The Pandemic Shook the Food and Beverage Industry. Here's How It's Recovering.
In this period of recovery, learn how transnational food and beverage companies have numerous opportunities not only for revival but also for unprecedented growth.
Food and beverage (F&B) was one of the industries most severely affected by the pandemic. Global restaurant sales were set back by six years, online grocery sales rose by 54%, and supply chains suffered permanent disruptions.
Social distancing norms and extended lockdowns brought customer confidence to an all-time low, and F&B companies had to postpone growth initiatives. It was made clear that bolstering supplier relationships and acquiring market share through global expansion was essential for sustainable growth.
In this period of recovery, transnational F&B companies have numerous opportunities, not only for revival, but also for unprecedented growth. Going global armed with curated localization strategies as well as adjusting sourcing and pricing strategies to reflect the post-pandemic reality is the need of the hour.
Covid-19: The Great Recession of 2020
The Covid-19 pandemic created an economic slump of a magnitude similar to that during The Great Recession of 2007-2009, at least for the F&B industry. The top players of the industry also handled it in much the same way.
Although inflated raw material prices, volatile national currencies and an all-time-low purchasing power led to decreased consumer demand for food products, the F&B industry still fared much better than other sectors.
According to a National Library of Medicine journal, transnational companies emerged stronger than ever before from the 2007-2009 recession by expanding to emerging markets, partnering with governments for pandemic recovery efforts and consolidating market share globally using ultra-processed products. Even mid-sized companies like the vertically integrated orchards products manufacturer, Shoreline Fruit, shored up its expansion efforts by solidifying its supplier base.
If you're an F&B company exploring ways to steady your ship, expanding into newer international markets can provide the necessary global mobility to tackle current and future supply chain crises, irrespective of whether your revenue is $50 million or $500 million a year.
Global penetration: an F&B necessity
The road to recovery for F&B companies has now led many to once again consider global expansion. Be it exploring newer markets to gain market share, hunting for diversified suppliers and distributors or avoiding restrictive national policies, globalization becomes inevitable for long-lasting growth.
A great example of this is the renewed interest in trade fairs. These massive events are the bread-and-butter of F&B companies in terms of discovering new distributors, but they naturally dried up at the start of the pandemic. Companies had to shelve their expansion plans until these fairs resumed.
Now that the world is starting to re-open, fairs like the Salón Gourmet Fair in Madrid and the China International Import Expo are once again inviting companies to explore their options. Many of these fairs allow entry only to local employees, necessitating a ground presence for your brand.
Secondly, regionally-diversified suppliers are also a key factor in minimizing supply chain disruptions. If your supplier portfolio is concentrated in, say, your home country, then a sudden crisis could leave your distributors in foreign markets with nothing to sell.
And lastly, within your national borders, hitting the ceiling in terms of market share or expansion plans due to government policies is inevitable. At some point, you'll have to look to international markets to unlock your next growth milestone.
Growth possibilities on the horizon and next steps
What should F&B companies focus on while crafting their global expansion plan for the near-term and the long-term? Your overarching plan should not exclude the absolute essentials:
Marketing strategy toward distributors and retailers
Localization strategy to accommodate cultural norms
Product line and packaging
Highly mobile presence in each market
The 2021 ASEAN F&B Distributor Survey showed that it was "very rare" for brands to enter a new market with a strategy that took local idiosyncrasies into account. Brands often approach distributors with generic pricing, presentations and samples without tailoring their strategy to the distributor and the market.
Having a strong brand alone will not translate into similar growth for your company outside of your home country. If you don't have an existing relationship with the distributor, you need to prepare a sophisticated strategy to ensure a successful partnership.
Similarly, your promotion strategy should be localized to the market you're entering to account for cultural differences. For instance, Nestle's Popularly Positioned Products (PPP) sold smaller SKUs in emerging markets that cost less than their products sold in Europe and North America.
Local market conditions should also inform your product line and packaging. If supply chains are particularly tricky to optimize in an emerging market, consider shipping lighter packages. If there is no demand for an extensive product portfolio, focus on a select list of products to sell instead.
Lastly, establishing a presence in a new international market is best done in a highly mobile model that is resilient to unpredictable policy changes, especially considering the recent geopolitical shifts being seen around the world. Companies can avoid launching full-fledged subsidiaries in favor of lean entities that get all the benefits of a local presence without the higher liability of a subsidiary.
A global PEO partner like INS Global can help you cement easily-transferable operations in your target market managed by local people in tune with relevant cultural nuances. With local expertise in a broad range of countries worldwide, this PEO partner can help you safely and simply navigate international legal and tax considerations.
The pandemic initially proved devastating for the industry, and signs of recovery weren't commonplace for a long time. However, in the months and years following the worst of the pandemic, signs of renewal offer a wealth of opportunities to companies that are willing to be flexible and agile. The world is on the road to recovery, and capitalizing on innovative expansion models offers the best chance of global penetration.
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