CP/CMs can stand out to food producer customers and consumers with clear communication about clean ingredients and sustainability benefits.
PMMI Business Intelligence: 2024 Contract Packaging and Manufacturing - Drivers of Machinery Investment
Food industry contract packagers and manufacturers (CP/CMs) can cover a wide range of industry segments, and with that comes a wide range of trends and factors affecting their operations.
That’s according to PMMI Business Intelligence’s 2024 report, “Contract Packaging and Manufacturing – Drivers of Machinery Investments.” Business Intelligence researchers explain there are three primary segments that make up the food CP/CM industry, each catering to different organizations and different niches of the larger food market. The three categories are:
Within these three categories, trends are emerging in operational connectivity, financial pressures from food producers, and pushes toward customization and sustainability.
Connectivity becoming essential
The food industry has generally been slower than other manufacturing segments to adopt technology-focused strategies like extensive operational integration and high levels of automation. This is rapidly changing, especially for larger producers, and CP/CM organizations will need to evaluate their digital infrastructure to retain a competitive advantage.
For instance, while only 16% of food producers have adopted cloud-based enterprise resource planning (ERP) systems, this number represents a two-fold increase from just a year ago, according to the SupplySide Food & Beverage Journal article, “PartnerSlate Co-Founder Details Roadmap to Successfully Navigating Co-Man Landscape.”
CP/CMs looking to keep up with their large food producer clients will need to carefully assess whether adopting a more highly connected, cloud-based information sharing system will be a market advantage. OEMs and suppliers have a large role to play in helping their food CP/CM clients evaluate and implement more extensive digital integration.
Financial pressure
While the CP/CM food industry has been experiencing steady growth and is projected to continue growing for the next five years, inflation combined with rising input costs has the potential to hinder this market.
As one major industry player is cited in the SupplySide Food & Beverage Journal article, CP/CM services in the food industry can cost up to 10%-15% more than in-house production.
When costs rise and negative pressure pinches the market – such as persistent inflation and stubbornly high input costs – larger food producers are more motivated to bring production back in-house and trim their portfolio of contractors.
CP/CMs that offer unique capabilities, such as novel formats or deep customization options, can still stand out to large producers looking for specialty runs.
Customization and personalization
Customization and personalization are two major trends in the general food industry being embraced by CP/CM organizations.
For CP/CMs, customization extends to both their large food producer customers (offering customized product blends, packaging formats, labeling options, etc.) and to consumers in general (personalized packaging, custom labeling, specialty runs, etc.).
A CP/CM organization that can offer an extensive number of customization options to their customers, as well as cater to personalization options for consumers, will be well positioned to stand out in the industry.
Clean, clear, and sustainable
Sustainability is a dominant trend in the food industry, and a strategy that is often anchored by clean/sustainable ingredients and clear, honest labeling.
To differentiate themselves from the competition, CP/CMs will need to pursue a comprehensive sustainability strategy, including sustainably sourced materials and ingredients, environmentally friendly production practices, and green packaging formats.
While sustainability initiatives are vital to food CP/CMs, it is equally important for CP/CMs to communicate these environmental benefits to both their food producer customers and to the general customer base.
This is where “clean and clear” comes in: food CP/CMs need to be upfront and honest about their sustainable credentials to their food producer customers. In fact, these credentials can often be key selling points for their services.
On the consumer end, food CP/CMs must ensure their labeling conveys their sustainability story in comprehensive, easily understood terms that will resonate with consumers.
SOURCE: PMMI Business Intelligence: 2024 Contract Packaging and Manufacturing – Drivers of Machinery Investments
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