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Challenges that will define the dynamics of Food & Beverages Market in 2023 and beyond

  • Published Date: January 30, 2023

The expanse of the food and beverages market has grown dramatically, especially over the last decade. This industry has witnessed substantial motion with innovation in processes, products, and services to keep pace with the rapidly changing consumer preferences.

However, this multi-billion-dollar business vertical while showing a commendable growth pace is also facing various obstacles. While some of the challenges have been persistent in the F&B industry, some new issues have cropped up in recent times.

A paradigm shift has been observed in consumers’ eating habits as they prefer sugar-fee and fat-free products to maintain good health. This has encouraged food producers to bring various changes in the present manufacturing process and effectively tackle some of the major challenges of this sector.

Elimination of plastic waste

There has been constant growth in industrialization and the food and beverages market has expanded with it. However, this development has had a disastrous impact on the environment which has enforced ‘plastic ban’ – an ideology that has persisted for several years during discussions on international platforms and has now come to a realization. Driven by rising awareness of eco-friendliness, excessive consumption and inappropriate disposal of plastic have come up as one of the major issues faced by food and beverage companies today.

In this scenario, a product with an ‘eco-friendly’ tag connects with the consumer and is likely to amass more lucrative sales than a product that is likely to harm the environment. F&B manufacturers and retailers are now focusing on supply chain management to tackle the present challenges through the adoption of numerous recycling practices.

Major food and beverage manufacturers are taking initiatives to shift towards sustainable packaging. For instance, lately, Kelloggs, stated that nearly 76% of its total packaging is recyclable, compostable, or reusable. The company also claimed that 44% of its total packaging is made from recycled content.

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Increasing health-consciousness

The increase in food-related disorders has encouraged consumers to bring essential changes in their lifestyles and diet. As a result, the population is getting inclined towards buying foods without added preservatives and sweeteners that might impact one’s health negatively.

The prevalence of diabetes has increased over the years and obesity is considered one of the major factors for the same. This realization has led consumers to shy away from products containing artificial sweeteners and other added preservatives.

Another trend that forms the core of the challenges faced by food and beverage market is the rising demand for organic food. The extreme decline in the consumption of processed foods has stimulated the organic food market. Due to their rich nutrient value, organic foods are witnessing higher demand across the globe. Also, as the population is getting aware of the harmful effects of pesticides on the environment and health, organic farming is growing exponentially.

The ascent of the veganism trend

With growing concern regarding animal abuse, more and more consumers are shifting towards vegetarian and vegan products, resulting in a decrease in demand for meat and its products, becoming one of the major challenges in F&B industry. Social platforms have increased awareness about animal abuse, and thus people are inclined towards purchasing products that are labeled “humane-certified”, “cage-free” or the like.

Manufacturing products that guarantee animal safety has become one of the prime challenges for food and beverage sector, as food manufacturers need to maintain their reputation regarding the ethical treatment of animal concern. Driven by this, businesses are coming up with plant-based alternatives to keep the retail chains running.

For instance, recently, MeliBio, the world’s first company focused on creating plant-based honey teamed up with Narayan Foods. Through this partnership, the company aims to launch its products across 75,000 European stores.

The optimum level of stringency

The food and beverages industry is governed very strictly by regulatory bodies. Organizations like EPA, FTC, FDA, and OSHA have been diligent in implementing norms concerning the release of healthy products, supervising food labels, maintaining a clean, hygienic environment, and the like.

Most businesses are known to quickly adhere to the norms. However, the regular changes subject to raw material, waste disposal, food quality, documentation, surplus production, etc., have cropped up to be one of the major challenges faced by food and beverage market.

For instance, in December 2022, after the U.S. Department of Agriculture’s FSIS suspected the possibility of cross-contamination in under-processed products, Kraft Heinz Foods Company had to recall about 2,400 pounds of ready-to-eat ham and cheese loaf products.

Impact of the COVID-19 pandemic

The COVID-19 pandemic impacted the F&B sector adversely. Nationwide lockdowns prohibited employees from working in factories which impacted the supply chain. That apart, people also started panic buying due to extended lockdown, creating further food shortages and a major gap between the ones who can afford to stockpile items and the ones who cannot

However, the industry is anticipated to show healthy gains gradually driven by various initiatives taken by businesses and regulatory bodies to recover their economies. For instance, the Partnership for Sustainability Leadership in Business project, supported by The Hongkong Bank Foundation, under the Centre for Civil Society and Governance at The University of Hong Kong organized the 4th Knowledge Primer in November 2022. The theme of the event was ‘Collaboration for Driving Circular Economy in the F&B Industry’.

It aimed at investigating the possibility of promoting a circular economy in the F&B sector. Over 120 industry leaders participated in this event to clarify the hurdles encountered by various stakeholders and to study the implementation status quo.

The war and resulting inflation

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While the F&B industry was suffering from the repercussions of the pandemic, some man-made conflicts, and climate shocks, together with the war in Ukraine deepened the challenges for the sector. Russia and Ukraine have been the major producers and exporters of food. Before the war, these countries supplied nearly 30% of the world’s barley and wheat. 36 countries, which also include the most vulnerable and impoverished, depend on them for over half of their wheat supply.

The food markets across the globe are extremely concentrated, in terms of supplies as well as reserves, further leading to inflation. The constantly rising inflation and supply chain disruptions have been at an all-time high. As per the United States Institute of Peace, food inflation has been at 15% or more in 36 countries. Citing an instance, insurance premiums for vessels operating in the Black Sea are increasing rapidly, which only further raises prices for staple foods.

Regardless of the constant challenges encountered by the food and beverage industry, it is expected to show healthy growth in the future. It remains to be seen how the global market will fare in the upcoming years, propelled by changing lifestyles, disposable income levels, and favorable government reforms.

Author: Saipriya Iyer

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