The term “the new normal” has been thrown around a lot recently, indicating the drastic changes that we need to take place in our daily lives. In a broader perspective, the manufacturing landscape is no different. A prime example would be the food and beverage industry, where the dilemma is whether to adapt to the new normal or wait until the pandemic is under control.

The term “the new normal” has been thrown around a lot recently, indicating the drastic changes that we need to take place in our daily lives. In a broader perspective, the manufacturing landscape is no different. A prime example would be the food and beverage industry, where the dilemma is whether to adapt to the new normal or wait until the pandemic is under control.

Companies in the food and beverage (F&B) sector tend to have more flexibility in the manufacturing process than many other industries, with high levels of product customization and individual product offerings. However, even with this high level of diversification, the F&B sector cannot weigh out the global economic downturn. Capital Expenditure (CAPEX) and investor confidence are expected to remain low in 2021. Global food, beverage, and tobacco machinery production is forecasted to contract by 15.2% in 2020, to remain flat in 2021, and recovering in 2022 with a growth of 4.4%.

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COVID-19 creates opportunities and threats

In recent months, because of the lockdown measures enforced in countries around the world, demand for food and beverage products has grown rapidly. This ultimately helped to boost the sale of automation parts for existing machinery as operational spending in factories continued.

However, due to the lockdown measures, growth and slaughter cycles have been negatively affected as workers can’t go down to the fields or farms. As a result, crops are dying in fields that cannot be harvested and livestock is being slaughtered and disposed of because it is more economical to do so.

This situation has been made more severe with the introduction of social distancing measures in meat processing plants, where employees typically work in close proximity for better throughput. With these new social distancing measures and high infection rates, many meat processing facilities have temporarily shut down. As a result, there is nowhere for farmers to send their animals to be processed, leading to a shortage in meat supplies.

A prime example could be seen in the American food processing industry where meat shortages are causing fast food chains like Wendy’s to run out of burgers and supermarkets like Costco not having enough ground beef and pork products to meet demand. The problem in the US particularly is that the food processing industry is dominated by a few large companies such as Homel, Smithfield, JBS, and National Beef, so individual company shutdowns have a big impact on the whole industry.

In the US, the food industry had contributed over 20,000 COVID-19 cases (as of May 15th 2020), almost half of the outbreaks started in meat factories. This will have big implications on the American F&B sector in the long-term, with food producers spending on new safety standards and new manufacturing concepts, such as work group rotation, temperature screening, and localized shutdown procedures.

Generally, the situation in the US is still not improving and OMDIA predicts that spending in this industry will be flat in 2021, with more investment in 2022 and through to 2024. Currently, the machinery market is fragile as CAPEX continues to decline due to worries on low supplies of raw ingredients, such as corn and meat, and the management of COVID-19. This creates an environment where food producers and farmers delay investment in new machinery until the markets and external environment shows signs of recovery, in a bid to mitigate risk.

New procedures increase the costs of doing business.

The impact of COVID-19 has meant that food manufacturers need to re-imagine traditional production processes to incorporate social distancing, apply protective measures, and introduce new equipment. In addition, more time and work need to be dedicated to ensuring guidelines are in place to comply to new standards of working practice. In most food and beverage subsectors, even with the new guidelines in place, factories cannot produce at full capacity, especially in the crop and meat industries. Traditionally, employees in a meat factory have to be positioned side by side (in a production line) in order to breakdown and process meat. In order to comply to regulations and open the factory, employees need to be spaced out resulting in cutting their numbers in half, negatively impacting throughput. Omdia believes that the enforcement of safety measures to tackle the COVID-19 pandemic could be an opportunity that will drive demand for other machinery, like robotics.

Learning from the automotive industry, food manufacturers could deploy industrial robots and co-bots to reduce reliance on the human workforce. This would ensure that the remaining workforce were compliant with social distancing measures, whilst maintaining output and efficiency. Robots would also reduce downtime as a result of sickness and injury, especially those on the production line like repetitive stress injury (RSI). According to the Occupational Safety and Health Administration (OSHA), RSI affects some 1.8 million workers per year in the United States, with one government study putting the cost of RSI between $17 billion and $20 billion a year.

However, the use of automation in a “hands on” industry like food and beverage processing can be a daunting task, especially at the start of the manufacturing process with farms and livestock. These areas are typically made up of a high number of small suppliers, with lower profit margins, and processes where it seems there is no way of applying full automation or remote production.

Additionally, the adoption rate will differ between regions, with labor intensive areas like South East Asia slower to invest in new technology. From a machinery standpoint and a “smart factory” stance, Germany and China are often the trend setters when it comes to transformative technology, like unmanned factories and smart warehouses. However, high costs and a lack of skilled labor are likely to present barriers to adoption and implementation on a wider scale.

Overall, the F&B industry is seeing increased consumer demand but is struggling further down the supply chain as COVID-19 protection measures disrupt operations and stretch resources, leading to factory shutdowns. This has led to wasted produce and a lack of investment in new machinery. Machinery sales are forecast to recover in 2022, but long-term it is likely that new technology, such as robots, will be deployed as a way to limit reliance on the human workforce.

The Machinery Production Market Tracker – Q2 2020 is offered under Omdia’s Industrial research pillar. Published quarterly, the report provides a comprehensive overview of global machinery production, including a country-level breakdown of production by machinery type, estimates in market size of 10 automation product types in each machinery sector, and an extensive directory of more than 9,000 builders across Asia Pacific, Europe, and the Americas. Contact us for more details or if you wish to subscribe.Recent Article : Post–COVID-19: China’s machinery production and automation equipment market cannot be immune to the global pandemic

Robotics: Omdia is currently in the scoping stages to update on its Robotics report. For an in-depth conversation on the scope and industry developments, contact the lead analyst, Kevin Schiller ( Kevin.Schiller@omdia.com )