Opportunities are Ripe for LLPs

As globalization continues to propel U.S. food companies’ supply chains further overseas, sourcing, transportation, and coordination of imports and exports is becoming more complex. Likewise, the demands—and opportunities—for lead logistics...


“Foodstar gives us a solid platform in China’s rapidly growing $2 billion plus retail soy sauce market, where its Master brand holds a strong position, especially in southern China. Following a smooth integration, Foodstar’s sales have exceeded our expectations. We plan to sustain the growth momentum by launching new products, expanding distribution across China and completing Foodstar’s new factory in Shanghai to meet increased demand. Foodstar is expected to increase our company’s annual sales in China to more than $300 million in fiscal 2012.”

The company added that, “China represents a significant growth opportunity given its 1.3 billion consumers and importance as the world’s second-largest economy after the U.S.” Furthermore, “The acquisitions in Brazil and China put emerging markets on track to generate more than 20 percent of our company’s total sales in fiscal 2012, up from 16 percent in fiscal 2011. The acquisitions are the latest examples of our successful ‘buy and build’ strategy in emerging markets, where we have acquired and grown strong local brands and businesses in the key markets of China, India, Indonesia, Russia, Poland, and now Brazil.”

 

Regulations, recalls, and trends

Food companies are dealing with more regulations, particularly those associated with the Food Safety Modernization Act (see sidebar “The FSMA’s Hidden Land Mines”). At the same time, responding to recalls also requires more sophisticated logistics capabilities and enhanced visibility, which is the expertise of lead logistics providers.

According to Ferrell, “Food companies are having to reevaluate their systems and update their processes from a compliance perspective,” in order to respond to more regulations, potential recalls, and emerging trends in the sector.

For starters, a recent forecast from Tompkins, entitled “Strategies to Transform Your Supply Chains in 2012 for the Food & Beverage Industry,” stated that companies in this sector are “now cautiously optimistic as they look to 2012. At Tompkins International, we see 2012 bringing a number of trends that will emerge—some familiar and some new.”

Some highlights of the forecast include the following:

Demand-driven supply chains (DDSC). Demand-driven supply chains allow for huge potential for better cost reduction and more satisfied customers. By reporting to each link in the supply chain what true and current demand exists in the market, an accurate response via increased inventory or more frequent deliveries keeps supply in tune with demand. These transformations are opening supply chains up to extraordinary benefits and major value creation.

Focus on food safety. Food safety will continue as a hot topic in 2012. The need for consumers to feel that their food supply chains are safe will continue to drive food safety initiatives. Retailers and food producers understand the importance of quickly reacting to a recall to ensure their brands are not tarnished and to reduce the financial risk to their businesses. The Product Traceability Initiative (PTI), along with other initiatives, will ensure food and beverage companies have the visibility to limit risk.

In China for China. More and more Western companies with operations in China are moving to serve markets within China itself. The country’s emerging consumer market is being driven by a growing middle class that is purchasing food and beverage products. Local and global food and beverage companies are taking advantage of this new market and its huge growth potential.

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