Materials issues are emerging as defining factors in today’s food and beverage industry, as news headlines and our readers make clear.

Between lethal Chinese gluten and soaring corn prices, raw materials are front and center concerns in 2007. Throw in an ongoing effort to alter the standards of identity for many foods, and the impact on processing materials coming in and going out of the plant is considerable. Material availability and cost are on everyone’s mind, from the executive suite to the third-shift sanitarian. Food Engineering readers began voicing their concerns about ethanol’s impact on raw material costs in last year’s State of Food Manufacturing survey. This time around, those apprehensions are even greater. Whether it’s the HFC in soft drinks or the starch in sauces, the doubling in corn prices in the last 18 months affects a huge number of food and beverage products. Concern surfaced frequently in readers’ open-ended responses to a survey question about the top two trends that will impact manufacturing operations over the next five years. Rising gasoline prices and energy costs also were mentioned frequently.

This spring’s pet-food recalls put a sharp edge on traceability mandates and the vulnerability of processors in an age when ingredients and products can be sourced and shipped anywhere in the world. Managing raw materials and finished goods up and down the supply chain is becoming a top-of-mind concern. One in five survey respondents say their organizations will purchase a supply-chain system this year. It’s also an important tool to help plants improve productivity: One in five respondents indicated there is a “great need” to improve supply chain management, making it the third highest productivity issue. Two years ago, only 12% indicated there was great need for improvement.

Chemical analysis may have detected the melamine in hundreds of tons of Chinese wheat gluten used in pet food, and the industrial chemical was subsequently detected in rice protein concentrate imported by Wilbur-Ellis Co. in April. But microbial contamination is the focus of food-safety testing, and an ingredient assay focuses on a particular element, such as protein. In the absence of international standards and strict enforcement, food companies are at the mercy of unscrupulous sellers of whey protein isolates, soy protein isolates, soy grits and other ingredients that fetch a higher price when inexpensive chemicals like melamine boost the protein content.

Despite the exposure, fewer readers indicated an intent to install automated tracking and tracing systems. Hopefully the three-quarters of respondents who won’t make this software investment had already done so; in fact, 43.3% of 2006 respondents had budgeted tracking and tracing software.
Ingredient prices can be as lethal as poison when it comes to jeopardizing the viability of food production. Price supports for sugar devastated candy manufacturing in recent years in Chicago, once considered the candy capital of America. Brach’s, Fanny May and other confectioners have shuttered their Chicago plants and moved production north and south of the border in the last decade, cutting local candy-making jobs in half.

Availability of raw materials was flagged by some respondents in a question concerning the top trends that will impact manufacturing operations over the next five years. But material prices also are a huge issue, as pointed out by a reader who wrote, “material and supply costs vs. how to stay competitive” will drive manufacturing decisions. “Continued rising gas pricing will drive capital expenditures for cost reductions,” another suggested.

Efforts to overhaul the standards of identity for more than 200 food products could have a huge impact on both prices and competition. The FDA and USDA’s Food Safety and Inspection Service have had standards modernization since the mid-1990s. Those efforts went into overdrive in February when the Grocery Manufacturers Association submitted a citizen petition to “permit maximum flexibility in the food technology used to prepare the standardized food” and to allow “any alternative process that accomplishes the desired effect.” The petition appeared to be on a fast track for a rule-change approval until a California chocolatier noticed that, among the allowed changes, vegetable oil and other inexpensive fats could be used as substitutes for cocoa butter in chocolate. Small and mid-sized chocolate companies have since mounted a vigorous protest, with numerous comments opposing the GMA petition. The FDA has placed docket # 2007P-0085 on hold


People and production

More automation, better training and a more systematic approach to continuous improvement were frequently mentioned by survey respondents when asked, “Where does your company’s manufacturing mission fall short? What is needed to fill the gap?” The good news is that food companies are committing more resources to address those gaps.
Planned spending on production, packaging and process-control equipment is higher this year than at any time in the last five, the survey found, with budgets up an average of 7.5%. Two out of five readers say they have more capital available this year than last, and while 11% are dealing with smaller budgets, the reductions are the smallest in years.
Investments in automation and control hardware and software are up even more sharply, an average of 7.8%. The increases are occurring at 44% of the plants, the highest proportion in at least five years, and the 2% experiencing spending cuts is the smallest proportion in several years (see related charts on page 66).
As in past years, PLCs top the automation shopping list, with five of seven respondents intending to purchase the industrial controllers this year. Sensors and motion controllers also are popular technology investments (see chart on page 62). Wireless networking equipment is more likely to be purchased than wired networking equipment. Despite escalating energy costs, the proportion of plants investing in energy management software dropped to 16.7% this year, the lowest point in recent years.

Company buyouts by meat processors accounted for a modest increase in the overall number of mergers and acquisitions by food and beverage companies last year, reports the Elmwood Park, NJ-based Food Institute. The same trend is seen in the survey, with 14% indicating their firms were acquired or merged with another company, up from 11.9% in 2005. Plant expansions and renovations remain the most common structural changes, with slightly more than half (53%) saying their companies took this route to added capacity. That’s down slightly from 2005, a change reflected in Food Engineering’s annual Food Plant Construction Survey (see chart on page 64). Workforce hiring remains bullish, with one-third of readers reporting an increase in staffing in the last year, continuing a four-year trend. There was a small decrease in the number of companies adding food engineers (18%), but the drop was more than offset by a decline in those downsizing engineering (10%).

Integration of manufacturing systems and IT and manufacturing software remain the most nettlesome issues that need to be addressed when companies merge, with half of readers flagging them as major challenges. Integration of warehouse/distribution systems was a challenge for 44%, followed by reassignment of manufacturing management and integration of ERP/MES systems.

Who answered the survey

Study results are based on 151 responses from food and beverage professionals to the State of Food Manufacturing survey during June 2007.
More than a third (35%) were engineers. Operations management composed 15% of the base, followed by quality control (11%), production management (10%) and general administration and R&D (9% each). The remainder scattered across a wide variety of job functions, including maintenance, purchasing and project management.
One-third work at facilities with 100-249 employees, and another quarter at plants with 250-499. Head counts of 500 or better were the norm for 29%, including 7% with 2,500 or more. One in 10 are based at plants with fewer than 100 workers. A wide variety of beverages, produce and foods are represented, with dairy and frozen novelties (14%) and baked goods and snacks (13%) the most frequently cited, followed by processed meat, poultry and seafood.
Illinois, California, Wisconsin, Pennsylvania and Minnesota were the most frequent locations of respondents’ plants.