Nearly 80% of food and beverage companies have passed on higher costs to customers, survey finds

Table of Contents Dive Brief:Dive Insight: Dive Brief: A survey of up to 60 mostly…

Table of Contents

Dive Brief:

  • A survey of up to 60 mostly C-suite executives by Mazars found 78% of companies have passed at least some of their inflation costs on to customers, but only 2% have been able to pass on 100% or more. Most of the companies surveyed were small, with two-thirds reporting fewer than 100 employees, while 5% reported more than 1,000.
  • The firm’s annual Food and Beverage Industry Outlook also showed 83% of executives expected sales to increase in 2022. And with a host of issues impacting their businesses, 54% of respondents were most concerned about higher shipping costs, container costs and pier fees.
  • The food industry is being impacted simultaneously by several issues, including higher costs to produce and ship goods, labor shortages, supply chain bottlenecks, rapidly changing consumer tastes and, more recently, Russia’s invasion of Ukraine.

Dive Insight:

Food and beverage manufacturers are being inundated with a barrage of challenges that are testing even the most seasoned executive. The disruptions have placed many CPGs in a bind as they try to remain competitive and respond to shifting trends.

“It’s almost become the new normal that you have to have a very scrappy and nimble business model to be able to survive in this kind of environment,” Mark Schiller, CEO of healthy food and beverage maker Hain Celestial, said in December. “It’s unprecedented.”

Inflation remains among the most prominent issues for executives, with many weighing how much of their added costs to pass on to consumers without driving them away to other offerings. The consumer price index, which measures the cost of goods and services like food, has risen 7.9% during the past 12 months, the Labor Department said last week. Food at home has surged at an even faster rate, rising 8.6% throughout the same time period — the biggest 12-month increase since the period ending April 1981.

A slew of factors are coming together to boost costs for U.S. businesses. In addition to shipping, Mazars also found 39% of respondents were very concerned about rising commodity and other costs, 33% truck/driver availability and 29% recruiting and employee retention. The survey found just over half said they’ve increased wages or salaries, 30% provided remote work options and 27% increased benefits to improve employee retention.

Mazars found just over half of food and beverage companies surveyed said new products are an important factor in growing sales in 2022, and 60% reported new product introductions are planned or already underway.

The items will continue to reflect trends that have infiltrated the food and beverage space in recent years, with new offerings focusing on health and wellness and convenience. Mazars said 80% of respondents noted health and wellness is somewhat to very important when introducing new products. In addition, 48% expect plant-based options will have a positive impact on sales, while 35% said functional and “free-from” foods would have the same impact.

The ongoing pandemic has provided another catalyst for healthier and functional items that were already growing in popularity before the outbreak occurred. It’s a big reason why CPGs are finding new ways to incorporate classic functional ingredients such as adaptogens, prebiotics and CBD into more of their products in 2022. 

At the same time, cleaner labels remain an attractive avenue for CPGs as shoppers keep a closer watch on what goes into their bodies. A report last summer from the International Food Information Council found nearly two out of three consumers say ingredients have at least a moderate influence on their food and beverage purchases.

https://www.fooddive.com/news/nearly-80-of-food-and-beverage-companies-have-passed-on-higher-costs-to-cu/620149/