The food industry is confronted with ever-increasing challenges from consumers and retail. A recent study by Munich Strategy examines how the food ingredients suppliers are equipped for these tasks.

In a recent analysis, the management consulting company Munich Strategy examined a rather little-noticed segment of the food industry. Under the motto ”How manufacturers grow profitably in a disruptive environment”, the consultants made a per­formance comparison among relevant food ingredients manufacturers and evaluated their business models in terms of turnover size, growth and earnings and financial strength. ”The food ­industry and retailers are faced with enormously high consumer expec­tations. They want everything at the same time: visual appeal, taste, health and naturalness, but also transpa­rency and sustainability. And they want their individual intolerances to be taken into account,” Barbara Siegert, expert for food, innovation and digital transformation at Munich Strategy and co-author of the study, explains the background.

In addition, there are constantly new requirements and regulations from legislators, which further increase the pressure. This is also evidenced by the new supply chain law, which is forcing the supplier industry in general and food ingredient manufacturers in particular to act. In this environment, the food ingredients industry defi­nitely has a key role to play, Ms Siegert emphasizes. Based on the performance data of the companies in its SME database and discussions with market participants and experts, Munich Strategy analysed a total of 56 companies. ”With a share of 26 percent of 'lighthouses' and 42 percent of 'low performers', the ingredients sector is better off than the confectionery ­industry,” Siegert reports, referring to the corresponding previous study on the confectionery sector (24 % lighthouses, 47 % low performers). In terms of turnover, the confectionery industry is average ahead of the ­ingredients industry, which, however, has a better profitability.

In terms of business models, Munich Strategy divides the companies into three classes: raw material specialist, branch specialist and solution spe­cialist. While suppliers, who primarily supply raw materials, have a basic sourcing and processing competence, branch specialists are characterized by their application com­petence and deep understanding of the requirements of an industry. The focus of the solution specialists, for their part, is on the end user and their needs. Due to their profound ­understanding of technology combined with a high level of core market ­competence, these companies often deliver customized solutions.

The Munich Strategy team is ­convinced that the rapidly changing consumer trends with new offers and start-ups, but also tendencies such as vertical integration among the big players and their extreme innovation and cost pressure, are also changing the ingredients sector. For Ms Siegert, it is primarily the solution specialists who are well positioned to meet ­future demands, even though the raw material specialists are currently by far the biggest players on the market in terms of turnover. Further consolidation of the market is expected here. For the solution-oriented speciality suppliers, it is important to provide companies with support in product development and to meet the increasing demand for plant-based ingredients as well as the call for healthy food with biotechnological processes.