How ingredients suppliers manage global struggles: From disrupted supply chains to cost-of-living pressures
Supply chain disruptions were centre stage throughout the COVID-19 pandemic, when consumers will remember rows of empty shelves lining supermarket aisles. Although COVID-19 has since dropped down the agenda of global crises, supply chain disruptions persist.
At the same, another major challenge has lingered: the cost-of-living crisis. High inflation and rising interest rates saw families in 2023 tighten their purse strings and revaluate shopping behaviour.
Both have impacted the ingredients sector, forcing suppliers to overcome hurdles and reshuffle offerings to ensure demands from food and beverage manufacturer clients were met.
Geopolitical tensions and trade disruptions plague supply chainsâEarly last year (24 February) marked the one-year anniversary of the escalation of the Russo-Ukrainian War. Ukraine has traditionally been a major producer of sunflower, corn, soybeans, wheat and barley. Considered the âbreadbasketâ of Europe, more than 70% of Ukraineâs land was once dedicated to agricultural production.
Understandably, Russiaâs renewed invasion of Ukraine has disrupted agricultural production and trade, and continues to do so. Other global conflicts in 2023 include the outbreak of wars in Sudan and between Israel and Hamas, predominantly concentrated on the Gaza Strip.
Supply chain disruptions as a result of geopolitical conflicts have undoubtedly been felt by the ingredients sector. âThere have been ebbs and troughs with supply chain issues, particularly on ingredients that require things like sunflowerâŠâ explained Tony Gay, technical sales director, nutrition, at ingredients supplier Prinova Europe.
This is unsurprising, given that of all the crops that Ukraine cultivates, it is best known for sunflower seed production. According to Statista, in the 2021/2022 crop year, Ukraine had the highest production volume of sunflower seeds of any country in the world.
Although disruptions have proved âchallengingâ, being partnered with Nagase Group has brought benefits, explained Gay at the recent Food Ingredients Europe (FiE) event in Frankfurt, Germany. Japanese chemical trading firm Nagase acquired Prinova Group in 2019, which means the latter can now carry âa lot more â inventory to ensure it can cater to its customers demands, we were told.
âWeâre always carrying good inventory ourselves. Weâve actually captured more market share because of the inventory we holdâŠWe acknowledge those issues at the time and have managed to navigate them [by] holding more inventory.â
Since the dairy industry is dependent on grain for animal feed, the sector is immediately impacted by grain supply disruptions. GettyImages/Johnny GreigIn dairy, the Russo-Ukraine conflict has also caused disturbances. The dairy industry is âveryâ dependent on grain for animal feed, explained Jeppe Sand, head of food sales at Arla Foods Ingredients â a subsidiary of Denmark-headquartered Arla Foods.
âIf the price for feed goes up, then the milk prices need to go up as well. Otherwise there will be less milk, and if there is less milk then the price will be [even] higher. Thatâs the same for whey powder. So it has an effect on everything.â
As a global company, Arla Foods Ingredients is âvery dependentâ on global supply chains to be effective. âGlobal supply chains are crucial to the dairy industry. If there are challenges there, we will also be hit by that,â Sand told us at FiE.
So how are dairy manufacturers combatting potential shortages? Arla Foods Ingredients has observed its customers purchasing âa little bitâ extra. âWe are seeing that people donât want to be out of product. They want to stock up.â
When natural disasters and weather events threaten ingredient sourcingâConflicts are not the only cause of disrupted supply chains, however. On the back of what is considered Europeâs worst drought year in 500 years, 2023 saw droughts in South America and Africa, and devastating natural disasters in Morocco, Libya, Syria, and Turkey.
Ingredients suppliers are undoubtedly affected by climate crises and natural disasters, but global operations have a better chance at managing potential supply disruptions, according to ingredients major ADM.
âThatâs the advantage of being ADM. We are a global company, we are active on each continent with a lot of activities. So when we see that we need to compensate our crops in other continents, we do that,â said Mel Tunderman, vice president savory, EMEA, at ADM.
Business continuity plans can also help prevent against ingredient shortages. In flavour offerings, for example, ADM has facilities in China and North America, and can âmanoeuvre aroundâ to ensure customers are served.
The agricultural year followed devastating droughts in 2022, considered the worst in Europe for 500 years. GettyImages/DrbouzIngredients supplier Corbion is another ingredients supplier âaffected by everythingâ on the global stage. Being based on âevery continentâ, the company is affected on every continent, with both local and global situations, sales director Janine Gierman told FoodNavigator at FiE.
Increasingly, the Netherlands-headquartered company has observed its customers âbuying differentlyâ and specifically requesting products that extend shelf life, which not only reduces food waste but allows for businesses to hold more stock for longer periods if required.
Manufacturers feel the pressure from cost-conscious consumersâGlobal conflicts, notably the Russo-Ukraine war, have also had an impact on global economics. The subsequent rising cost of fuel and agricultural inputs has pushed up the price of agri-food production, with interest rates simultaneously adding fuel to the cost-of-living crisis fire.
For Corbion, this does not mean that consumers and retailers are purchasing less, but âdifferentâ. Looking to its own customer base, the ingredients supplier has observed food and beverage manufacturers under pressure cost-wise. But at the same time, environmental sustainability remains high on the agenda, and customers are demanding shelf-life of double or even triple the industry standard. Importantly, those ingredients âneed to be naturalâ, and âneed to be localâ, explained Corbionâs Gierman.
Premium product offerings such as high protein yoghurts are still in high demand, according to Arla Foods Ingredients. GettyImages/Group4StudioIncreased cost-of-living pressures have not prompted all customers to switch to more affordable options, according to Prinova Europe. In âcertain instancesâ, product ranges have âaltered slightlyâ, observed Prinovaâs Gay, who said some customers have turned âback to basicsâ formulations. But on the premium side of things, brands are launching products tailored towards anti-stress, anti-anxiety and cognitive health, all aimed at combatting the stress element of the cost-of-living crisis.
Other premium product launches include high-protein offerings, ranging from yoghurts to puddings, explained Arla Foods Ingredientsâ Sand. But since high-protein yoghurts are usually consumed on-the-go at breakfast time, they donât come with a high price tag and consequently are not considered a major investment for consumers. âIn that regard, we have not seen much lack of demand, which is positive,â he told this publication.
