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Food and beverage, cosmetic and retail industries

How to cope with raw material prices volatility?

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  • April 15, 2016

raw material price volatility

The cost of raw materials remains the top overall concern for food industries and manufacturers. Regarding extreme price volatility of raw materials it becomes a real challenge for food companies to remain competitive and assure sustainable margins. Crops, dairy products, oils, chemicals have high influence on companies’ bottom line results.

 

 

R&D is key department to maintain growth and long term competitive advantage

The raw materials market remains unstable both in the United States and abroad. Food companies are extremely anxious about pricing fluctuations. New means to manage risks related to raw materials market must be set up to avoid losing market share or even bankruptcy. Efficiently management of the product portfolio is essential and R&D has the main role to cope with it.

Adapt existing products

A finished product is not set in stone. To gain market share or remain competitive companies have to adapt to the unstable price of raw materials. If a given raw material price increases, the percentage in finished goods has to be updated and reduced, in favor of a cheaper ingredient. Even, replacing the ingredient has to be considered. For instance switching some meat proteins in products to less expensive vegetable proteins could be an option.

Stop non-profitable products and innovate with new products

The whole product portfolio has to be reviewed and optimized. The 80/20 products have to be identified and non profitable products could be cut from portfolio. Considering current prices, efficient management of margins in new product development is crucial.

Lascom CPG offers a powerful formulation tool to help R&D teams in their daily tasks. It is simpler to change percentage, replace ingredients and create new formula knowing immediately the impact on costs and other criteria. Volatile raw material prices could then be managed and finished products adapted depending on raw material market fluctuations. Please click here to find out more about Lascom CPG Solution

 

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