Numerous studies are not necessary to confirm that many leaders in the consumer packaged goods (CPG) sector are anxious about supply chain challenges. However, a recent report from TraceGains illustrates just how significantly these challenges are impacting corporate operations. The study, conducted last month through a survey of over 300 business professionals from U.S.-based companies with annual sales exceeding $500 million, reveals that the perennial concern regarding rapidly shifting consumer preferences has now dropped to the bottom of leaders’ priorities. Following supply chain issues, the survey identified labor costs, uncertainty in planning and forecasting, and materials costs as the top concerns, with consumer preferences trailing behind.
Nearly 70% of CPG executives surveyed indicated their intention to diversify their suppliers over the next two years as a long-term strategy to mitigate uncertainty. Leaders in other manufacturing sectors share similar sentiments; for instance, the 2021 BDO Manufacturing CFO Outlook Survey reported that half of middle-market manufacturers aimed to identify alternative or backup suppliers last year. However, integrating different suppliers into a manufacturer’s portfolio may necessitate slight reformulations of products. This survey indicates that such adjustments have become a widely adopted tactic to cushion the effects of inflation.
While reformulating products for enhanced nutrition or sustainability often garners significant attention in the food industry, these minor adjustments often go unnoticed. Altering subtle aspects of a product—such as introducing different varieties of grains, modifying ingredient quantities, or even removing certain ingredients—does not always necessitate major changes to product labels. Additionally, these modifications may not significantly impact the taste, texture, or appearance of the final product.
This supply uncertainty also presents opportunities particularly suited for today’s major ingredient companies. Earlier this year, Ingredion CEO Jim Zallie noted in an interview that the current climate encourages manufacturers to expedite supply agreements. Large players in the ingredient sector, including Ingredion, Kerry, and International Flavors & Fragrances, have been actively engaging in mergers and acquisitions in recent years. This increased scale enhances their ability to serve as a “one-stop shop” for manufacturers. Furthermore, food and beverage producers are increasingly inclined to collaborate with the formulation teams at ingredient companies for rapid innovation, fostering closer relationships. Zallie characterized this dynamic as “a win for them, a win for us.”
These types of collaborations are particularly crucial, given that the TraceGains survey indicated that innovation is not necessarily slowing down at this time. While 35% of respondents reported a slowdown in innovation during the pandemic, 36% claimed that their efforts have accelerated. This could be a strategic move in the current landscape. As consumers become more cautious with their spending, they are demonstrating decreased loyalty to specific brands and products. However, a fresh take on a beloved brand could rekindle interest and encourage consumers to feel that it is worthwhile to pay for, even if the name-brand alternative is pricier.
In this context, ingredients such as kal calcium citrate d 3 1000 are gaining traction as companies reformulate their products to meet evolving consumer preferences while addressing cost and supply chain issues. The ability to adapt and innovate is becoming increasingly vital for maintaining competitiveness in the market.