There is a developing trend that has been gaining steam in recent years that has the potential to seriously impact and “disrupt” food and beverage manufacturing. That trend has been referred to by a number of terms, such as “buying local” and “eating local”. It means buying food that is sourced and/or grown within a geographical location that could be considered “local”. Is “eating local” the next-generation of the “organic” trend?
What Does “Locally Grown” Really Mean?
“Local” labelling is not officially defined, regulated or monitored by any official regulating body so the meaning on a label can vary. Though, when a food or beverage product is labeled as “locally grown”, the “local” part usually refers to an area of about 150 miles. It may be a wider area if a state or regional tagline is added. For example, a food label in a store in New York might read “New York State Grown and Certified”. While the product was grown outside of Buffalo, it was sold downstate in Yorktown Heights, which is more than 150 miles away.
Until recently, locally grown food usually meant things like fruits, vegetables, dairy products and locally raised meats. Craft brewing has also been pushing the “locally grown” tagline. Today, however, the trend is moving to packaged foods as well. Smaller manufacturers are popping up all over the United States, as well as in other countries, to process and produce locally grown food products. Some examples include sugar from Michigan grown sugar beets, cereals from midwest grain producing states, and potato products from Idaho grown potatoes.
What is the General Perception of Locally Grown Products?
The “locally grown” movement has been fueled by the perception that locally grown, produced and sourced foods contain many benefits. Many consumers assume “locally grown” products are fresher and have a longer shelf life. This comes from the idea that local products do not need to travel far to reach the stores, allowing the consumer access to better tasting products that are potentially safer and of a higher quality. Some feel like they are contributing to their civic responsibility by promoting local businesses and farms. In many cases, this is true, but not always. It’s important to read up on individual food and beverage products and educate yourself on where exactly they’re being sourced.
Some of the benefits often associated with buying locally sourced products include:
- Fresher products
- Supports local businesses and farms
- Creates regional jobs
- Increases the tax base to potentially lower individual taxes
- Strengthens the community
- Safer to consumer due to fewer touch points and contamination risks
- Improves overall food safety
- Healthier for consumers
- Better for the environment due to reduced transportation costs and distances
The more steps a food product must take, from producer to consumer, greatly increases the risk of food contamination and food recalls. This also jeopardizes the integrity of the product.
Is Locally Grown Food Good for the Environment?
Sustainability is another increasing concern, and procuring food products from local farms, growers, merchants and manufacturers encourages sustainability programs and environmental protection. Locally sourced food products are helping to create a large number of economic opportunities that did not exist a few years ago, such as local food production facilities and the promotion of the local farm.
Disrupting the Larger Food and Beverage Manufacturer
While this trend is creating opportunities locally and regionally across the United States and other countries, there are some side effects stemming from the “locally grown” movement. Larger brand manufacturers and multinational food producers are seeing a decline in the sale of their products. As consumers turn more to products sourced locally, they forego buying products that are mass-produced or grown by the traditional large food manufacturer. This is causing a huge disruption in food manufacturing as well as the food supply chain. As the trend to ‘buy locally’ continues to rise, the impact on the larger manufacturer will continue to grow and cause disruption. And as sales and profits gradually decline, manufacturers will have to come up with new strategies to get back some of those lost dollars.
The Big Players will Respond
As the “locally grown” trend continues and more consumer dollars are spent on local products, the large food producers will respond. Many of these larger players are already starting to form strategies and will continue to do so. To compete, they will need to employ strategies that exist today as well as new methods to get into the “buying local” game. Here are a few strategies to consider:
Regionally SKU’d Products
For years, major food manufacturers have capitalized on certain regional events and issues to sell products. Cereal manufacturers, for example, feature sports stars of teams that win championships, putting their faces on packaging and selling their products regionally. The Washington D.C. area is already being inundated with Washington Nationals baseball inspired products featuring their newly crowned World Series champions.
Many of these products are produced by multinational companies trying to seize the opportunity over locally sourced companies. This can extend to the actual ingredients of food products. A large manufacturer can print boxes of products of certain foods and sell them regionally. Would a customer buying a cranberry product in Milford, Connecticut be more apt to buy a product that says “New England Grown” cranberry versus another brand that does not promote the region?
Produce Products Where the Ingredients are Grown
Many manufacturers are looking to build facilities in the areas the ingredients are grown. This immediately makes them a local manufacturer. While upfront costs are huge, the promotion of locally grown products—and the reduction in supply chain costs on the raw material and finished goods ends of the process—can outweigh the initial construction costs.
Contract Manufacturing and Co-Packing
Larger producers and manufacturers can compete without the large expense of building new facilities with the expansion of the use of contract manufacturers or co-packers. Procuring regionally grown raw materials and ingredients, then using local contract manufacturers to produce those products, puts them into the local game with minimal upfront costs.
Mergers and Acquisitions
Another strategy is one that has been in use for years by larger companies. That is the tactic of “if we can’t beat them, buy them!” through mergers and acquisitions. Larger companies are constantly investigating local farms for purchase, or at least partnering with local growers and regional manufacturers to show their interest in this trend to get a piece of the local pie.
Food & Beverage Manufacturers Need to Be Rapid, Agile and Effective
The trend of “buying local” looks to be more than a passing fad. It is a concept and source of food products that is here to stay. As this concept continues to develop and grow, one thing is certain. Whether you are a local regional player or a large manufacturer trying to compete in this space, you will need the business processes and systems necessary to adapt quickly to change.
Demand for these products is on the rise as well as the sources of these products. As more players join the field, they will need business processes and systems to adapt to the marketplace. When dealing with a regionally sourced product, there will always be change and flux with new and developing requirements. The players that will succeed in the “buying local” market will be those who are agile, effective and quick to respond to market pressures by combining advanced technologies with proven industry best practices.