Leading Advisory Firm Blames Lack of Vision and Planning for the Post-Crisis Era
(PRUnderground) September 15th, 2020
Over half of all food manufacturers will succumb to fallout from the pandemic crisis, according to food industry consultants Blueberry Business Group.
Even some of the largest companies will struggle to survive.
It’s another dismal prediction for an embattled industry.
Blueberry says that despite many forecasts for restaurants and grocery stores as consumer habits change, little is said about the thousands of companies that make and market the foods purchased through these channels.
The firm predicts that crisis effects will take 3 in 5 manufacturers out of the game.
“Most food companies were not built or managed for the type of environment this pandemic has produced,” says Debra Bachar, Blueberry President. “Failures, exits, bankruptcies, liquidations, takeovers will end their lifespans during a long and difficult cycle that will get worse before it gets better.”
Blueberry cites several reasons for the demise. One is that many chief executives and boards are not preparing their organizations for the next wave of impacts on the industry.
“Companies are burning adrenaline on cost cutting, drawing down credit, and restructuring to meet current demand,” says Debra. “These are practical for the immediate term, but the future needs just as much if not more attention.”
The food industry is in the earliest stages of crisis fallout, and “trying to do more with less will kill plenty of manufacturers when the market snaps to the next paradigm.”
Although many large food companies report significant gains over the last two quarters, Blueberry Senior Advisor, Bill Pierrakeas, says these are unlikely to deliver long-term profits.
“New growth on relic brands is temporary and wont scale,” he says. “Without a vision or plan to hedge exposure to second and third order effects, future quarters will look grim when the surge runs out of life.”
Blueberry cites other reasons for food manufacturer demise, including a yo-yo economy, acquisitions based on artificial valuations, industry consolidation, financialization, downward price pressure, and surprises brought about by revised customer economics.
Any one of these could be the final nail in manufacturer coffins.
“Placing calculated bets on the future is what running a big food company should be all about,” says Debra. “But CEOs and Boards are often unwilling to invest in anything that isn’t staring them in the face.”
She went on to say that market stressors should be driving more fear in boardrooms, but there is a prevailing belief that organizations can ride out the crisis by responding to events as they occur.
“What’s emerging is an unreliable narration of their companies’ future because the original math and logic of 2019 investments and 2020 plans no longer apply.”
Despite the prediction, Bill says companies can avoid becoming a casualty by going on the offensive to shape outcomes of what lies ahead.
“Building a plausible picture for the post-crisis era, then combining cost reductions with strategic investments that generate good returns will mark the long runners.”
A point Debra underscores, “Those unwilling to do so will not outlast 2021.”
About Blueberry Business Group Ltd.
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Original Press Release.