What Makes Food Sector a Complex Industry

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Food Industry Trends

The food sector is a vast and dynamic space, but which element caters to this constant expansion of the food industry? It’s a basic and simple fact – people have to eat. Owing to this absolute necessity, the food industry is never saturated and always welcomes new businesses.

 Here the question may arise, just how big is the food sector? According to research, the food industry alone is responsible for 20% of the nation’s economy. On average, the food sector encircles up to 2.1 million farms, 935,000 eateries and above 200,000 food processing, manufacturing and storage facilities that are government registered.

It is understandable that the economic sector as large as the food sector triggers a huge variety of activities in order to bring the food from farm to end consumer’s table. Research reports that in the United States alone, up to 1.5 million people are associated with the food industry, belonging to different areas including supplying, consuming and catering food products that the American market demands every day.

THE FOOD SUPPLY CHAIN

Food Supply chains are quite complex and to operate successfully they require a vast range of activities like:

  • Farming & Agriculture – Food chain initiates with farmers growing crops and raising livestock. Fishing for seafood is also involved.
  • Food Processing: The process of transforming fresh products and ingredients in to canned and frozen foods.
  • Research & Development: Working on exploring new ways to make food tastier and nutritious along with discovering ways to make the overall product more profitable.
  • Food Manufacturing: Producing goods that cater to agricultural production in the food industry. For instance, farm technical equipment, fertilizers and hybrid seeds.
  • Financial services: Dealing in funds or loans and insurance to aid food production and distribution.
  • Marketing: Promoting food products through different mediums to wholesalers and retailers. It also involves packaging.
  • Regulation: Maintaining the safety and quality standards of food by monitoring the manufacturing and distribution process.

The size of the food sector in combination with the unique nature of the industry itself poses some unique challenges. Following are some of the common challenges that people belonging to food sector business confront and guide on how technology can help solve them.

CHALLENGES IN THE FOOD SECTOR

The diversity and complexity of the industry are clearly described above. With the exception of retailers and restaurants, one thing is mainly common in food sector business – Most of them are B2B companies and their customers are other small and large businesses.  

This is how the chain works – farmers and growers sell the food material to food processors and distributors, research and development firm sell ideas and solutions to manufacturers and restaurants, manufacturers sell to food distributors and food distributors sell to restaurants and retailers.

RELATIONSHIP-BASED AND DATA-DRIVEN

In the food industry, all partners somehow depend on the network of B2B relationships to manufacture and distribute food for end customers. The complex network of B2B relationships makes the food industry unique as compared to other sectors where relationships are generally long term and knowledge-based. When decisions associated with huge transactions are on the line then ultimately customer insights turn important than ever.

Strong adherence to relationships or network and demand for knowledge indicates that data is crucial in the food sector. Gone are the days when knowledge used to prevail within the sales organization through sales force responsible for collecting and leveraging customer knowledge in order to drive sales. Now is the era of B2B Marketing Food Industry

Speaking of now, many food businesses are transforming from in-person relationships to an omnichannel structure where PR is built through digital sales channels like for instance mobile ordering. An online platform allows for placing mobile orders online enabling customers to directly online or through a mobile order writing too.

THE COMMODITIZATION OF FOOD

The food industry has some other different challenges. The food sector tends to depend heftily on marketing/promotion, quantity, and price conditions to persuade, attract and keep customers. It’s because the food is considered as a commodity. For example, one farmer’s soybeans are not much different than another farmer’s soybeans. It won’t be wrong to say that there’s a great deal of competition that makes discrimination between products grounded on value reasonably challenging. Therefore factors like price, knowledge, and connections are valuable means of differentiation in the marketplace.

The challenge ingrain in versatile pricing strategy, making omnichannel selling highly beneficial for buyers and sellers in the food industry. Omnichannel approaches involve online order placement. Management associated with mobile sales allows both the parties to quickly access information about price and promotion, acquire data related to past or standing orders, exclusive customer pricing along with other contractual detail. It makes the ordering process convenient for the consumer, as well as more beneficial for the merchant.

The ability to uplift margins is crucial in the food industry except for the beverage sector because it’s usually classified by low margins. According to data from NYU’s Stern School of Business that was collected on margins of several industry sectors in the United States; American business’s net margin was 6.4% in the food industry. The number ranged in such a way that 1.13% was for food wholesalers, 6.86% was for processors and 3.83% for farmers.

Rare challenges like the demand for data, the requirement to raise margins and reduce costs along with keeping up customer relationships and uplifting market share—are directing widespread technology implementation in the food sector.

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