Food & Beverage (F&B) company executives are indeed a hassled lot nowadays. Their erstwhile loyal customers often walk into the store armed with a potent weapon: the smartphone. If the products the customers are looking for are not on the shelf or seem overpriced, with just a touch, they can view alternative products that their friends rate as similar, better or cheaper. The F&B industry may well have staved off threats that came in the form of the mad-cow disease or the Ebola virus. But they could find their undoing in the smartphone if they do not innovate and innovate quickly.
As if this was not enough of a challenge, new food safety regulations aimed at ensuring higher standards of safety and quality are coming in with bewildering regularity. Customers are pushing for greater sustainability and healthier food options. Faced with such challenges, this sector, not surprisingly, is witnessing sizeable M&A activity.
Notably, significant advances in technology offer ways to address these challenges. Emerging forces of globalisation, virtualisation - which transforms hardware and software from a capital expense to a utility - and a highly demanding generation of new-age consumers are providing the means and the incentives for easier and faster execution of these solutions with minimal disruption to the current business.Is our food safer today?
According to the World Health Organisation, about 75 per cent of the new infectious diseases that have come to affect humans over the past ten years were caused by bacteria, viruses and other pathogens with origins in animals and animal products. Even as the industry grows at a rapid clip, the number of incidents of food-borne illnesses seems to be relatively constant year to year. There is no dearth of examples to prove how a single, highly publicised incident can colour public view of a brand forever and can even decimate companies. Like most other supply chains, the F&B chain has globalised significantly with ingredients from various global sources making their way to a destination factory, wherever it may be located.
While this has expanded the product range and boosted competitiveness for F&B players, it has also significantly increased quality risks. Manufacturers have countered this by installing stringent quality management systems and are leveraging advanced analytics for early detection of potential risks. However, traceability continues to be a key challenge. After an incident is reported, it is traceability that determines how quickly F&B manufacturers are able to identify the source of the problem within the complex supply chain web and nip it in the bud.
Given their life-threatening nature, quality or contamination issues in F&B products can have a colossal impact on the product and the brand. F&B companies should be able to address incidents by tracing the issue to the root cause, and acting in near real-time. The increasingly global nature of today’s business adds a massive layer of complexity here.
Advances in technology now allow for track-and-trace functionalities spanning the entire chain from the farm to the fork. Data from field devices across the supply chain can be seamlessly integrated with web-enabled or cloud-based traceability solutions. This allows for real-time data visibility, and the cloud enables ease of global deployment. Recently, Cognizant implemented a cutting-edge cloud-based solution for Feihe International (formerly American Dairy Inc.), a China-based dairy product company. The solution enables Feihe International to trace foods, feeds, ingredients, and food-producing animals through all stages of production, processing, and distribution.
The enhanced traceability across farmers, producers, processors, and retailers provides for significantly superior quality and safety tracking, compliance monitoring, and issue resolution, which are critical focus areas for the F&B industry in today’s globalised manufacturing environment. Though the primary motivators for implementing a traceability solution remain related to risk, manufacturers are also seeing a positive impact on customer perception and loyalty.
Do we waste more than we consume?
It is pertinent to visualise a time when we would buy a TV-dinner packed in an entirely bio-degradable cover, and the entire content including the outer shell would be edible. Manufacturers are sharpening their focus on sustainability, and packaging material tops the sustainability agenda of F&B companies. According to the Washington-based Grocery Manufacturers Association, F&B and consumer product companies are planning to reduce packaging waste by 20 per cent by 2020.
Sophistications in computer-aided design, combined with advanced analytics, are key enablers in the optimisation of packaging design and creation of lighter, recyclable or renewable packaging material. Collaboration between chemical companies, F&B manufacturers, academia, and the research community is key to creating a fine balance between sustainability, safety, cost, and convenience. One of the global packaging majors, for instance, collaborated with several consumer packaged goods companies to create an innovative wrap that kept beverages colder by 50 per cent. Some other companies are leveraging social media and crowd-sourcing by creating virtual environments to create an open innovation forum.
Technology has positively impacted not only the manufacturers, but also the end consumers by empowering them with ever more information. New-generation consumers - largely millennials or digital-natives aged 18-35, whose social interaction straddles the physical and virtual worlds - will soon be walking into a store, scanning product barcodes with their smartphones, and instantaneously accessing health-related data, prices at nearby stores, customer reviews, and even what their ‘friends’ have to say about the product in social media.
This combination of social media and mobility could redefine the rules of engagement for F&B companies with their consumers. Companies will need to start navigating through the online chatter and track the buzz that their brand is creating, or the lack of it. Some of them have already started including social media as part of their overall marketing mix.
A leading snack food company recently introduced a newer packaging for one of its products after criticism on Facebook and Twitter that the original packaging was, well, ‘too noisy’. The company involved a larger community by inviting them on to their Facebook site to approve the new design and gave away a free product to the first 24,000 participants. What with the site getting 1.57 million ‘likes’, the initiative created a Guinness record for garnering the maximum number of fans on Facebook in 24 hours.The future of F&B
Food safety, sustainability, and the informed consumer are going to be increasingly important focus areas for F&B companies globally as they gear up for a surging global demand already expected to touch $15 trillion by 2014. In leveraging the forces of globalisation, millennial consumers, and new technologies such as cloud computing and mobility, F&B companies have a great opportunity to enhance their competitiveness.
Interestingly, all this does not require a major overhaul of IT systems, nor does it entail disruptive implementations. Virtualisation can help ensure that much of this becomes a non-disruptive layer that sits on top of existing infrastructure and IT systems. This can potentially open up new paradigms for the F&B industry to not just address the challenges emanating from evolving consumer and regulatory realities, but also turn them into opportunities and differentiators. By partnering with service providers that bring deep industry domain and technology expertise and experience, F&B companies can truly focus on what is core to their businesses and delight the consumer.
Mahesh Venkateswaran is senior vice president and global head of the engineering and manufacturing solutions practice at Cognizant.
Cognizant is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. With over 50 delivery centres worldwide and approximately 118,000 employees as of June 30, 2011, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world.
For further information visit: www.cognizant.com