Even before the pandemic, the farming industry was struggling. High production and low demand caused prices to fall precipitously, and USDA discovered that the price of staples like corn and soybeans dropped 48% and 40%, respectively, between 2012 and 2019.
Other preexisting difficulties include a deteriorating relationship with China — U.S. agriculture’s biggest soybean and sorghum customer — along with reductions in arable land due to urbanization, price volatility and rising levels of farm debt contributing to a scarcity of capital.
Then the pandemic struck, and the food manufacturing industry was hit with a new challenge: crippling labor shortages. And lengthy wait times for distribution resulted in spoiled food products. Dairy Farmers of America estimates that supply chain disruptions spoiled up to 3.7 million gallons of milk each day during the pandemic. These temporary setbacks were painful, but they also carried valuable lessons.
While resilience is often talked about in terms of recovery, it’s also defined by strength. COVID-19 is not the last challenge CPG food manufacturers will face, and it may not be the most significant one in the future. Rather than focusing solely on the lessons learned during the coronavirus crisis, it’s more prudent to perform a risk analysis of the food manufacturing industry supply chain.
The most obvious lessons? Workforce safety should remain a top priority because any threat to the workforce brings food production and distribution to a grinding halt. Also, creating redundancies throughout the supply chain can make food manufacturers more resilient. Unlike other raw materials, food has a shelf life, so minor disruptions can have major consequences. According to research from Bain & Co., investments in supply chain resilience can yield a 15-25% output increase and a 20-30% boost in customer satisfaction.
The pandemic was a global catastrophe. Even as the world moves into the next normal, food manufacturers still have some work to do. The agricultural industry needs to address these three challenges to ensure success moving forward:
Technological developments and innovation
Automation and digitalization will transform food production and distribution forever. While there will be considerable improvements in safety for workers and consumers, it’s always a challenge to implement new technologies effectively. As microchips and internet-connected devices continue to become smaller and cheaper, a slew of new sensors will be deployed in the food production process. More information is great, but companies will need to use artificial intelligence to process this data.
Technology will also change how food moves from one place to another. Drones are already showing promise in the delivery space, and drones and robots will likely continue to increase how fast products are delivered, reducing dependency on human workers and lowering spoilage rates due to lengthy delivery times. Plus, farmers can use aerial imaging technology to help manage their crops. When farmers can improve crop management by applying pesticides more accurately or adjusting watering practices to meet changing needs, they can boost yields and increase profits that are reinvested into the next season.
Rapidly evolving consumer preferences
Consumer preferences are difficult to predict, which is why they’ll continue to challenge food manufacturers. Consider the relatively recent rise of plant-based meats as an example. These products are currently limited in scope, but they have the potential to transform the food industry. Considering livestock and feed accounts for more than half of the entire agricultural industry, a shift away from meat would be a seismic shift.
While consumer trends can’t be anticipated with absolute certainty, food manufacturers should assume that plant-based meat will continue to become more popular. Because preferences can change quickly, companies might need to use smaller factories that can shift production with less notice. Of course, they’ll also need flexible supply chains that can get these new products where they need to go.
A new focus on sustainability
CPG companies are using more ecological packaging materials and taking aggressive measures to reduce waste and improve water conservation. Missouri, in particular, is producing some interesting sustainable packaging solutions derived from soybeans, cotton waste, polylactic acid from corn, cornstarch foam, and hemp. Still, sustainability work is far from over.
Ongoing meteorological and environmental changes might broadly impact agriculture and food production. According to the Food and Agriculture Organization of the United Nations, the earth is losing almost 30 million acres (12 million hectares) of agricultural land each year, and about one-third of harvests worldwide go to waste. Sustainable food production is a key challenge moving forward, and it will need to be addressed at each stage of the farmer-to-consumer supply chain.
For food manufacturers, a state of upheaval could be the new normal. The implementation of advanced technology, changing consumer preferences for food and the demand for sustainable food production will keep manufacturers on their toes. Industry leaders and entrepreneurs alike will have to develop innovative new solutions to ensure future success for the food manufacturing industry.