The food and beverage business industry can be extremely lucrative. Just like any other industry though, you’ll need to be committed and have funds to support your growth. Keep reading to learn more about how to grow and fund your food and beverage business plan.
What are the biggest challenges in the food and beverage business?
The food and beverage industry is one of the most difficult industries to start and maintain a successful business. There are many challenges that business owners face on a daily basis. Here is a breakdown of some of the biggest challenges that business owners in the food and beverage industry face today.
- Financial: The top five main financial challenges facing business owners in the food and beverage industry include commodity hedging, rising labor costs, maintaining inventory levels and fulfillment rates, capital expenditures like repair and maintenance, and collecting receivables. Food prices have been on the rise and it’s affecting many businesses in the food and beverage industry. Most often those prices get passed onto consumers, however, consistently increasing food prices makes it extremely difficult for a company to make longer-term forecasts and create operating budgets. Labor also is a concern of business owners in the food and beverage industry. Inflation and rising housing, food, and healthcare costs coupled with inflation, has created an environment where wages need to be increased in order to ensure the well-being of the labor force. These increased labor costs will directly affect the bottom line of many companies in the food and beverage industry. One last financial challenge facing business owners in the food and beverage industry is the cost of repairing and maintaining machinery and other essential capital equipment. It is not just food prices that are increasing. The price of skilled labor and the price of machine parts are also increasing. The parts and materials that keep machines operating are not only increasing in cost, but they are also increasingly harder to source. Financial challenges will always present themselves for any type of business, however, a company in the food and beverage industry may want to consider seeking a lender who is experienced with the industry and who can account for the many challenges that business owners are facing today.
- Inventory: One of the largest inventory concerns for businesses in the food and beverage industry is shelf-life. Other industries have the luxury of creating products that do not possess an expiration date. Yes, trends within those industries may change and some products may lose their appeal over time, however, food products literally can rot, mold, and become unusable. The way this can be addressed is ensure that your food supply chain is streamlined to prevent delay, and ultimately, waste. The United States threw away approximately 80-billion pounds of food in 2020. In a world with growing food scarcity concerns, disposing of 80-billion pounds of food each year in only one country is unethical at the very least.
- Health consciousness: Consumers are more aware than ever about the ingredients of food and beverages and how those different ingredients can pose potential health risks. People are avoiding added sugars, dairy, gluten, preservatives, chemical additives, and many other ingredients for various reasons. Added sugars have been linked to obesity and diabetes. Processed meats have been linked to different types of cancers including colon cancer. It is information like this that today’s consumers are concerned about most. The goal of businesses in the food and beverage industry then needs to be to provide high-quality and delicious products without the use of preservatives and additives. Additionally, the nutrition trends of organic foods and free-trade have greatly impacted the way that businesses source their ingredients to create their food and beverage products.
- Sustainability: As a business in the food and beverage industry, sustainability is a major challenge that needs to be addressed. This may include streamlining the supply chain to reduce waste, creating sustainable food and beverage packaging, and sourcing ingredients from farms that practice sustainable farming techniques.
- Ethical sourcing: Maintaining transparency and accountability about sourcing is something that today’s consumers are demanding. What kind of farms do you source your ingredients from? What are the conditions for the animals? What about the workers? Are they treated fairly? Transparency in the global food supply chain is difficult to always provide, however, it should be considered a challenge that can inspire consumers to purchase your products.
There are many challenges that businesses in the food and beverage industry face. Being aware of those challenges can help you to better prepare.
Types of food and beverage businesses
There are many types of businesses within the food and beverage industry. From fine dining establishments to food manufacturers, when we talk about the food and beverage industry, it is important to remember how massive the industry is and how many different types of businesses participate in it. Here is a breakdown of just a few of the many different types of food and beverage businesses involved in the industry.
- Bars and restaurants: Bars and restaurants make up a large portion of the food and beverage industry. You can find bars and restaurants located in almost every town or city no matter the size. Those bars and restaurants employ a large number of people. From the cooks to the servers, from management to the wholesalers who supply those bars and restaurants with their products, a great number of people work in this sector. The bar and restaurant sector consists of fine dining establishments. brasserie, fast food restaurants, traditional restaurants, bistros, diners, steak houses, bars and pubs, cafes, themed restaurants, bakeries, kebabs, pizza joints, ethnic restaurants, and catering businesses that attend to weddings and other events.
- Dairy goods companies: Dairy goods companies are responsible for supplying supermarkets and restaurants with dairy products such as milke, butter, and cheese. From collecting dairy at the farm to intake at the dairy plant, to processing the raw ingredients to creating the end product that you see in supermarkets or that is used by restaurants, a dairy good company may have an interest and stake in every step of the process.
- Fruit and vegetable wholesaler: Fruit and vegetable wholesalers are responsible for getting fresh produce into the hands of restaurants and consumers as quickly as possible to ensure freshness and to maximize shelf-lives. Of all the food that is wasted in the US, 40% of the waste can be attributed to produce. This is why fruit and vegetable wholesalers need an efficient supply chain to make sure waste can be minimized and profits maximized.
- Bottling plants: Bottling plants are facilities that use specialized bottling machinery to fill empty containers with products such as milk, juice, soda, beer, and other consumables. A bottling plant also prepares the product to be shipped and presented to customers.
The food and beverage industry is massive and it makes up a significant portion of the US economy. The above examples of businesses within the food and beverage industry is only a small sample of what the industry entails.
Tips to growing your food and beverage business
There are several ways you can grow your food and beverage business. By possessing an engaging business story, utilizing e-commerce, tapping into social media trends, emphasizing your values, improving your cash flow, understanding your finances, and increasing efficiency, you can begin to take the necessary steps to scale and grow your business. Growing your food and beverage business is like peeling back the layers of an onion – no pun intended. First you must have the vision and build the foundation. Next, you must build the layers that can support the growth of your brand and company.
Why is inventory control critical?
Inventory control is important for many reasons. Inventory control keeps counts accurate, helps you to make proper inventory management decisions, can eliminate waste, and ensures you have enough supply to meet demand.
How food and beverage businesses can benefit from inventory financing
Food and beverage businesses must have plenty of products or supplies to ensure a sale is never missed. It can be challenging to manage cash flow, especially when sales are growing. You may need to replenish inventory before you have funds for sold items, resulting in cash flow problems. In addition, inventory can tie up a lot of cash that may be needed to cover payroll, rent, marketing expenses, and so forth. The key to inventory financing is to find affordable inventory financing, which is easier said than done. That is until you discover Kickfurther. Kickfurther is up to 30% cheaper than other options. Kickfurther can provide your business with affordable, fast, and easy inventory financing.
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