The global market for industrially produced and packaged food will show stable long-term growth. With a market share of 22 %, German manufacturers are leading in this segment. However, a new study published by management consultancy Munich Strategy shows: the rules of the industry will change fundamentally. Matthias Riemann, author of the study, ­explains how manufacturers of food and packaging machines should realign their strategy.

The study “Growth through differentiation. Digitization and verticalization as strategic fields of action for the food and packaging machine industry” examines the success factors for future growth of European manufacturers and identifies two fields of action: digitization, which companies can use to generate value added – e.g. with new technologies and business models – and verticali-zation, which allows companies to integrate individual process steps along the value chain.

The study is based on analyses of Munich Strategy’s mid-tier database comprising more than 3,500 medium-sized companies and on findings drawn from consulting projects in the food and packaging machinery sector. The findings were validated with 42 interviews conducted with market players – manufacturers and users – and industry experts.

According to the study, the global market for food machinery will grow by 3.9 %, the market for packaging machinery will grow by 6.7 % until 2023. To participate in this market growth, manufacturers need to achieve differentiation from their competitors. As this is becoming increasingly difficult via the manufacturers’ own products, it is crucial for them to occupy new fields. The majority of the interviewed machine users indicates that, in general, European manufacturers of a certain food and packaging machine type differ only slightly from each other. The study identifies the fields “digitization” and “verticalization” where manufacturers can offer additional services to their customers, thus solving problems and creating additional benefits.

The study shows: machine manufacturers can generate value through digitization, mainly with new business models. “Platforms help to connect suppliers with machine users, improving the exchange of information and quality management, while data driven models can be used to monetarize machine data directly and indirectly,” explains Matthias Riemann, author of the study and head of Munich Strategy’s packaging department.

According to the survey, two thirds of the users are interested in these models and willing to pay for it. Furthermore, many customers require additional features such as performance analyses or a presentation of the results that works for minimum trained users. Digital tools such as remote maintenance, trouble shooting and predictive maintenance are considered positive and necessary.

“Machine manufacturers need to identify digital pioneers among their customers in order to successfully implement data driven models,” says Matthias Riemann. “These are willing to share their data if a win-win situation is created and monetary incentives are provided”. According to Munich Strategy, service models such as pay-per-use will also become more relevant in the future, especially in non-European markets.

More than 60 % of the interviewed machine users from all segments see the advantages of a bundled offer of processing and packaging machines, as the study proves. “One face to the customer” and the reduction of internal administration work are quoted as most important advantages of verticalization. Verticalization creates more value for customers and is easier to be implemented in segments with a high degree of standardization such as confectionery products.

Crucial factors for a successful verticalization are know-how in integration and application and technical requirements that need to be met. Verticalization can be achieved through mergers and aquisitions or strategic partnerships with other market players. It is essential to find the ideal combination of machinery to create a coherent product and process portfolio – especially when verticalization is used to integrate both food processing and packaging.

“Machine manufacturers are in a very strong position: their customers require additional services and are willing to pay for them”, Matthias Riemann sums up. “Companies who turn into ‘machine manufacturers plus’ and also anchor their positioning in marketing and sales will dominate the market in the future.”

The complete industry study can be requested at: presse@­munich-strategy.com