McGladrey Survey: Food and beverage companies expect growth risks and challenges

More than six in 10 food and beverage executives are anticipating growth in both revenues and profits in the near future, according to a new survey released by McGladrey LLP, the nation’s leading provider of assurance, tax and consulting focused on the middle market.

But their widespread optimism is tempered by industry-wide strategic risks and reputational challenges, such as increased competition, food safety issues and the development of more effective approaches to marketing and sales.

Chief among the challenges executives are facing is their search for the next engine of growth. Nearly 80% of executives expect new products to drive their expansion, and they are turning to a number of emerging trends to find the next hot one. According to the survey, companies are leveraging at least four trends to stay competitive in the marketplace place. These include adding a health and wellness focus, using natural or organic foods, introducing ethnic foods or beverages, seeking locally sourced products, and enhancing convenience and simplicity.

“Everyone is looking for the next kale or quinoa,” said Cristin Singer, a McGladrey LLP partner and national leader of the firm’s food and beverage industry practice. “The broad array of trends executives are chasing reflects their determination to be successful, but it also presents them with considerable risks. Staying competitive is one thing, but throwing the whole bowl of strategic spaghetti at the wall to see what sticks might not be the way to go.”

Another area of significant concern is the potential effect of product recalls on a company’s reputation. More than 40% of executives said product quality was a major risk and 45% indicated maintaining product recall capabilities is a priority for them. In response, a majority of companies are placing a major focus on ingredients and supply chain tracking. But even with these efforts, only roughly one-third are confident in their current safety and recall strategies.

Technology security also is an area in where executives lack confidence – less than half are assured of the safety of their data and systems. Based on the work of companies that have more trust in their systems, food and beverage companies should consider reinforcing their cyber security through enhanced employee security protocols and installing new or upgraded hardware.

Despite these challenges, the future is reasonably optimistic for the food and beverage industry, and executives indicate that new products and line extensions are most likely to drive growth.

The McGladrey food and beverage survey used on an online questionnaire to collect responses from 179 executives, owners and decision makers at food and beverage companies with annual revenues between $10 million and $1 billion. Respondents included growers, manufacturers/processors, distributors and retailers.

For more information about the survey results, visit the McGladrey website.