Global Processing

Safety and quality concerns redefine food & beverage practices

December 12, 2005

The worldwide market for plant-level expenditures in the food & beverage industry, which totaled more than $280 billion in 2003, will exceed $340 billion by the end of 2008, expanding at a Compounded Annual Growth Rate (CAGR) approaching 4 percent, according to a study by ARC Advisory Group.

“Food quality and safety concerns are among the most important issue facing food & beverage companies today,” according to Senior Analysts David Clayton and Ravi Murthy, authors of ARC’s “Food & Beverage Industry Plant-Level Expenditures Worldwide Outlook.”

“Consumer and government concerns over food safety have increased dramatically. Furthermore, power retailers and government regulators are demanding improved supply chain visibility to increase safety and efficiency. New food safety regulations and the continually higher requirements of power retailers, like Wal-Mart and Carrefour, are major concerns for food & beverage companies,” the authors contined.

The US Public Health Security and Bioterrorism Preparedness and Response Act of 2002, often referred to as the US Bioterrorism Act, took effect December 12, 2003. Title III of this Act has a significant impact on over 500,000 domestic and foreign food facilities who manufacture, process, pack, or hold food & beverage products regulated by the FDA. The US Bioterrorism Act requires tracking and tracing of food products and food ingredients from the farm to the retailer. Title 18 of EC regulation 178 on food safety, which was enforceable beginning in January 2005, has similar tracking and tracing requirements.

Food safety and brand risk avoidance are top priorities

Food safety issues and food security are among the top priorities for food & beverage companies. Loss of consumer confidence in your company or brand can mean loss of an entire product line or even destruction of the company itself. Companies have historically put extensive resources toward establishing and maintaining brand value, but far too little toward minimizing brand risk. With a growing number of examples of corporate fraud, executive malfeasance, and the threat of bioterrorism, consumer confidence is fragile.

Recognizing that it costs five times as much to recall a product as it does to distribute it, food & beverage companies are keenly interested in brand risk avoidance. Product recall costs can be enormous, particularly if a company exports products or is seeking new markets. Other costs, such as cleaning up the manufacturing unit or destroying certain batches and business interruptions, often lead to major profit losses.

As the food & beverage industry becomes truly global, incidence of epidemic diseases in the livestock and beef industry, such as outbreaks of mad cow and bird flu, become even more costly. Food & beverage companies are taking proactive steps to stay on top of the crisis these epidemics can bring to the industry. Hazard Analysis and Critical Control Points (HACCP) programs and systems to fight, control, and detect pathogens and irradiation system installations at the plant level are at an all time high. Food & beverage companies are realizing that failure to become proactive against such epidemics could lead to bankruptcy.