From farm to fork: Exploring the state of America's food industry

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Categories: Food and Beverage, Sage X3
July 11, 2017
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Consumers today expect fresh ingredients, transparent packaging, and convenience in their food selections.

The growing use of mobile apps, the impact of new federal food safety guidelines, evolving tastes and food habits are driven largely by Millennials. Disruptive, new players are key elements of the evolving state of food manufacturing in 2017.

For food and beverage manufacturers, the shifts provide bold new opportunities, especially for those companies that drive innovation through technology. It’s a bold new look from farm to fork: exploring the state of American’s food industry that requires new solutions and new ways of thinking.

Driving growth

In Food Engineering’s 2016 State of Food Manufacturing Survey, manufacturers cited several key factors for anticipated gross throughput, including:

  • Increased sales
  • New products
  • More consumer demand, including new customer acquisition
  • Improvements in production and processing
  • Plant expansions
  • Improved economic outlook

Driving physical growth

Automation, new food safety requirements, and increased consumer demand are driving a continued expansion of construction, according to a recent Food Engineering plant construction survey. Much of that construction is coming from expansion and renovation projects compared to new construction, at a ratio of 2.5:1, according to the survey respondents.

Many of the changes to physical plants are driven by the implementation of the federal Food Safety Modernization Act (FSMA) guidelines, many of which become actionable this year. Plants need to accommodate FSMA mandates. The new guidelines are prompting manufacturers and processors to address issues in advance.

Yet, the growing demand for new, allergen-free and non-GMO products is also driving some of the expansion, according to the survey. New projects can also improve efficiency, lead sustainable production practices and improve water and energy use.

Flexibility is another important factor in plant design and redesign. Manufacturers need to design production facilities in order to foster flexibility. Built-in flexibility allows for faster response to shifting consumer demand and faster speed to market.

Flexibility is being incorporated in newer plants in a number of ways:

  • Minimized pipe runs
  • Fewer difficult-to-clean areas
  • Space design that allows for flexible installation or removal of equipment
  • Modular design that allows for future expansion, without installing compressors, boilers or other equipment not yet needed

Clues in the search bar

The 2016 Google Food Trends report, driven by search queries, shows the complex and changing habits for foods and preparation styles. Here is a closer look at five of the food trends identified in the report.

  1. Turmeric was designated as a top “food with a function” in the Google research, which was based on seasonally adjusted searches between 2014 and 2016. Turmeric was associated with many YouTube (also a Google product) searches related to the spice’s health effects, including autoimmune disorders, liver and gallbladder ailments and better cardiovascular performance. The spice is indicative of consumers’ growing desire for information about the benefits of ingredients and how to best use those ingredients to maximize flavor and health.
  2. Pho, the spicy Vietnamese dish, has been growing, in terms of searches, by 11 percent annually since 2013. Searchers are looking for information on how to make the dish themselves and where to find it in nearby restaurants. Pho represents American consumers’ interests in experiencing world cuisine, both in their leisure dining and at home.
  3. Pork shoulder is a versatile meat that many Americans realize can be used for more than barbecue. Google searches reveal that consumers want to experiment with the meat cut, using it in traditional dishes and in new ways, such as Korean or Cantonese variations.
  4. Mug cakes are a top-trending, bite-sized snack food, reflecting the nationwide trend for healthy, convenient, portion-controlled tasty foods. While flavor continues to be a top priority, so too are dietary restrictions and health benefits. Consumers want choice, flexibility and the ability to make varied snacks at home.
  5. Pasta may seem like a surprise entry on this list, but pasta, especially rigatoni, is back after several years of reduced search interest, according to Google data. Consumers are experimenting with pasta recipes weeknights and weekends. Like with pork, they’re also taking a familiar ingredient and looking for new ways to present it.
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Food manufacturers need to respond to shifting tastes and demand for fresher, farm-to-table products.

A changing landscape

The landscape is changing greatly in the way people shop for food. Here are a few observations of how food shopping and delivery is shifting.

  • Online delivery continues to be popular. Traditional shopping patterns are changing as the digital grocery store increasingly becomes the norm. Grocers are looking to spice up what has, for many, become a mundane task by offering more in-store dining options, entertainment, product sampling, cooking demos and nutritional instruction, to entice consumers into brick-and-mortar stores.
  • Mobile apps provide new opportunities for processors and manufacturers to partner with technology providers. Apps that are most likely to appeal to today’s consumers include those that reward loyalty, maximize savings, improve convenience, and offer exclusive insights or information to users.
  • Digital coupons allow manufacturers to deliver savings for both in-store and online shopping options. Electronic coupons, along with the aforementioned apps, allow food producers to gather many data points on each shopper during each interaction. This data, when used smartly, can help anticipate shifts in preferences and demand for new products.
  • Meal kit delivery is booming, providing consumers with convenience, healthy options and proper portions. A report by Packaged Foods indicated that meal kit delivery reached $1.5 billion in sales in 2016 and is poised to become a multi-billion-dollar segment within five years. For busy consumers, meal kits also eliminate the need to grocery shop, either in person or via an app or website.

It’s all in the packaging

Packaged Foods released a report in late 2015 detailing five trends in the food packaging business that will have an impact on food processing:

  1. Targeting Millennials. This influential generation prefers foods that are fresh and less processed, preferring fast casual restaurant brands and navigating the perimeter of grocery stores, focusing on fresh, non-packaged foods.
  2. Smaller is Better. American households are smaller, with 61 percent having 1-2 people. Single-serve, meal-for-two, multipacks of individual portions and resealable packaging are also byproducts of this shrinking trend.
  3. Convenience. Packaging today needs to fit hectic lifestyles. Foods need to be in containers that are easy to open, resealable, portable, lightweight and easy to dispense.
  4. Transparency. Consumers want to be able to see and assess their food, giving rise to see-thru packaging or packaging with windows. This visual transparency complements consumer expectations for transparency in ingredients and sourcing.
  5.  Eco-friendly. Improved recyclability and sustainability, including reusability, are a growing expectation. As a result, makers of eco-unfriendly foods such as bottled water and single-use coffee are shifting their packaging and production to more earth-friendly packages.

How millennials eat

Several recent surveys illustrate how the Millennial generation eats, which is influencing how food is harvested and made today. A study of 1,000 Millennials by the Retale app revealed some notable insights:

  • The impact of the Great Recession is still felt, as 36 percent indicated eating out was their most likely cut activity, outpacing entertainment and clothes buying. Just eight percent indicated a cutback in grocery buying.
  • Millennials are more likely to grocery shop 2-3 times per month (34 percent) followed by once a week (29 percent) and once a month (15 percent).
  • Per trip, Millennials usually spend $50 to $99 (37 percent), followed by $100 to $200 (35 percent) and $0 to $49 (20 percent).
  • A third (34 percent) of Millennials characterize their spending on groceries as “thrifty,” motivated by cost (50 percent), followed by availability of locally grown products (38 percent), store proximity (34 percent), technology that eases shopping (31 percent) and recipe-based shopping (28 percent).
  • 30 percent of Millennials have ordered groceries online, with “saving time” (48 percent) the most oft-cited reason.

Need for automation and digital

With the food landscape shifting, manufacturers realize they need new tools to stay ahead. The State of Food Manufacturing Survey shows that investments are up in areas that improve automation and digitalization, including:

  • 36 percent of respondents plan to buy digital sensors and transmitters up from 21 percent the previous year.
  • 29 percent expect to buy wireless plant networking equipment.
  • 16 percent will invest in recipe management software.
  • 11 percent will buy asset management or management, repair, and operations (MRO) software, a four-fold increase over the 2015 survey.

For food manufacturers, integration of new and old systems throughout the enterprise becomes an essential component of efficient production. Enterprise resource planning (ERP) software, like Sage X3, is a powerful way to bring together all manufacturing areas with back-office functions.

With the right ERP solution, companies can harness the vast amounts of data that are generated within the organization, along the supply chain, and by end users. With ERP, executives have a clearer understanding of manufacturing, warehousing, ingredients, sales, billing, and transportation.

When an ERP solution integrates with other critical systems, such as customer relationship management and business intelligence, the opportunities are limitless to anticipate and respond to shifting trends, consumer preferences and market changes.

At NexTec Group, our consultants work closely with food manufacturers to understand their innate needs, strengths, and opportunities. We will help select the right systems that provide modern solutions for food and beverage manufacturers. Download the NexTec Ebook – Reduce food waste and improve operations to learn more about how NexTec and Sage X3 can transform your company.