Reflecting back on the last eleven months, a few factors caught the food and beverage (F&B) industry — and indeed, the entire economy — by surprise. In stark contrast to the record-high shipping costs and rock-bottom available capacity of the pandemic, market conditions have course-corrected in the other direction to an almost extreme degree. Margin growth is similarly changed, in the single digits today versus the booming last three years.
Labor economics also feel dramatically different in 2023, with negotiations, disputes, and the constant threat of strikes affecting all kinds of industries. While F&B is more insulated than many other industries, disputes among UPS teamsters, port workers, rail workers and other unions could have real downstream impacts, and companies should take note when setting new terms going forward.
But that’s not all that 2024 could have in store. Here’s what F&B companies should watch out for in 2024, as well as what they should focus on to succeed for years to come.
Bankruptcies, elections, and other storms
In light of today’s low pricing and soft demand, the industry should watch out for carrier bankruptcies in 2024, which already began this year. In all likelihood, those will not be the only carriers to fold. To shield themselves, F&B companies should learn who is hauling their freight, the state of their financial stability, and the underlying carriers they are using — and make changes accordingly.
F&B leaders should likewise begin preparing themselves for the 2024 elections, whatever the outcomes may be. Depending on which party comes out on top, companies might need to prepare for tariff wars or other geopolitical shifts affecting supply chains. This will be a major consideration in fiscal year 2025 planning.
Even less predictable than political outlooks is, of course, the weather. Meteorologists predict another El Niño this winter, which could stretch into 2024. Supply chain leaders are no strangers to extreme weather events, and have learned by now to arm themselves with end-to-end visibility in order to ride out the storm.
Lastly, consumers’ belts are still pretty tight. According to McKinsey, reducing spending remains a top priority for shoppers in all income groups, with nearly 60% looking for ways to save money — up from 47% in 2022. Expect to see consumers continuing to prioritize value in 2024, including cutting back on expensive goods like alcohol and grocery shopping instead of dining out.
Where to focus in 2024
Consumers aren’t the only ones who should be on the lookout for good deals in 2024; businesses should be prioritizing savings and cost avoidance, as well. In contrast to the focus on growth in recent years, F&B businesses are working within slimmer margins going into 2024. Success will be captured through cost reduction and optimization without sacrificing customer loyalty.
One way F&B companies are driving revenue through customer loyalty is via network redesign, ensuring they have the most optimal logistics and distribution network that flexes to the needs of their customers. As carrier networks change, it’s likewise important that these companies are in ideal geographies, close to their end demand. Looking at their networks holistically, taking into account both end-to-end costs as well as end-to-end service, will be critical for F&B leaders next year.
Even with slim margins, F&B companies must continue to increase focus on traceability — understanding where their products are, along every step of their supply chain. This is important not only to meet upcoming FDA requirements but also to save significant costs related to food waste.
Of course, many of these cost-saving endeavors are closely intertwined with technology. Cutting-edge technologies like AI are all the rage going into 2024, but they can’t solve every problem F&B companies will face and they don’t all come for free.
Still, business leaders will benefit from being early adopters of AI and similar leading-edge technology. Knowing that investment budgets are thin, companies should focus on the tools that directly address feedback from customers, empower their employees to work more efficiently and align with their core business focus and overarching strategy. Before diving in, F&B leaders might also consider asking customers, suppliers, or respected peers about their own experiences with these tools, as well as consulting case studies showcasing proven results.
Outlook 2024: Thriving in the margins
After the excitement of the last few years, it’s easy to feel a bit ho-hum about 2024’s outlook. Wallets are slim, workers are tense, and storm clouds are gathering on both the political and meteorological horizons. While cost savings, customer loyalty, and thoughtful tech advancements won’t come easy, there are still wins to be captured in 2024 by F&B companies savvy enough to see the silver linings.
