Food firms looking to reduce costs should be diligent in their ingredient sourcing

Food firms looking to trim costs in the recession must be sure to complete due diligence in their ingredient sourcing and not compromise the long-term image of their brands by reduced quality, warns a food chain consultant.

Manufacturers are taking a long, hard look at their costs so as to minimise the impact of the economic downturn on their margins. Product optimisation programmes may include the launch of new ‘value’ lines that save costs for them and for the consumer, or reformulating existing products to use less expensive ingredients.

“As we have seen in previous recessions, it is the least cost manufacturer that stands best to ride out the recession – which means alternative suppliers with cheaper raw ingredients and additives are attractive,” Jamie Weall, consultancy services director at FoodChain Europe told FoodNavigator.com.

But he emphasised that “new suppliers must be fully evaluated and not just assessed on price”. Any unforeseen issues, such as allergens or GMOs detected later on, “could be extremely costly”.

Weall advises that a thorough risk assessment be conducted before any changes are made, to ensure they are appropriate and do not jeopardise safety and legal obligations.

“For all food manufacturers and suppliers, legal compliance remains front and centre.”

Compromising quality

There is already evidence that consumers are changing their shopping habits to save money, as the trend towards private label goods over brands is continuing – and may be escalating. Moreover, discounters are tempting shoppers away from major high street retailers with their cut price deals.

But Weall says manufacturers should be cautious about changing their brands to much in order to compete with private labels on price. Such measures are, he said, “often self-destructive”.

“This often results in a reduction in quality which is loyal customers pick up, and which compromises the product’s long term future,” he said.
Two-legged overheads

Human resources account for a considerable portion of manufacturers’ expenses, and a recession can mean measures such as hiring freezes and redundancies.

“As the old saying goes ‘overheads walk on two legs’,” Weall said.

But skills base should be an important consideration when reducing headcount – especially in technical departments, where quite specific skills are required to ensure food safety and due diligence are maintained.

Moreover, where a company needs its staff to acquire new skills, but off-site training courses are too expensive, Weall recommends revaluating cost-effective training methods such as e-learning.