Over the past few years, the food and beverage industry in Australia has faced a series of events that seem to be growing in intensity. The global pandemic created supply chain challenges and skills shortages, while political tensions and social unrest continue to send shockwaves across global markets. The growing urgency of the climate crisis is also putting pressure on consumers and manufacturers to act now to create a sustainable future for their businesses and the world.
Although it’s been hit hard, the food and beverage industry has remained resilient. According to an October 2022 report, the global industry grew by 8.7% from 2021 to 2022, and this growth is set to continue. Whilst the Australian Food and Grocery Council reports that the local industry has the potential to become a $250 billion powerhouse by 2030 — double its current size.
However, for your business to claim its share of the pie, you need to clearly understand the specific challenges and opportunities that exist in the industry today.
Let’s explore the most significant trends in the food and beverage industry and uncover how you can overcome these challenges to harness current and future opportunities.
10 trends that will shape the future of the food and beverage industry in 2023 and beyond
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Supply chain challenges to continue
Supply chain disruptions will continue to be one of the most significant challenges in the food and beverage industry in 2023. Although the days of domestic lockdowns are gone, disruptions to the global supply chain remain, with Toll Group Managing Director, Thomas Knudsen revealing that supply chain issues are likely to persist in 2023.
The Russia-Ukraine conflict has greatly impacted supply chains, with economic sanctions, undersupply of products and a surge in commodity prices affecting the food and beverage industry worldwide.
Congestion and backlogs in ports around the world are also causing delays in supplying key ingredients. This has forced many food and beverage organisations to develop workarounds, such as formulating alternative recipes to continue production without key ingredients. They are also adopting circular supply chain models and embracing technological innovations, such as AI to streamline processes and gain more control of their supply chain.
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Food inflation forecast to increase
According to the Australian Trade and Investment Commission, global food prices have risen by 31.1% and are at their highest level since 2011.
Fruit and vegetables have experienced the biggest price increase, with data from Deakin University suggesting that fresh produce has risen 6.7% in just over 12 months. This is being driven by a number of local and global factors, including flooding, supply chain issues and rising fuel and transportation costs.
This inflation will have varying impacts across the food and beverage industry. While it’s good news for large supermarket players, others in the industry may well feel the price squeeze.
And given the integral role of food and beverage products in the hospitality industry, rising food inflation is a critical factor to keep an eye on. For example, restaurants typically increase their menu prices when ingredient costs rise, but if wage inflation doesn’t keep pace, price increases may dampen consumer demand.
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Staff shortages set to linger
Staff shortages are another pressing challenge in the food and beverage industry today. According to the latest ABS Business Conditions and Sentiments report, accommodation and food services businesses were the most likely to report difficulty — 51% of businesses stated they were struggling to find suitable staff to fill jobs.
Low unemployment rates and a continued shortage of international workers has meant a critical undersupply of staff, forcing some businesses to reduce hours due to a lack of workers.
What was an emerging issue in the hospitality industry back in 2020, is still one of the current trends in the food service industry in 2023. And, as per warnings from KPMG, it may remain a concern for the next three to five years.
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Conscious consumers to drive growth
Rising consumer concerns about environmental issues and sustainability are also forecast to drive food and beverage industry growth.
Deloitte’s 2022 Sustainability & Consumer Behaviour survey found that consumers are placing sustainability at the centre of their shopping decisions.
Consumers are making efforts to choose seasonal and local produce and reduce carbon emissions, making small and independent businesses more attractive options.
Packaging is another area that’s coming under increased scrutiny, and the food and beverage industry is taking action on this trend. A recent McKinsey global survey of packaging purchasers across industries reported that 75% of organisations have already made clear sustainable-packaging commitments.
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Uptake of digitalisation and automation to increase
Creating efficiencies and cost-cutting while maintaining quality is one of the many challenges in food industry finance. In 2023, organisations will be looking to digital and automation technologies to solve some of these challenges, from digital expiration date labels, sensors that gather data on machine performance and analytics that assess shelf life and product traceability.
Technology in the food and beverage industry has come a long way. For example, e-commerce in the food and beverage industry has proliferated to match consumer preferences for online shopping. But the Australian Food and Grocery Council has warned that significant tech development investment in local food manufacturing is required or the industry risks losing ground to imports.
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Growth of meal prep kits and food boxes that offer consumers convenience
Meal prep kits are one of the big success stories in the food and beverage industry in recent years, with pandemic lockdowns kickstarting their popularity.
In 2023, amid rising food costs, an increased focus on nutrition and more awareness of the value of reducing waste, meal kits are set to become one of the biggest growth areas in the food and beverage industry.
According to Future Market Insights, the meal kit delivery services market is expected to grow 15% over the next decade to represent a US$59.2 billion sector.
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Healthier consumer food preferences to trend upwards
Health concerns are on the rise and people are becoming increasingly focused on what they eat. In a recent Deloitte survey, 93% of consumers said they wanted to eat healthily at least some of the time.
And with consumers becoming more aware of the link between food and overall health, they’re changing their shopping habits accordingly. This means a shift towards fresher produce, less meat and reduced sugar.
Companies can take advantage of this trend, by offering healthier products or adapting existing products for certain diets (such as gluten-free or vegetarian).
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Demand for non-alcoholic drinks to keep rising
In line with an increased consumer focus on health, non-alcoholic drink sales have skyrocketed in recent years.
According to the International Wines and Spirits Record, the no- and low-alcohol beverages market has reached US$10 billion and is set to grow by 8% to 2025. This is compared to only 0.7% growth of regular alcohol volume during the same period.
Increased awareness of the value of a balanced lifestyle has fuelled this growth, with millennials and higher-income earners the biggest spenders in this category.
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Demand for plant-based and alternative proteins to grow
Plant-based ‘meat’ is set to become one of the biggest growth areas in the food industry in 2023. Already accounting for $150 million in consumer spending, it’s projected to contribute almost $3 billion in domestic sales by 2030.
According to Food Innovation Australia Limited (FIAL), this potential growth represents $5 billion in value-added opportunities and 6,000 new jobs in the sector over the next decade. There are countless opportunities for manufacturers that embrace alternative proteins such as seaweed, nuts and seeds and edible insects.
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Payment delays and insolvencies to increase
Rising inflation, increased transport costs, supply chain issues and global uncertainty are putting financial pressure on many organisations in the food and beverage industry. These factors could lead to an increase in industry payment delays and insolvencies in 2023.
Insurance company Allianz predicts an acceleration in business insolvencies globally, and the food and beverage industry has been pinpointed by some as one of the sectors with the highest probability of payment default in 2022-2023.
How to harness opportunities to grow your food and beverage business
Some of these trends need to be overcome and others harnessed. Regardless, these are the tangible actions you can take to help grow and protect your food and beverage business.
Investing in digitalisation and automation technologies
For those in the food and beverage industry, technology is one of the most powerful ways to gain a competitive advantage. For example, automation and robotics can help improve productivity, particularly for food manufacturing businesses. Sensors and predictive analytics can improve competitiveness by reducing water and energy consumption, as well as minimising equipment downtime.
Meanwhile, artificial intelligence and virtual reality can also speed up the product development process within the food industry. E-commerce digital infrastructure allows businesses to better meet the growing consumer preference for online shopping. Online wine retailer Vinomofo is a successful e-commerce business example to take note of.
Adapting products to meet changing consumer preferences
Growth opportunities exist for food and beverage businesses to adapt or introduce non-alcoholic drinks or other products, focusing on health, sustainability and plant-based/alternative proteins, all while promoting convenience.
Sustainable packaging should also be considered. It’s a commitment that Mars Wrigley Australia has made. The creator of Snickers and Milky Way has a goal of transitioning its products to 100% recyclable paper-based packaging by 2025. To do so the company will not only redesign its packaging, but also support recycling infrastructure and educate consumers.
Undertaking robust business continuity planning
Global economic uncertainty is one of the most significant challenges facing the food and beverage industry today. To help prepare for future market uncertainty, Food Innovation Australia Limited (FIAL) suggests that food and beverage businesses rethink their business continuity planning, including cash and liquidity planning.
Unlock your business potential with Octet
At Octet, we can help you capitalise on these industry opportunities with our intelligent working capital solutions. Designed for the unique requirements of the food and beverage industry, our smart, fast and flexible finance solutions give you the power to leverage opportunities as they arise.
We’ll work with you to unlock your business potential by:
- Strengthening your cash flow. Our Debtor Finance solution lets you access up to 85% of the funds from your unpaid invoices within 24 hours. That means you get cash when you need it most to help your business withstand the payment delays forecast to impact the industry in 2023. The result is increased cash flow, more liquidity and — ultimately — less risk for the entire supply chain. For beverage company Saintly, this facility allowed it to grow the brand while alleviating the pressure of cash flow fluctuations.
- Helping you ride out pricing and exchange rate fluctuations. Our secure supply chain platform helps to manage the peaks and troughs of commodity-price and exchange-rate fluctuations. It allows you to make cross-border payments with your existing debit/credit cards, bank accounts and Octet finance solutions.
- Giving you the flexibility to adapt. Meeting changing consumer preferences requires flexibility. Having cash flow available in line with your invoiced sales lets you evolve your product offerings or invest in food-and-beverage-industry-specific technology without going into uncharted financial territory. With our Trade Finance facility, you’ll have access to a convenient, revolving line of credit (with up to 60 days interest free and 120-day repayment terms) so you can seize opportunities as they arise.
- Improving business efficiency. Our working capital solution, Supply Chain Accelerate, allows more sophisticated businesses to access an unsecured, off-balance sheet source of funding, settling 100% of your supplier invoices upfront, while you can repay 30, 60 or 90 days later.
- Reinforcing your supply chain. By using Trade Finance as an intelligent procurement tool, you’re also able to take advantage of any available early payment discounts with both local and overseas suppliers. This might allow you to buy extra stock or take advantage of bulk purchases to attain discounts. In turn, this can help you to reduce the potential supply chain disruptions that are forecast to impact the industry in 2023.
Powering the food and beverage industry
Octet provides solutions for all of your supply chain business finance requirements in one central location. We can help you better manage your cash flow, grow your business and leverage both global and local opportunities.
Get in touch today to discover which options will best suit your business.
