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.
Unstable price of raw materials : 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 our PLM for Food and Beverage.
I like how you stated that a finished product is not set in stone. I feel like it’s very important for companies using raw materials to be vigilant to make sure they are prepared for the unstable price of raw materials. I’ll have to keep this article on hand for future use.
Thank you for this positive feedback!
Indeed, in the F&B and cosmetic industries, remarkable efforts are put in the design steps of the product and the “after-launch” is too often neglected. Yet it is a critical period of the product’s lifecycle and determines, for example, how the product or the range of products will be updated or renewed over the years. If you are interested, you can download our solution brief “From specification management to information continuity” here freely: https://www.lascom.com/wp-content/uploads/2015/07/Lascom-Specification-Management.pdf
Sacha Baïzet – Moderator