Opportunities and Challenges for the Opportunities and Challenges for the for the Food, Beverage, and CPG Industries for the Food, Beverage, and CPG Industries John Blanchard Research Director Food , Beverage , and CPG Industries ARC Advisory Group ARC Advisory Group [email protected]
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Opportunities and Challenges for the Food Beverage & CPG Industries
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Opportunities and Challenges for the
Opportunities and Challenges for thefor the
Food, Beverage, and CPG Industriesfor the
Food, Beverage, and CPG Industries
John BlanchardResearch Director
Food , Beverage , and CPG IndustriesARC Advisory GroupARC Advisory Group
♦ F d d d t f t d dili i i♦ Food and product safety due diligence increasing• Concerned consumer • Yearly food borne illness statistics
• Global terrorism• Global sourcing & rapid high volume distributionGlobal sourcing & rapid high volume distribution
• These facts plus product counterfeiting are producing• New industry and company food safety initiatives• Increased regulatory and customer requirements
More Sustainable ManufacturingMore Sustainable Manufacturing
♦ Driven by retailer initiatives• “The challenge of creating a low-carbon society will
require a revolution in thought and action – arequire a revolution in thought and action – a revolution in green consumption.” - Terry Leahy –CEO Tesco
♦ Driven by business and regulatory y g yrequirements
• As a part of their effort to eliminate waste and improve efficiency, Pepsico has been applying eco-friendly technology in packaging, deploying solarfriendly technology in packaging, deploying solar energy and methane gas recovery technology, and testing hybrid vehicle programs in their delivery fleets
♦ Driven by limited resources for manufacturing in most♦ Driven by limited resources for manufacturing in most parts of the world
♦ Driven by the “green” consumer/shareholderA 50% f id “ ” i h i h i
• A recent survey over 50% of consumers consider “green” in their purchasing decisions and 20% are ardent “green” even concerned over how a company treats its employees
Response to Changing Business EnvironmentResponse to Changing Business Environment
i i l “Margins rise while returns are flat”♦ Initial Strategy• Mergers, acquisitions, divestitures, outsourcing• Product portfolio rationalization/optimization
A Discipline of Innovation Emerging A Discipline of Innovation Emerging
Innovation is generally recognized as the principle driver of growth and shareholder value
• Companies involving suppliers earlier in design phase of new products and processes
g
• Some OEMs are driving innovation faster than their clients – even in non-traditional areas of their business• Patented product packaging a e ed p oduc pac ag g• More functions on a single unit or machine• More continuous on-line quality verification• New environmentally friendly technology• Packaging end line provider• Packaging end line provider
• Sustainable manufacturing and limited resources in emerging markets will
resources in emerging markets will drive innovation even faster
Where Are We Today?Where Are We Today?
♦ Few food, beverage, CPG manufacturing sites have their processing, packaging, warehousing, logistics, and business systems networked together with bi-and business systems networked together with bidirectional electronic exchange of information
♦ Over 67% of packaging lines do not measure performanceperformance
♦ All respondents felt there was room for improvement in on-line quality verification, with almost two thirds saying there was significant room for improvement
♦ Some factors inhibiting adoption of technology• Lack of ease of use for operatorsLack of ease of use for operators• Cost and complexity of maintaining technology• Lack of resources to evaluate new technologies• Long standing purchasing & amortization policies
It’s Not Just About TechnologyIt’s Not Just About Technology
“To sustain the productivity surge, today's managers must develop incentives that encourage their workers-as well as
themselves-to be more creative, self-starting, educated, and willing to experiment. Jobs that call for simply following recipeswilling to experiment. Jobs that call for simply following recipes
will become scarcer, and demand for an innovation-driven workforce will continue to grow.”
“……..It took 40 years for businesses to figure out how to redesign their factories and processes so that electricity could deliver a productivity payoff. Managers cannot afford to wait
decades to harness the greater productivity offered by today's
“Productivity's Technology Iceberg” March, 2004 by Erik Brynjolfsson,Professor of Management
decades to harness the greater productivity offered by today s IT advances. …….