Key Challenges Faced in the Food and Beverage Industry
The food and beverage industry in India has been a victim of change in the past decade owing to sky rocketing customer demands and industry innovation. A rapidly paced and exceedingly customer propelled sector, this multibillion dollar industry is no stranger to reform and evolution through the years. Steered by changing global trends, this industry faces a myriad challenges.
It has been observed that the general perspective of individuals in respect to the food and beverage industry has seen a massive hit. People are more self conscious than ever, preferring nutritional food to indulgent food. As the prevalent awareness on health and nutrition has increased, so have the customer’s demands to eat wholesome, healthy and quality rich meals.
Some of the cardinal and prominent challenges faces by the food and beverage insudtry are as follows:
GST Input Tax Credit:
According to the National Restaurant Association of India’s 2013 India Food Service Report, the current size of the Indian food service industry is ?2,47,680 crore and is projected to grow to ?4,08,040 crore by 2018 at the rate of 11%. This growth is further fueled by the growth of the great Indian middle class. In the previous regime, restaurant owners did not have an option to adjust the output service tax liability against the input VAT on goods consumed. Since the input credit from central taxes were not available for set-off against VAT liability and vice versa. This would lead to the cascading effect of taxes, increasing the costs, and thus hiking prices for the consumer. Restaurants have been classified as services, and thus the reverse charge mechanism from the earlier regime has been adopted in the GST regime as well. Under this reverse charge mechanism, restaurant owners will need to pay tax at full rate on all taxable supplies from unregistered persons, which is bound to impact the profitability at some point.
Healthy and Organic Products:
Individuals today are on the hunt for food that does not contain added preservatives or contain any sort of artificial ingredients. The decreased demand for processed food has resulted in the emergence of organic food markets. The increased number of food related disorders that have occurred from dining in restaurants has prompted customers to make fundamental changes in their health, diet and lifestyle. Even when the occasional health fanatic decides to stray from his new found mindset, he expects high quality of food and ingredients.
Slow product innovation cycles:
One of the most crucial aspects in the food and beverage industry is bringing new products to the market. What makes it crucial and challenging is the timely manner in which new products align with emerging consumer trends. By the time these innovative products are tossed through R&D, testing and market detail, a great amount of delay is incurred. By the time these products hit the market, trends might be abating or a competitor from a smaller, more agile company or brand could make it inopportune for that new product to stand out.
The Food Safety Modernization Act was passed by the FDA in January 2011 with an aspiration to decrease inconsistency and disparity in the supply chain, improve food quality, avoid food contamination, and enhance food tracing. Traceability is a vital obstacle in the food and beverage industry, not just for record management but also for generating revenue for every sector. Maintaining precise data records will drive food processing companies to employ advanced technology, like warehouse management systems and enterprise resource planning.
F&B companies are also facing organizational challenges that accompany mergers and acquisitions. F&B multinationals have multiple brands and business units to manage as well as massive amounts of data to consolidate. Because of the complexity of consolidation, and both compliance and market-based demands, F&B companies that aspire to remain competitive must look into technological solutions.
The food industry generates vast amounts of waste, right from the bottom of the supply chain to the top. Farmers, grocers, manufacturers, and wholesalers, each one of them generate product waste within the industry, despite technological advancements and the employment of recycling procedures. Manufacturers must overcome this obstacle in the food and beverage industry with advanced methodologies.
An industry with fierce cut throat competition, there exit various major and minor challenges in the food and beverage sector. However, a single change is bound to affect the entire market. Brands and Branches is a franchising company that operates in the food and beverage sector. They are a master franchisee and have various prominent brands under them. They are governed on a FOCO (franchise owned, company operated) model which assures risk free opportunities which essentially implies that the owner/investor of the brand need not worry about the adversities of running a restaurant as its efficient functioning lies on the shoulder of the brand or the company that already has expertise in the same.