Food Industry 2016

2016 graphiBlueberry Business Group issues seven business activities that from our perspective will frame the food industry environment in 2016.

As context, the stressors in 2015 were more intense than anticipated. It was a year of mega mergers, big-headline consolidation outcomes, and financially strained retailers. Included were a good number of shocks and lightning strikes. Every square inch of real estate was evaluated for better utilization. Extended payment terms put a squeeze on cash flow. Acquisitions took on a new definition: The stripping out of costs, competition, and time.

Our list below is directed towards an audience of One, the CEO. Only the CEO can create/force alignment around the organizations’ strategies and operating plans.

Your company may already be incorporating one, some or all of these activities into your 2016 plans. Your customers and competitors are doing so as well. Reactions to ripple effects are essential features of every plan.

Corporate energy in 2016 will be directed towards driving revenue growth while protecting earnings as margins shift from “here” to “there” between all members of the industry.

1. ZERO BASED BUDGETING
Organizations are re-envisioning business and eliminating unnecessary complications while spending only on what is proven to drive growth or expand margin. Zero based budgeting has grown in sophistication and now includes time discipline and selective agendas. Savings fall to the bottom line or are re-allocated to customer-facing areas of the business and new technology.

2. INVESTOR ACTIVISM
Leading the corporate governance movement claiming “bloated expenses and lackluster growth” (Bloomberg), interventions are taking hold to improve shareholder returns. With over $300 billion in available funds (Bloomberg), activist attention may turn to food companies in Europe. CEOs are confronting unwanted interventions with goals closely aligned with market realities and delivering on them swiftly.

3. BUYING OVER BUILDING
A volatile customer consolidation environment and changing consumer behaviors are outpacing underlying growth. Acquirers are seeking more bolt-on acquisitions and “reverse synergy” targets. Rather than automatically folding growth brands into core businesses, more effective value-creating post-acquisition practices should prevail.

4. TALENT WARS
Turnover is accelerating in numbers while key vacancies remain open for a year or longer. Each new strategy requires an assessment of relevant skills to execute. Leaders are addressing internal dysfunction contributing to exodus or defection; companies are becoming recruitment machines.

5. RIGHTSIZING
Rightsizing principles are being applied to asset reduction, plant closures and consolidation, inventory levels, overhead and labor. Blanket manpower cuts are increasingly considered unwise in light of future workload needs and limited availability of talent pools.

6. VENTURE CAPITAL FUNDING
Since 2010, over $570 million in venture capital funds (Forbes) have been invested primarily in early-stage food start ups, nurturing small regional players as nimble sources of innovation in new product categories. Venture capital will continue transforming the food industry. “Big Food” is quietly launching their own funding units to get a leg up on emerging brands and future category leaders.

7. CONSUMER MIGRATION
Customers are skittish as digitally empowered consumers continue cruising new routes and channels. Channel customers are redefining supplier selection criteria, avoiding those that do not contribute appreciably to growth. Manufacturers are apportioning resources to gain occupancy in growing niches, staying alert to changing consumer appraisals of new and established brands, products and service features. Deep discount brick and mortar players loom on the horizon.

Here’s to a productive 2016 as the push for growth continues!

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