The global food and beverage industry is seeking greater resilience in the face of business interruption and supply chain volatility in a post-pandemic world.

A new survey shows that these companies are most concerned about how to deal with disruptions in the face of global conflicts, climate change and the cost of living crisis.

According to WTW’s Global Food & Beverage Risk Outlook 2024, nearly half of food and beverage companies (48%) view business interruption as their largest internal exposure, followed by supply chain as the greatest internal (40%) and external (35%) risk factor.

Amid ongoing uncertainty, they are increasingly looking for more flexible and creative insurance coverage, according to a WTW leader.

Food and beverage companies adapt to the ‘new normal’

However, this year’s survey also suggests that businesses have learned from the financial shocks of the past few years. Four in ten (41%) say they are aiming to increase liquidity, while other top strategic goals include cost reduction (38%) and stabilizing operations (35%).

Encouragingly, nearly half of companies (47%) said they review their business continuity plans every six months, and 31% quarterly.

The shift signals a realisation that in a volatile global economy, financial flexibility is a powerful risk management tool for food and beverage companies. And for the insurance industry, customers want similar flexibility in their insurance coverage. “We’re seeing a lot of demand for innovation, particularly around the supply chain,” said Simon Loescher (pictured), global head of food and beverage at WTW.

“Technology is playing a key role, with customers investing in digital supply chain management tools and shipment tracking devices. This technology is now fuelling the insurance industry, allowing us to build solutions based on shipment tracking. There is still a lot to be done, and we are investigating how digital transformation and supply chain developments can help us innovate better solutions.”

Food and beverage industry risks are not “one size fits all.”

In addition to focusing on risk management, the increased liquidity shows that “companies are thinking about war chests, getting cash to prepare for the unexpected,” Lusher added.

Luscher looked at this year’s results compared to recent polls. “In 2022, everyone was coming out of the pandemic, feeling good but facing geopolitical tensions and rising crime rates. We wondered if people would feel more stable and if priorities had changed. To some extent, they have, but not as much as we expected,” he said. Business insurance.

Climate change also emerged as an area of ​​deep concern, with nearly three-quarters (71%) of food and beverage companies in the WTW survey citing climate change as one of the top environmental factors posing the greatest risk to their business.

Extreme weather and changes in weather patterns have impacted crops from Latin America and Europe to North America and Asia, forcing many companies to adjust their supply chain.

To build their long-term resilience, companies are turning to predictive modeling for long-term investments. This includes planning production and storage facilities and infrastructure based on climate suitability and sea-level changes. “Our clients are very focused on long-term planning,” said Loescher, who acknowledged that the broad scope of the food, beverage and agriculture sectors makes it difficult for brokers to address their unique risk profiles.

“It covers a variety of businesses from meat processing to crop production. Each responds to the challenges in different ways,” he said. “Intermediaries need to understand this complexity and the enormous pressure on food security.

“Populations are constantly growing. Environmental challenges and global warming are adding to the pressures, so this is something to keep in mind when developing customized insurance solutions for food and beverage customers. It is not a matter of one size fits all.”

Opportunities in Food and Beverage

But not all is bad news for the global food and beverage industry. Despite the turmoil, the sector is largely optimistic about its prospects, with 40% of companies surveyed by WTW expecting to achieve some level of profitability within two years.

One of the most notable highlights of this year has been the evolution of consumer trends. Two years ago, plant-based meat alternatives were among the hottest trends in food and beverage, spurring the rise of brands like Impossible Burgers and Beyond Meat. However, consumer enthusiasm for these products appears to have waned.

“People seem to be becoming increasingly wary of highly processed foods and these meat substitutes. There has been a shift towards plant-based options, with a shift towards healthier options rather than meat substitutes,” said Lusher.

Food and beverage companies have been quick to capitalize on emerging trends, such as gut health, probiotics, wellness, and sustainable production techniques. With consumers’ fast-paced demands, brokers should encourage insureds to hone their business focus, manage critical risks, and reassess areas where they may need more protection. “That way, companies are prepared for almost any outcome, and operations can continue to move forward,” said Loescher.

What are your thoughts on risks in the food and beverage industry? Please share them in the comments.