Long read

Where can I cut costs without impacting food integrity?

By Bethan Grylls

- Last updated on GMT

How can food and beverage manufacturers cut costs responsibly? Credit: Getty/Wasan Tita
How can food and beverage manufacturers cut costs responsibly? Credit: Getty/Wasan Tita

Related tags Food inflation Inflation Technology Innovation

Food Manufacture recently aired a webinar that explored how food manufacturers could reduce costs without negatively influencing food integrity. Here are the highlights from our expert guest speakers.

There is an increasing demand for food and drinks of high integrity, those that are nutritious, safe, authentic, ethical and sustainable. But how do you deliver on all fronts – especially during a time of inflation?

What is food integrity?

Looking at the definition of food integrity, Kathleen Kelliher, recently retired head of organic policy and environmentally friendly farming for Defra, agreed that the Department’s description was apt: “the state of being a whole, entire or undiminished or in perfect condition”​, but she also said integrity is about “the product being actually what it says it is”​.

In a high inflation environment, everyone’s finances are squeezed – for the industry that means its margins come under intense pressure. With that comes an increased risk of substitution, cutting costs and shortcut taking.

How inflationary pressures threatens food integrity

Independent food safety consultant, Alec Kyriakides, said in the context of the industry, cutting costs usually means looking raw materials and operating costs such as energy, people and equipment. While for the consumer it means being more cost conscious in what you buy and ensuring what you purchase goes further.

Cleaning​ is probably the most common thing that gets cut in this type of environment,” ​Kyriakides said. “Anything from reducing the amount of cleaning chemicals to reducing the cleaning times. I've seen factories and even stores stop buying cleaning products to save money. But cleaning is absolutely fundamental prerequisite to control foodborne pathogens.

“Another issue is staff reductions and whilst there are obvious direct impacts of staff reductions in the individuality to apply routine controls, it often has indirect effects of putting more pressure on those who are left. People become fearful of losing their job – they’ll come to work when they’re ill, and so issues emerge.

“When there are less people doing the same tasks, there's less time that they take [off work] – so more mistakes happen, whether that's in the factory or even in things like checking packaging or checking the labelling allergens.”

Kyriakides also raised concern with the impact of sourcing materials from cheaper sources.

“Clearly everyone comes under pressure to look at their raw material sources, but remember the entire food chain is under pressure in these types of environments and so if you get a reduced cost, it often comes with reduced controls and reduced assurances of that raw material.”

Does organic or premium food offer higher integrity?

Looking at it from a consumer safety perspective, Kelliher raised the need for labels that promise integrity. She offered the example of certifications such as Leaf and Red Tractor, as well organic control bodies (e.g., the Soil Association).

Her reasoning behind this viewpoint is a result of the strict and regular inspections such products undergo.

“All of these offer consumers confidence that goods have been produced in a way that means farms have been inspected every year. There’s high animal welfare and there’s an increasing emphasis on the environment,” ​she said.

Paul Hargreaves, CEO at Cotswold Fayre and Flourish, made similar points around the premium market, stating that they have been few incidents of fraud over the last several years in this category. But he also raised concern with the price of food.   

“At the moment we have a pretty untenable situation; we’ve got food that I think is too cheap, but at the same time people can’t afford it.

“At these low prices, animals aren’t getting treated well and the people working in the factories may not be getting paid enough.

“I’m not saying speciality food is the answer to everything but there are less incidences of food fraud at that end of the market.”

Hargreaves believes that the issue of wages “needs addressing at a much higher level” ​than food and drink business owners can offer – i.e. government. But he added that the sector does “need to talk about it and apply pressure”​.

Cutting costs in food production responsibly  

When it comes to cutting costs in a responsible and safe way, Kelliher said companies should focus on “their unique selling point” ​(USP).

“By focusing on your USP, you can start to cut costs – it might be your deliveries, it might be transport, it might be packaging.”

She elaborated on the example of reduced packaging​, as she explained that many consumers are seeking out more sustainable products, this gives way to an opportunity. A chance for companies to create a captivating narrative around their USP (e.g. less plastic​) may encourage growth and sales, for example.

Kelliher also suggested that producers could use this moment not just to look at their USP and supply chain but also their customer base.

“Older consumers have ​[generally] been hit less hard by high inflation, so there’s the opportunity to sell your products to them. Don’t ignore the younger ones, but don’t focus all your energy on them either.”

In other words, opportunities in what appears to be a bleak time can be found if you look for them carefully.

For Cotswold Fayre and Flourish as a wholesaler, a massive cost is distribution.

“We’re making sure we’re absolutely maximising the size of orders, full pallets, full truckloads and so on,”​ said Hargreaves.

“The products we deal with a lot are from small artisan producers, so we try and pay them more quickly than they expect, which helps with their cash flow and for them to do the right things as well.”

Hargreaves also noted the importance of being a good employer.  

“Just think how much it costs to train people up. Retaining staff does save money – it might cost you a little more in the short term but in the long term it makes a difference.”

“Inflation in salaries is challenging in terms of being able to recruit and retain the right people,”​ added Mehdi Adjiri, technical controller at Graze. “Integrity is harder to manage than food safety – we are still learning about this concept, so getting the right people in is crucial."

Planning ahead

The solution to challenging events such as inflation, Kyriakides believes lies in prioritisation and optimisation.

“We know that margins are going to be tight in periods of high inflation; and if we have already prioritised, then we have a fighting chance of optimising the right things,” ​he said.

He emphasised the importance of identifying recurring events, like inflation and food safety risks (for example spring and summer drive increased barbecue use and therefore associated disease due to undercooking or cross contamination) and setting out a plan to mitigate these.

“Whilst we know these cycles will happen, we don’t have a good understanding of when they will occur. However, identifying cyclical events is helpful as it means we can develop strategies to mitigate risk and hold them in reserve until they need to be deployed.

“Weather is another very predictable cyclical event that drives increased food safety risk - heavy rain or floods can spread enteric pathogens onto field crops and increase the burden that overwhelm subsequent processes, such as washing. On the opposite side, high temperatures can drive insects, amphibians and reptiles onto and into field crops for shelter with associated contamination risks; and of course such temperatures can also put excessive strain on the chill chain whether that be in manufacturer, distribution, retail or in the home.”

Kyriakides recognises that prioritisation is not easy and for that offers the following suggestion: break your technical activities into their component parts and decide where each of them sits in your organisation's priorities. Do this in a conventional way by prioritising high, medium and low within each of your technical activities, then consider these levels as 'industry leader', 'average position 'and 'legal minimum' respectively. This then provides you with a structured and measured way to optimise and prioritise while still remaining within the parameters required. In other words, when costs need to be cut, an organisation has the opportunity to move from 'average' to 'legal minimum'. 

Adjiri agreed with Kyriakides planning approach. “The key is to prioritise and have a clear plan which is aligned with your business objectives. Understand the key areas to utilise your time and resource."

He added: “Having a plan means you can evaluate the cost up front.”

Adjiri also stressed the weight strong relationships hold, both within your company and with external partners.

“Procurement is your best friend – be close to those teams as it will help you mitigate risk and maintain integrity," ​he suggested. “Your knowledge of your immediate supply base as well as secondary supply base is very important in helping you make sure risks are managed.

“Encourage your supply chain to do the same. It becomes short sighted if you don’t have an overall understanding of your value chain.

“It also helps to have good relationships and to build rapports with your suppliers; they are much more likely to be involved and invested in protecting your brand and supply chain.”

The Collective Dairy’s Andrew Dockerill, who heads up food safety and quality, echoed Adjiri’s thoughts around building strong rapports with procurement and supply colleagues, as well as suppliers. But he also emphasised the opportunity to take the lead and inspire – to believe in strong values and get behind them, so that partners will follow suit.

He emphasised the importance of values and integrity not getting “hidden behind” ​the pressure inflation brings, while also acknowledging that the challenge of cost can make it hard to keep that top of mind.

“But the solutions don’t always have to be high cost,”​ he pointed out.  

Well thought-out technology investments could be a good move to make to help mitigate against the challenges cyclical and unpredictable events bring.

Talking to this topic, Joris Kolff, senior regional sales director for food and beverage at Aptean, said that while “we ​[technology] cannot predict every event, we can future proof businesses so they become more agile and able to react quicker”.

In terms of implementing such systems, Kolff said it was important to start with the foundations and then add solutions to it, such as AI and blockchain.

Future challenges for food and drink

Commenting on the future, Kyriakides reflected on the way in which risks are divided - that is into structural and cyclical changes. The structural ones include things like demographics, for example growing and ageing populations, whilst the cyclical ones refer to repeated events, as previous mentioned.

It’s well known that we do not yet have the resource to feed the growing population, so it is imperative we develop currently less secure sources into more secure sources by turning to alternatives. However, if we do turn to alternative sources, we must be mindful of our impact - that we do not over rely and overconsume on a just a few alternative resources.  

Moreover, our culture of ‘want now, get now’ places a lot of stress onto official controls, and, as Kyriakides flagged, “how do you manage safety in an environment that’s fluid like that?”

Looking at the cyclical changes, the biggest worry perhaps are further pandemics. Kyriakides referenced Avian flu as a big concern, questioning where that will lead next.

For more insights, watch Food Manufacture’s free webinar, sponsored by Aptean, on demand here: How to maintain food integrity during a high inflation environment.

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