GE Capital recently surveyed c-suite executives at middle market food and beverage companies (with revenues ranging from $10 million – <$1 billion) around the
country on numerous topics from financial performance to operational issues. In addition to finding that executives are upbeat
and the industry is performing well, the survey also revealed
that executives are especially focused on consumer preferences,
margins, and investing in their companies.
Growth and Optimism
Overall, the survey found that the food and beverage sector
is performing strongly and growing. Nearly three quarters (73
percent) of companies in the survey improved their financial
performance in the past year and almost as many (66 percent) improved their overall performance.
Looking forward, respondents are optimistic with nearly
seven out of ten firms predicting an increase in revenue in the
coming year, and a mean total revenue growth of 6. 2 percent
forecast for the industry. According to nearly half of executives
surveyed, this increase in sales is expected to be accompanied by industry expansion. These executives’ bullish outlook
isn’t limited to their sector, as the majority are confident in
the economy on a local, national and global level.
As one might expect, this bodes well for employment in the
food and beverage industry. In fact, the majority of companies
(53 percent) plan on adding employees, while only 5 percent
plan on decreasing headcount, leading to 5. 4 percent forecasted mean total employment growth.
Keeping up With Consumers
In addition to maximizing their businesses’ financial performance, food and beverage leaders are also looking to
maximize their engagement with consumers by responding to
their evolving tastes. Companies are keenly watching evolving
consumer preferences, with value a driving force and wellness
and sustainability also top of mind. Similarly, companies are
increasingly aware of the shifting retail landscape.
More than one quarter of companies ( 28 percent) identified
value as a consumer preference that will significantly influence
new product offerings in the next twelve months. Accordingly, it
should come as no surprise that nearly three in ten ( 29 percent)
increased use of in-store promotions and coupons over the past
year in response to shifts in consumer spending and preferences
while more than a fifth ( 22 percent) have lowered pricing
Health and wellness is another key focus for food and bev-
erage companies in the coming year with more than a third of
companies ( 34 percent) identifying it as consumer preference
that will significantly influence new product offerings in the
Sustainability is similarly a major initiative for the industry.
In fact, almost a third of firms ( 30 percent) implemented sustainability initiatives over the past year in response to changing consumer preferences. These initiatives not only reduce
the impact on the environment and boost product image, but
can also lower production costs.
Companies are also increasingly aware of the changing retail landscape (e.g. increases in club stores, superstores and
specialty retailers) within which consumers interact with their
products, with almost one third ( 32 percent) citing it as a one
of their top two concerns that could impact their business.
Executives are also mindful of maintaining margins in the
face of increasing cost structures and are making operational
improvements to enable them to do so. While strong margin
growth of 5. 2 percent is forecast for the coming year, nearly
six out of ten executives are forecasting that their cost structure will increase in the coming year, which may put pressure
on their margins.
In response, more than half of companies are planning on
raising prices in the next 12 months (56 percent). Additionally,
a similar number (54 percent) are planning to improve operational efficiency to lower costs. Many companies are turning
to new technologies for these improvements with many planning on increasing automation (41 percent) and/or replacing
old equipment with more efficient models (38 percent).
Leaders in the c-suites of food and beverage companies
have margins on their minds and are thinking up numerous
ways to maintain and improve them. However, executives
aren’t only looking within to maximize margins; they’re also
considering how investing in their businesses can improve the
Investing for Growth
As executives look to the future they are investing in their
companies to enable them to confront challenges and seize
opportunities. Specifically, more than four in five executives
are either increasing their capital expenditures or maintaining
them at their present level.
When it comes to uses for additional financing, more than
half of food and beverage companies (53 percent) are eyeing
equipment such as high pressure pasteurization (HPP) devices,
and other capital expenditures, which can further increase
efficiency and enhance food safety.
The survey results show that the strong performance and
growth of the sector is empowering executives to continue improving and expanding their firms so as to best position them
for future growth.
The 3 Topics Food and Beverage
Executives Are Thinking About
Chris Nay, Senior Managing Director, Food and Beverage, GE Capital