In our previous cost-of-living article, we learned about the ongoing effects of the crisis on customers, retailers, and brands. Most certainly, inflation together with customers’ reduced disposable incomes is causing changes to their shopping habits, and this is having significant impacts on businesses within and outside of the plant-based sphere.
Fewer treats, shopping around, smaller budgets, and the return of pandemic behaviours are just some of the ways that food inflation is affecting consumers.1 Remarkably, 80% of Brits have reported budgeting for groceries or monitoring their spending more carefully, while almost half said that they were now buying and eating less food.2 The case is similar Europe-wide.
We also learned that some of these changes might actually benefit the plant-based market, providing opportunities to gain new consumers and innovate the industry. Recent data shows that, as a result of higher prices, consumers are purchasing less meat, eggs, and dairy. Plant-based products have, thus far, not been affected by inflation as badly, so we might start to see a greater number of people swapping to more affordable plant-based alternatives.
On the other hand, many mainstream customers already find some plant-based foods ‘expensive’. In a yet-unpublished ProVeg International survey, 70% of European consumers agreed that plant-based food products generally cost more than animal products. Therefore we must try to keep down the costs of plant-based products, compared to meat and dairy.
So, how should producers and manufacturers react? And more importantly, what can be done to leverage any opportunities offered by the cost-of-living crisis? Let’s find out.
1. Communicate price rises efficiently
It’s likely that at some point you will have to put up your prices. This will inevitably be difficult news for your clients to hear, especially if they have to push costs onto the consumer, which might affect sales.
- If you handle the communication poorly and punch up your prices higher than absolutely necessary, you could risk losing clients – retailers and brands that are also trying to contend with the cost-of-living crisis.
- When increasing prices, it’s vital that you are honest with your customers and communicate the price hikes efficiently. Explain the reasons why prices are increasing and the measures you have taken to reduce the hikes. In these uncertain times, it’s important to maintain good relationships with clients to ensure smooth, profitable partnerships and safeguard business as the cost-of-living crisis continues.
2. Keep an eye on the future
As a business in a cost-of-living crisis, it’s vital that you watch for potential problems or solutions that might be around the corner; keep an eye on the economy, and follow consumer trends, competitor moves, and innovations that could improve your manufacturing methods and save money.
- Have one eye on the future to ensure that you are prepared for anything it throws at you and able to safeguard your business while leveraging any opportunities. Producers and manufacturers should consider various plans for worst-case scenarios and for the possible impacts of inflation, client losses, and decreased demand.
- Does it look like the cost of your ingredients will shoot up? Hold timely and efficient negotiations with your suppliers and work with them to buy ingredients in advance to beat future price hikes and keep manufacturing costs down.
- Gain knowledge of price elasticities. You should be able to calculate how much you will need to raise prices to meet revenue targets. Yet, these calculations must be tied to what the market can support today.
3. Where possible, keep things local
Are your suppliers expensive or raising their prices beyond your budgets? It might be time to look for more affordable suppliers that can provide you with the same quality ingredients.
- If possible, look to switch to local suppliers closer to your manufacturing facilities – this is one of the best ways to minimise costs, especially those related to transport and/or delivery.
- Look for local farms producing high-quality ingredients at a reasonable cost, and nearby wholesalers. By doing so, you’ll help to streamline your supply chain, remove a few middlemen, and save money (as well as emissions, improving your organisation’s carbon footprint!).
4. Review your entire business
It’s important to try to see the opportunity in any bad situation. When times are tough, we can use the experiences and learnings we’ve gained to make changes and improvements. With this in mind, the cost-of-living crisis can be viewed as a chance to restructure, innovate, and improve all areas of your business and its processes.
- Look at your company in its entirety – review supply chains, ingredient sourcing, formulations, technology, partnerships, production processes, packing, logistics, distribution, energy usage, etc. What needs work and what can be streamlined? And where can costs be reduced and efficiency improved? Are your suppliers too expensive? What innovations in technology could be used to improve manufacturing processes? What digital initiatives could your business benefit from? These are all examples of the types of questions that you should be asking yourself to improve efficiency and save money.
- Investigate ways you could conserve energy to limit costs – turn off appliances when they are not in use, and where you can, update machinery, lights, and other appliances to be more energy-efficient.
- Invest in digital initiatives that could be used for process management to solve supply-chain issues and inefficiencies around production and distribution.3 Technology to map and monitor the sourcing and movement of goods is now “intrinsic in the optimal running of food and drink businesses”, according to a recent article in Food Manufacture.4
- Explore ways to innovate – align your production facilities, methods, and ingredients with the future, and you will help to future-proof your company and its products. Are your competitors using more advanced equipment? Are there new, cheaper, and tastier plant proteins available? Could you utilise the latest developments in R&D? If an innovative ingredient or process is available, invest in it – it will put you in line with or above your competitors.
To mitigate the effects of the cost-of-living crisis and leverage opportunities, ProVeg recommends the following best-practice strategies for manufacturers:
- Communicate price rises efficiently – be honest, understanding, and efficient in your communications with clients to maintain professional and profitable business relationships and safeguard partnerships.
- Keep an eye on the future – watch for potential problems or solutions, keep an eye on the economy, and follow consumer trends, competitor moves, and innovations. Prepare for client losses and reduced demand.
- Where possible, keep things local – save money by bringing sourcing closer to home.
- Review your entire business – look over supply chains, ingredient sourcing, formulations, technology, partnerships, production processes, packing, logistics, distribution, energy usage, etc. to see what can be streamlined and improved, and make use of the latest technologies to advance your business.
For more expert advice on how to boost plant-based sales, get in touch with ProVeg at [email protected].
Make sure to head back over to the New Food Hub, to read our cost-of-living crisis article aimed at retailers and brands!
- How the cost of living crisis is changing food and drink habits, (2022). The Grocer. Available at: https://www.thegrocer.co.uk/promotional-features/how-the-cost-of-living-crisis-is-changing-food-and-drink-habits. Accessed 2022-12-14.
- How is the cost of living crisis affecting grocery shopping habits, (2022). The Grocer. Available at: https://www.thegrocer.co.uk/consumer-trends/how-is-the-cost-of-living-crisis-affecting-grocery-shopping-habits. Accessed: 2022-12-14.
- In belt tightening times priorisitising your digital business is critical, (2022). Retail Week. Available at: https://www.retail-week.com/tech/in-belt-tightening-times-prioritising-your-digital-business-is-critical/7042832.article?storyCode=7042832&storyCode=7042832&mkt_tok=NjQyLUZKSy03MDcAAAGIlcPTiZdKCsprDLASq3i2my6bzdE_Y7gsr3Zhg2a1x99GlVHUy-9IulG9_Z3qLK7YyNr4PAOVg0O90Mg-7c5_RDvTAhh1m3_lQcaDZVJRzK_8&authent=1. Accessed 2022-12-29.
- Securing the food and drink supply chain in a challenging market, (2022). Food Manufacture. Available at:https://www.foodmanufacture.co.uk/Expertise/Promotional-Features/Securing-the-food-and-drink-supply-chain-in-a-challenging-market. Accessed 2022-01-04.