Navigating through challenges like inflation, rising interest rates, and intensified global competition, the food and beverage production industry finds itself under significant strain. In this feature, David Bean, solutions group manager at Mitsubishi Electric Automation Systems Division, sheds light on the brighter side, offering insights into strategies that pave the way forward.
Inflation, higher interest rates and more aggressive competition from overseas have put food and beverage production under considerable strain.
These are temporary pressures driven by issues largely beyond the sector’s control, making it harder for businesses to focus on key issues, such as higher yields, waste reduction and allergen management. They have also coincided with price shocks in the global energy market, hitting high-energy users hardest.
Still, there is cause for optimism. The latest State of the Industry report from the Food and Drink Federation found that 81% of those polled were “prioritising innovation to maintain competitiveness in a challenging market,” while 41% said they had plans to increase capex in 2024. In the UK, the government has also announced £4.5 billion in funding for manufacturing, with some £960 million set aside for clean energy provision.
In an election year, it’s difficult to say if this investment will materialise, though the announcement is useful as it points to one of four key drivers in today’s energy market. Understanding these drivers – and how to manage them – will be key to maintaining better margins despite obvious headwinds.
Four key drivers
Capacity is arguably the most important driver. According to McKinsey, power consumption is set to double by 2050 as electrification continues. Whilst an issue that extends far beyond the next 12 months, the strain this will place on high-energy users is undeniable. Not least because the grid is already struggling.
Decarbonisation and resilience are also shaping how manufacturers use energy. The overall contribution from renewables to the UK grid is increasing, which is unquestionably positive news for the country’s net zero ambitions. However, the intermittency inherent to this process means mains power is no longer as dependable as it once was.
This naturally raises questions about the security of supply and is partly why distributed energy resources are growing in popularity. These technologies allow businesses to generate, trade and consume electricity in a way that’s simply not possible when relying on a traditional centralised grid, limiting exposure to the type of market shocks seen over 2021-2022.
And this leads to the final driver: cost. Food and beverage companies are understandably paying greater attention to the amount they pay for energy, even as inflationary pressures appear to be returning to something resembling ‘normal’. But this does not guarantee protection from further disruption. So, what can be done?
As with any complex problem, the best course of action is to identify and manage the factors that remain within control. Few businesses will be able to anticipate changes to the cost of energy because it’s the one commodity most sensitive to change. Still, companies can offset some of the uncertainty by making better use of what’s already being consumed.
Efficiency is hardly a new issue for the food and beverage sector. It makes sense for producers to scrutinise how, when and why electricity is used – particularly when it comes at a premium – and this realisation has led to considerable progress over the last 20 years. However, with more powerful tools now available, our efforts need to move from smaller interventions to a programme of continuous improvement.
Smart energy solutions can address some of the challenges posed by the four key drivers. Take decarbonisation. Research shows many producers are confident in their ability to deliver a sustainability programme, yet the managerial and operational oversight needed to make this transition a success is often lacking.
This is where digitalisation is becoming difficult to ignore. Digital tools make it easier to optimise and execute strategies based on trends from real-time manufacturing data. Without this insight, it’s almost impossible to know whether energy is being used effectively and if key assets, such as coolers, mixers, ovens and blenders, require closer attention.
Smart energy management also makes it easier for producers to integrate distributed energy resources as they become available, such as microgrids and battery energy storage systems. While we are still some way off a fully decentralised energy network, the direction of travel is clear and will certainly form part of food and beverage production.
This model provides better energy resilience and the opportunity to make use of green energy infrastructure. Given the government’s £960 million pledge, now appears an opportune time for manufacturers to explore these opportunities.
This isn’t a call for software but rather a change of approach. The sector’s energy needs will only grow as we head further into the decade, and most will need greater clarity around consumption to remain competitive – especially in the UK.
Smarter management will provide that clarity, but also a means to take full advantage of emerging developments in the energy market. In an uncertain climate, now is the time to take ownership of what can be controlled. The future of the food and beverage sector depends on it.
© FoodBev Media Ltd 2024