What are the key disruptions in food and beverage? Summary
- Labour shortages are limiting production and straining supply chains
- Rapid tech shifts are forcing faster system upgrades without clear plans
- Rising costs in energy and commodities are shrinking industry margins
- Climate change is damaging crops and increasing cold storage expenses
- Cybercrime and geopolitical unrest are destabilising global supply chains
“Food and beverage businesses are facing disruption on multiple fronts.”
Those are the words of James Watson, a partner at business strategy firm Argon & Co.
What’s more, these disruptions keep getting worse, while efforts to overcome them struggle to keep pace.
Labour shortages
One of the biggest challenges the food and beverage industry is struggling with is labour shortages. And this runs right through from suppliers to retailers.
In fact, research from Argon & Co found that 43% of operations leaders cite workforce challenges as their biggest concern.
“Labour shortages are constraining production capacity and stretching supply chains,” says Argon & Co’s Watson.
Rising prices
Increasing raw materials, packaging, and of course energy costs continue to plague the industry, making it harder for firms to protect margins.
“While prices are rising, albeit slower than raw material inflation, it is still one factor in why we’re seeing overall volume decline in the market,” says Watson.
This, according to Watson, is disproportionately impacting short-life, high-capital, low-margin and bulky products, and is the reason subsectors such as industrial bakeries and dairy are showing particular signs of struggle.
Regulatory compliance
Increasing regulatory and compliance pressures, including the European Union’s Deforestation Regulation (EUDR) and the Corporate Sustainability Due Diligence Directive (CSDDD) are also proving costly and complex for manufacturers big and small.
“Regulators are tightening requirements around packaging, emissions, and traceability, leaving firms with little room to delay investment in compliance,” says Watson.
Climate crisis
The climate crisis is threatening global supply chains, placing essential crops including corn, wheat, rice and potatoes, under threat.
Added to that, luxury commodities, such as cocoa, coffee and sugar are also severely at risk.
“Put simply, extreme weather events are wreaking havoc on harvest unpredictability and creating supply shortages,” says Andrew Dalziel, vice president of industry and solution strategy at supply chain specialists, Infor.
This is particularly true for time-sensitive crops, such as peas, which need to be processed within hours of harvest. If the crops are damaged then there’s little to no buffer stock or imports to fall back on.
And the challenges don’t stop there. Many growers and fresh produce wholesalers lack temperature-controlled warehouses and transport, meaning products can spoil quickly in excessive heat while still in the supply chain. Moreover, extreme weather events can disrupt transportation due of flooded roads and damaged railway lines.
Geopolitical unrest
From Russia’s invasion of Ukraine spiking energy prices, to Trump’s trade war disrupting supply chains, geopolitical unrest is threatening food and beverage production across the globe.
And these are just the threats we know about.
“What is more concerning perhaps is potential and probable disruptions that have not yet fully unfolded, such as conflict in Taiwan,” says Georg Glaser, partner specialising in supply chain resilience at consultancy firm Arthur D Little (ADL).
And while most companies have established contingency plans to handle supply and price shifts, it’s hard for food and beverage manufacturers to be fully prepared for the current and growing level of uncertainty, and speed of change.
Cybercrime
The food and beverage industry has been hit hard by cybercrime, in recent months.
Beverage giant Heineken was been hit by a data breach impacting 8,174 employees across a number of countries, according to a report in BreachForums.
Independent farmer Vital Bircher’s systems were breached in an attack that made it impossible to monitor the herd’s vitals. This led to the death of a cow and its calf.
Then there were the high-profile attacks on supermarket chains Marks & Spencer and Co-Op.
“Globally, cyber attacks are on the increase,” says Richard Werran, global director of consumer, retail and food at the British Standards Institution (BSI).
How is industry overcoming these challenges?
As is to be expected, the degree to which manufacturers are managing these challenges varies greatly.
Many are adapting quickly, with Argon & Co finding that two-thirds of leaders say the strategies they’ve deployed have been positive in helping to mitigate disruption. That reflects investments in automation, greater supply chain collaboration, and more agile operating models introduced in recent years.
Manufacturers and retailers are also starting to introduce longer-term contracts, which should enable them to unlock investment in areas with higher opportunity but longer delivery timelines.
However, there are also manufacturers who are struggling to overcome these challenges.
“There’s a significant minority who aren’t seeing results,” says Argon & Co’s Watson.
Around one in four leaders have said their strategies had no impact or even made disruption worse, underlining just how difficult it is to apply short-term fixes in such a complex environment.
“Labour shortages remain stubborn, inflationary pressures haven’t gone away, and geopolitical instability is introducing new forms of disruption all the time,” says Watson. “So while there is progress, the underlying headwinds are intensifying”
This means the gap between businesses successfully adapting and those that are falling behind is widening.
As disruption intensifies, the food and beverage industry stands at a crossroads. Businesses must move beyond reactive strategies and invest in long-term resilience - embracing innovation, collaboration, and sustainability.
Those that adapt swiftly and strategically will not only survive but shape the future of food. For others, the risk of falling behind is growing sharper by the day.
