There’s no question that prices on nearly everything have significantly increased in recent years. But did you know that the jump in food prices between 2021 and 2022 was the largest annual increase since the 1980s – increasing about 11% according to a GAO Report? It’s a vast difference between the general increase of about 2% annually in prior years. While a consumer’s first thought on these increases likely reflect their recent grocery store receipt, the food industry’s thoughts undoubtedly go toward their cost of goods and all the pressures behind that end product pricing.
Inflation, itself, has been one cause of the increase, but other factors have certainly had an impact, with a few of the key pressures for the food industry related to:
- Supply chain. Since the beginning of the pandemic, the industry has faced increased supply chain disruptions, shortages, and the economically motivated adulteration (EMA)/food fraud that can result from these. While the pandemic is “officially” over, manufacturers can still find it difficult to achieve supply consistency, resulting in consumers still periodically finding empty shelves where their go-to product has always been. Additionally, the disruptions from the ongoing war in Ukraine and other world events are not making things any easier.
- Environmental impacts. Droughts, floods, record-high temperatures, wildfires, hurricanes … the climate is changing with severe weather occurring more frequently and in areas never before seen. All are leading to ravaged, damaged, or reduced crop yields, which in turn creates ingredient/product shortages which impact every step of the supply chain. The extremes can also impact both the quality and safety of the food, with increasing temperatures causing more favorable conditions for the growth of pathogens and making it more difficult to keep foods cold in transportation.
- Labor. While some areas of the labor market have seen a rebounding, food businesses continue to be at the short end of the stick, with many facing worker shortages and/or high turnover rates – both in manufacturing and in foodservice. In fact, the labor shortage has been cited as the “single biggest factor” impacting the food supply chain. Not only does this cause excessive time and effort in recruiting and retaining workers, but it also increases the time and effort needed for training – and retraining.
- Food safety & quality. Maintaining food safety and quality in the face of such pressures causes challenges as both internal and supplier procedures and programs need to be revisited and updated to mitigate new and evolving issues. But that can lead to even greater expenditures, on which cost-focused leadership may push back to attempt to keep prices lower. Attention to both food safety and quality is essential because, as we discussed in a recent article, if your food quality starts slipping, food safety issues may not be far behind.
So how can food businesses deal with the pressures?
- Stay informed. A key factor in maintaining control of your business and managing your supply chain is staying informed of risks in your community and areas from which you source supplies – including those related to labor, weather, etc. As we also learned from the pandemic, being aware of infectious disease in your community and having wellness requirements and checks are essential to helping maintain a strong labor force.
- Be proactive. When you see indicators of pending issues, make preparations and take action before you need to. Whether it is trending weather in a supply area, an upslope in infectious disease in your community, or increased talk of retirement among your workforce, “jumping the gun” can actually be a positive step to mitigate risk before it occurs.
- Have options. If a key supplier is in an area hard hit by excessive weather or other crises, supplies are likely to become limited. Have at least one secondary source identified and validated through your supply chain and traceability programs.
- Offer incentives. Whether you are finding it difficult to find qualified workers or you have employees considering external offers, providing incentives such as increased pay, benefits, career advancement, etc., can help you retain workers, reducing the need to find and train new employees.
- Develop a Food Safety Culture. When adopted and embraced by all departments and levels of a business, a well-developed food safety culture can not only mitigate risk, but also enhance your quality and safety from incoming goods to final product. With a mature food safety culture led by top management, the relationship between quality and safety will be understood and the question of costs for food safety won’t be an issue.
With its historically low profit margins, the food industry isn’t always able to weather crises as well as other industries, but preparation and solid food safety and quality programs can help to ensure you are producing the best possible products, as well as keeping you on the right side of regulation! If you need assistance with your business, give TAG a call. We can help!
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