with ever-increasing buying power value sustainability. Sustainability can be achieved in several ways, starting with packaging, including using paper-based packaging that is more environmentally friendly. Furthermore, sustainability extends all the way down the supply chain. To ensure sustainable practices, manufacturers are now measured by multiple metrics, including greenhouse gas emissions, product recyclability and waste generation (e.g., water contamination).

  • Online and direct-to-consumer (DTC) sales6 Another growing trend relates to online and DTC sales. Especially given the COVID-19 pandemic, purchasing food and beverages online has become increasingly common. Moving forward, this trend may make food manufacturers more open to selling directly to consumers.7 PepsiCo Inc. and Kraft Heinz Co. are already selling DTC. But selling DTC isn’t simply limited to large companies, as smaller manufacturers have been able to accomplish this through brand awareness.

  • Innovation and upstarts3 In recent years, larger food and beverage manufacturers have been challenged by upstart companies. These manufacturers have responded in a number of ways, including purchasing the upstarts as well as starting their own competing brand designed to look and feel like an upstart. However, purchasing an upstart can turn consumers away, as the business is now associated with a larger company.

The Internet of Things (IoT)8 More and more, organizations are leveraging IoT devices. For instance, some manufacturers are installing sensors on individual pieces of equipment, which in turn promotes interconnectivity and easy access to real-time data. With more data at their disposal, manufacturers can make their supply chain more efficient, leading to significant savings. A critical benefit of IoT devices in food and beverage production is how they improve processes that involve expensive, complicated equipment. In many cases, if one piece of equipment goes down, production may be brought to a halt for a significant amount of time. IoT can help equipment run optimally and ensure that service and maintenance can be performed when needed. Additional benefits include improved quality control, and worker and food safety.


Insights on major lines of coverage


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Recommended Coverages For The Food & Beverage Industry


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Property (building, business property), Business Income with Extra Expense, Equipment Breakdown, Workers’ Compensation, General Liability (Premises and Products), Products Recall, Auto Liability and Physical Damage, Cyber Liability.

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

4 "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).

5 "How manufacturers are working to improve sustainability," Debra Schug,foodengineeringmag.com/articles/96280-how-manufacturers-are-working-to-improve-sustainability (Nov. 15, 2016).

6 "Food & Beverage Giants Like Pepsi And Kraft Heinz Tap Into Direct To Consumer. Is It A Fad Or The Beginning Of A Trend?" Louis Biscotti, forbes.com/sites/louisbiscotti/2020/05/18/direct-to-consumer-dtc-a-fad-or-the-beginning-of-a-trend/#7185d0ee4ca3 (May 18, 2020).

7 "The coronavirus pandemic lifts global online grocery sales," James Melton, digitalcommerce360.com/2020/07/20/the-coronavirus-pandemic-lifts-global-online-grocery-sales (July 20, 2020).

8 "How the Industrial Internet of Things is affecting food processing," Wayne Labs, foodengineeringmag.com/articles/97170-how-the-industrial-internet-of-things-is-affecting-food-processing (Jan. 8, 2018).

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