To stay competitive, food processing suppliers have to stay on top of market trends, technological advances, and regulation changes. Keeping up with all these developments can be daunting at any time, but is especially imperative as processors prepare for FSMA.
As part of our continuing efforts to provide insight on these matters directly from the experts, we recently talked with Jim LeClair. LeClair is Vice President and Division Manager at Dixon Sanitary, a division of Dixon Valve & Coupling. With 27 years of experience in the food and beverage sector, he has steered his way through many changes in the industry.
We asked him about current trends and challenges, and what advice he has for suppliers in today's market environment. He touched on several important developments:
- FSMA compliance
Read on to learn more about his insights into these challenges and recommendations for how to deal with them.
Consolidation: Changing relationships between food processors and their suppliers
With 2014 setting a new record for mergers and acquisitions in the food industry—and 2015 not far behind—it's no surprise that LeClair cites consolidation as a major concern for suppliers. From last year's Kraft-Heinz merger, to Danone's recent acquisition of WhiteWave, the trend toward “megadeals” and other consolidations is clear.
LeClair says these developments present challenges for both processors and suppliers. While processors must address issues of market adjustments and personnel, suppliers have to figure out how to serve the post-consolidation companies that emerge.
“All your contacts change,” LeClair notes. “Your niche within the customer company will change.” For instance, a once-primary supplier might find itself no longer the main supply firm.
How can suppliers meet this challenge? LeClair advises keeping in close touch with contacts at both pre-consolidation companies. “The biggest thing is making sure you don't lose those contact points,” he says. “A lot of that is reorganizing and making sure you have that CRM [customer relationship management] that tells you what's happening with your contacts and how things are changing.”
LeClair also suggests talking to engineers at the beginning of the design-build process, especially if that process is part of a consolidation. “The more you're set up in the specification part of the process,” he says, “the better off you are.”
Brand awareness is particularly valuable here. “The whole idea is to make sure your brand is the one within specification,” LeClair says. This means “that your brand is known to anybody who's taking over in the plant throughout the consolidation or changeover.”
He points out that changes within the supplier sector can factor into brand awareness, as well. As the food and beverage industry ages, he's noticed that some processors are most familiar with brands that no longer exist. “Knowing what that older brand is, when someone calls in and says they need a certain branded product, is very important,” he says. Understanding the former product and its potential replacements can ensure the best service for customers.
Overall, LeClair stresses that end-user contact remains key during any consolidation process. “Maintain that end-user contact to make sure that as contacts change, you're still relevant to the end user's plan.”
Innovation: Finding the next big thing
Beyond mergers and acquisitions, a second challenge LeClair sees for the food industry is innovation. As recent trends like Greek yogurt wane and segments like protein/energy drinks become ever more saturated, the food industry is ripe for a fresh idea. “What's the next driving food product that we haven't seen yet?” he asks.
He imagines the answer may come in beverages, prepared foods, or produce.
In the beverage market, for example, options like carbonated soft drinks are contracting compared to other products, like waters. “There has to be something coming out in beverages or dairy to drive some of that market,” LeClair says. Indeed, companies like Coca-Cola are putting extensive efforts into finding the next big thing in drinks.
LeClair also sees an opportunity for innovation in prepared foods. Frozen meals were a big innovation years ago. But with frozen entrees struggling, the time may be right for a new breakthrough. “I think the next pre-manufactured meals need to be pushed forward,” he says. While consumers like the idea of fresh foods, LeClair points out that people often don't cook from scratch and instead demand at least semi-prepared options. “It's another one of those areas that need to be addressed.”
Consumer preference for fresh foods also plays into the produce market. As LeClair puts it, “we keep on pushing to eat fresh and eat local, but a lot of times that's really tough for people.” Canned vegetables lack the perception of freshness, and frozen produce must be kept in a freezer. While there have been recent innovations in aseptic packaging, LeClair maintains that shelf-stable packages may not fully address the fresh-and-local issue. Thus, he expects innovation in produce to continue evolving in the near future.
Automation: Enhancing safety and efficiency
It's often said that the food industry lags behind when it comes to adopting new technologies for food safety and quality assurance. But with FSMA looming and skilled labor becoming ever more scarce, processors are increasingly turning to automation.
According to LeClair, automation has several significant benefits that ultimately add up to bigger profits. He notes that companies may hesitate at the initial capital outlays required, but in the end automation boosts the bottom line.
This is largely due to gains in efficiency. LeClair points to advantages like increased flexibility for contingent processing, as well as reduced waste in water, product, and time. “Automation is driving waste reduction,” he says. “It's driving better water usage. It's making those profit lines get better without having to worry about how the market is doing with pricing, because margins are always going to be tight.”
LeClair particularly mentions how automation is helping companies implement better CIP systems to minimize water waste. It's a key component in aiding some beverage companies with their quest to become zero-output facilities.
FSMA: Managing compliance
Closely related to automation is FSMA compliance. According to a recent survey, 61% of food and beverage companies say they're ready for FSMA. But at the same time, only 7% have fully-automated systems for managing compliance.
LeClair says many companies are questioning how they will comply with new regulations when their facilities may have been designed decades ago. He suggests that processors must modernize to ensure compliance. “Modernization is going to be a very large push to make sure that processors are meeting requirements and operating as efficiently as they can be, at the lowest capital cost.”
If processors are looking for a model, LeClair offers dairies as a potential example to follow. He notes that the dairy industry has a remarkable record with food safety and has long been operating under “highly regulative requirements.” As other food sectors start to face more regulation, he says, “they're looking at what the dairy industry has been doing for generations” in terms of safety and processing.
Imports: Meeting current standards
Perhaps a less-discussed aspect of FSMA involves imports. LeClair says both the food industry and consumers will face difficulties in making sure that imported foods meet the same requirements as those from U.S. companies. “What do you trust, and what don't you trust?” he asks.
Under FSMA, the obligation for import safety falls on importers. The FDA explains, “for the first time, importers have an explicit responsibility to verify that their foreign suppliers have adequate preventive controls in place to ensure that the food they produce is safe.” Taking on that responsibility will certainly be a considerable task.
Another import-related challenge LeClair cites is the potential expansion of free trade. While political support for free-trade pacts is fading during this election cycle, agreements like the Trans-Pacific Partnership may still be on the horizon. LeClair says such pacts could add pressure to the market and make it especially difficult for smaller U.S. companies to compete.
LeClair suggests, too, that country-of-origin labeling (COOL) is something to keep an eye on. Though the COOL law for beef and pork was repealed in late 2015, the issue is far from dead.
How Dixon helps processors solve these challenges
Dixon is making significant efforts to help customers meet their new requirements, LeClair said the company focuses on providing alternatives, while always maintaining an emphasis on value and quality. For example, Dixon partners with a German firm to offer a specific mix-proof valve to help dairies improve processing in a cost-effective way.
Dixon also places a high priority on ensuring that products meet CIP standards and other FSMA requirements. LeClair says being able to demonstrate those products' value to processors is crucial. “We're making sure we have the ability to show customers why and how they work in comparison to some of the older technologies that are out there,” he explains. To best serve his clients, LeClair focuses on educating distributors, as well as keeping in contact with end users.
LeClair hints that Dixon will soon introduce even more products that are designed specifically to meet FSMA requirements. While mum on the details for now, he invites everyone to check out Dixon's new offerings at the next PROCESS EXPO in September 2017.