RSM FOOD AND BEVERAGE INDUSTRY SURVEY

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1 RSM FOOD AND BEVERAGE INDUSTRY SURVEY Top priorities among growers, manufacturers, processors, distributors and retailers

2 ABOUT THE SURVEY Food and Beverage Industry Survey RSM US LLP is the leading U.S. provider of audit, tax and consulting services focused on the middle market, with nearly 8,000 professionals and associates in 80 cities nationwide. RSM is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent accounting, tax and consulting firms. For more information, join our Facebook fan page at RSM News, follow us on and connect with us on LinkedIn and YouTube.

3 ABOUT THE SURVEY Food and Beverage Industry Survey What are the opportunities and challenges in the food and beverage industry? The food and beverage (F&B) industry continues to change dramatically, and businesses need to respond quickly to constantly evolving challenges and trends without losing focus on top-line growth and margin management. Likewise, industry leaders must be mindful of the many risks that impact their business. From growth strategies and exploring new trends to data security and compliance challenges, what s top of mind for F&B executives? This survey examines their perceptions on these topics. Survey methodology The RSM Food and Beverage Industry Survey was conducted using an online questionnaire, promoted by RSM and coordinated by an independent research firm, which also compiled the final survey results. Survey results were based on responses from 179 executives, owners and decision-makers at F&B companies with annual revenues between $10 million and $1 billion. Respondents held executive roles at F&B companies, including growers, manufacturers, processors, distributors and retailers. Respondents were asked about growth outlook, market trends, business conditions and capabilities. This report provides a summary of the survey findings. Participation breakdown Retailer 51.1% Manufacturer/processor 34.8% Distributor 26.4% Grower 6.7% 0% 10% 20% 30% 40% 50% 60%

4 REVENUE AND PROFIT GROWTH OUTPACE EMPLOYMENT INCREASES Modest growth is expected for the food and beverage industry and according to survey results, smaller companies lag in growth. Revenues Decrease >10% Decrease 1-10% No change Employment level Increase 1-10% Increase >10% Operating profit (or loss) before interest and taxes

5 STRATEGIC OPPORTUNITIES AND FOCUS AREAS Increased competition and economic contraction erode profits. A majority of survey participants fear competition, economic conditions and their own sales and marketing effectiveness. Sales and marketing effectiveness Competitive environment Brand recognition and positioning Operations/production efficiency Ability to respond effectively to changing consumer trends Economic conditions or pressures Regulatory requirements Don t know/na Highly unlikely Somewhat unlikely Somewhat likely Highly likely Retailer/food service distributor/operator requirements Availability of skilled workers Availability of raw materials or ingredients Ability to respond effectively to changing consumer demographics (e.g., millennials; baby boomers) Access to funding Logistics/distribution issues Potential exposure to legal claims

6 NEW PRODUCTS AND LINE EXTENSIONS ARE MOST LIKELY TO DRIVE GROWTH New products typically have higher margins. Three-fourths of the survey s participants look to new products and line extensions to drive growth. New product introductions New product/line extensions (e.g., new flavors, packaging or reformulated product or brand) New marketing and sales campaign(s) New/improved business practices New customer segments for existing products New geographical markets for existing products New facilities and equipment Don t know/na Highly unlikely Somewhat unlikely Somewhat likely Highly likely Supply chain optimization Improved access to funding Acquisition of a brand or product New IT infrastructure and business systems Mergers and acquisitions Other (please specify)

7 F&B COMPANIES ARE CHASING A VARIETY OF TRENDS Manufacturers, processors, distributors and retailers are all leveraging four or more trends to stay competitive in the marketplace. Selling products like health and wellness foods and utilizing social media to promote theses products lead the strategic choices of survey participants. Healthy and wellness (e.g., gluten-free) Social media Convenience/simplicity (easy to prepare, ready to eat) Natural and organic (e.g., non-gmo) Don't know/na Not planning to address Evaluating the trend Planning to address/sell products Selling products Locally sourced food/beverages Private-label Ethnic food/beverages Sustainability/environmental considerations

8 EMPLOYMENT REGULATIONS POSE PROBLEMS According to survey participants, potential problems for companies in the next 12 months include minimum wage concerns and the impact of the Affordable Care Act. Minimum wage legislation Affordable Care Act Tax requirements Don't know/na Not a problem Minor problem Moderate problem Major problem Labeling/packaging/lot traceability regulations FDA requirements, including Food and Safety Modernization Act OSHA requirements Immigration reform

9 QUALITY, COST AND SPEED ARE MAJOR AREAS OF FOCUS Survey participants indicated there will be an emphasis placed on operational factors within their companies. Product quality Operations cost management/efficiency Distribution speed and accuracy Product innovation Don't know/na Not a focus Minor focus Moderate focus Major focus Vendor relations management Production scheduling Supply chain product monitoring and tracking Timing/availability of raw materials Ingredient/lot tracking and traceability Product recall capabilities

10 PRODUCT QUALITY IS A MAJOR RISK AREA Product quality Product contamination/recall Employee conduct Information security and privacy Don't know/na Not a risk Minor risk Moderate risk Major risk Fraud ABILITY TO RESPOND TO REPUTATION RISKS Many executives are less confident in their company s ability to address fraud and IT security risks, according to survey responses. Product quality Product contamination/recall Employee conduct Fraud Don't know/na Not very confident Somewhat not confident Somewhat confident Very confident Information security and privacy

11 WAGE AND LABOR ISSUES CHALLENGE EXECUTIVES Survey results revealed that at larger companies, increased labor costs and attracting technical talent are the biggest worries, while at smaller firms, minimum wage legislation, labor costs and retaining skilled labor for the shop floor lead the areas of concern. Increased labor costs Minimum wage legislation Attracting skilled labor for the shop floor Retaining skilled labor for the shop floor Competitiveness of your company s compensation and benefits package Corporate succession planning Attracting technical talent Don't know/na Not a problem Minor problem Moderate problem Major problem Workers compensation Union issues Retaining technical talent Worker safety/maintaining a safe working environment Corporate leadership/vision Verification of employee status to be legally employed in the United States (immigration) Worker training/retraining Employee conduct/codes of conduct OSHA compliance

12 MAJORITY OF F&B COMPANIES SHOULD INCREASE DATA AND SYSTEMS SECURITY According to survey participants, top data security tactics include employee security, updated protocols, employee training, upgraded software and hardware and engaging data security consultants. Confident that data and systems secure from unauthorized access 100% 80% 60% 7.9% 50.6% Not at all confident Not very confident Somewhat confident Actions to enhance IT and data security Enhanced employee security protocols (e.g., passwords) 41.6% Updated security protocols Employee training with respect to data security Purchased new or upgraded software Purchased new or upgraded hardware Engaged data security consultants 25.3% 30.3% 29.8% 37.6% 34.8% 40% 41.6% Very confident Vendor data security due diligence Added data security staff Updated privacy policies 21.9% 20.8% 20.8% 20% Testing of system strength 15.7% Outside review of systems 14.6% 0% Forensic analysis of previous breaches 7.9% Other actions 3.9% No actions 21.4%

13 THE POWER OF BEING UNDERSTOOD For more information, contact us at , visit us at join our Facebook fan page at RSM News, follow us on and connect with us on LinkedIn and YouTube This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute audit, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. RSM US LLP, its affiliates and related entities are not responsible for any loss resulting from or relating to reliance on this document by any person. RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. RSM and the RSM logo are registered trademarks of RSM International Association. The power of being understood is a registered trademark of RSM US LLP RSM US LLP. All Rights Reserved. ar_cp_1015_food risk survey