Consumers expect new products and variations from drinks companies, which in turn puts pressure on suppliers to become more agile and responsive to change.
It can also make the process more expensive – so Crimson & Co is urging manufacturers and suppliers need to work together to ensure costs don’t spiral out of control.
The rising cost burden
Crispin Mair, director, Crimson & Co, told BeverageDaily.com demand for variety in the FMCG sector is not new: but the drinks industry has had a relatively stable portfolio of products. However, consumers are now demanding greater variety from beverages.
“What the drinks supply chain is being asked to deal with is more complicated, there’s no doubt about it,” he said.
“There’s product proliferation, and promotional volumes. Then the whole industry is globalizing, with products requiring different labeling or outer casing, so the complexity is coming in there as well.”
Mair sees pressures particularly in beverage packaging, but also notes an evolving market with different flavors and mixers.
'Hitting the block' with suppliers...
“Companies are pretty good at making their own internal supply chain reactive, with shorter lead times or smaller batches. But one thing that is fairly poor, compared to other FMCG companies, is that they hit the block with the suppliers.
“Big drinks companies have pushed the price down on suppliers, suppliers have tight margins. They have to be efficient, but they can no longer be responsive and respond to unexpected demand.
“Drinks companies want the responsiveness, but they haven’t paid for it.”
The answer, Mair says, is for greater collaboration between suppliers and drinks companies, to ensure diversification don’t prove to be ‘ridiculously expensive.’
Crimson & Co is hosting a Drinks Industry Forum in London this week (Thursday 22) to discuss supplier collaboration projects, and how suppliers can reduce costs.