What’s Hot in the Food Processing Industry?May 20, 2019
Food Processing & Manufacturing has grown 29.7% in Upstate since 2014
Food and beverage. Since everybody’s got to eat—and we’re paying significantly more attention to what we eat—these topics are near and dear to all of us. Consumer habits drive food processing and manufacturing trends, creating massive business opportunity within the industry.
In the United States, food manufacturing is a massive industry, which presents great opportunity to communities who embrace the sector. The Upstate is home to more than 90 food processing and beverage companies and 30 distributors, and the cluster grew 29.7 percent in the region from 2014-2018, according to data from Emsi.
Visit our Food & Beverage page to see more on Upstate leaders in food & beverage industry.
In 2018, an announcement by Keurig Green Mountain regarding a $350 million investment into a coffee roasting and packaging facility in Spartanburg County was the Upstate’s largest investment, with 500 new jobs to be created. (Since the Keurig announcement, the company has merged with Dr Pepper Snapple Group, and today goes by “Keurig Dr Pepper.”)
Earlier this year, Upstate leaders had the chance to hear Scott Kupperman, founder of Chicago-based Kupperman Location Solutions. Kupperman is a site selection consultant who helped the company identify viable sites for its expansion.
In an industry where consumer eating trends are driving the need for constant innovation, new product introductions and the modification of existing products to meet current consumer needs are driving food industry investment in new locations and expansions across the US.
“Innovation is the lifeblood of this industry,” Kupperman says. “Companies can’t just make red cans of tomato soup anymore.”
We’ve noted some key nuggets of wisdom on food processing and manufacturing industry trends shared by Kupperman:
1. Lifestyle Shifts Play Out on Shelves
Consumers still crave convenience, though renewed focus on wellness means simple, recognizable ingredients are increasingly sought after. Upstart brand Halo Top, a health-focused ice cream line, sold $324 million in its first year, a number unheard of among most any product segment.
“What we’re seeing is indicative of the entire industry – a mix of large and small companies. This speaks to the focus on convenience, older products presented in a traditional way that have been repackaged and reformulated to address the way people are eating.”
In the case of Halo Top, its gluten- and dairy-free options resounded with widespread consumer demand for health-driven food choices.
2. Offerings (and Competition) Have Increased Exponentially
“Walk the aisles and consider what you’re seeing on shelves. Examine the options, packaging, competition – it’s all multiplying.”
The coffee aisle, he says, looks far different than it did in years past – number of brands, ingredients and formats have jumped noticeably. It’s all about giving consumers choices, Kupperman says. Just consider how the aisles with water and energy bars have changed recently.
3. Mergers & Acquisitions Drive Fast-Paced Change
Since food manufacturers operate on lean margins and are always looking to keep pace with consumers, larger established companies see business partnerships or startup acquisitions as an agile solution.
Among the M&A activity last year: Nestle’s acquisition of Starbucks’ packaged coffee business for $7.15 and Mondelez International acquisition of Tate’s Bake Shop for $500 million. There dozens of others over the course of 2018 as well.
Companies want products with higher margin, or products that speak to certain market segment, and M&A provides a fast-track way to add that line of products to a brand’s range.
4. Food Packaging Regulations Create Change & Opportunity
Both the European Union and China have or shortly will adopt regulations to minimize certain plastics commonly used in packaging.
Due to similar concerns about waste generated and the difficulty of recycling plastic effectively, other countries are asking manufacturers to contribute to the cost of recycling, cutting into already-thin profit margins. As a result, industry leaders will figure out alternate ways to package products in cost-effective, compostable or recyclable manners – bringing engineered materials into the mix.
An Indiana based company called Aardvark figured out a way to manufacture paper drinking straws that would not become un-glued after sitting in liquid for at least one hour. Demand for their products has soared due to waste reduction initiatives on the part of food service organizations, restaurant chains and amusement parks that have discovered their product, which (at least until recently) has been the only one of it’s type manufactured in the US.