NOV. 01, 2020
Food & beverage industry operations
For food and beverage manufacturers, their main focus is on packaged food, and less on fresh meat and produce. Specifically, packaged food can include pasta, canned fruits and vegetables, baked goods, cereals, condiments, frozen foods and snacks, among others. Often, when preparing these goods, businesses will start with fresh food and then process it, most often by cutting, seasoning, flavoring, cooking, freezing and packaging it.
Generally, the size of the manufacturer will range from a small, manual operation with few employees to a large, international organization that uses highly automated plants across multiple locations. In addition to production lines, food manufacturers will typically have significant storage and warehousing needs. This may include a cooler or freezer for housing raw goods or finished products. Finished products will be transported to a distributor or a final customer.
For beverage manufacturers — which are also referred to as bottlers — their focus is often on nonalcoholic drinks such as soda, juice and water. These goods can be packaged in glass bottles, aluminum cans, plastic bottles or similar containers. Bottlers may make their own beverages or have a franchise contract to manufacture certain brands of beverages.
Food and beverage manufacturers consist of many industry groups, including but not limited to the following1:
- Sugar and Confectionery Product Manufacturing – NAICS 3113
- Fruit and Vegetable Preserving and Specialty Food Manufacturing – NAICS 3114
- Dairy Product Manufacturing – NAICS 3115
- Seafood Product Preparation and Packaging – NAICS 3117
- Bakeries and Tortilla Manufacturing – NAICS 3118
- Beverage Manufacturing – NAICS 3121
- Other Food Manufacturing – NAICS 3119
Food & beverage industry outlook
In the U.S., more than 1.6M people are employed in food and beverage manufacturing.
According to the Bureau of Labor Statistics, in the United States there are2:
- 1,593,000 people employed in food manufacturing
- 93,440 people employed in beverage manufacturing
- 35,026 establishments for food manufacturing
- 13,377 establishments for beverage manufacturing
Additionally, the United States Department of Agriculture reported that food was a $1.7 trillion industry in 2019, broken down as follows:
- $799 billion for food at home (e.g., packaged food)
- $969 billion for food away from home (e.g., food from fast-food establishments and traditional restaurants)
Trade and tariffs
Of the various industries, food manufacturers have been especially impacted by trade disruptions.3 American tariffs on imported materials such as steel and aluminum have resulted in retaliatory tariffs on U.S. food exports. These tariffs have resulted in lower sales and profits for food and beverage manufacturers.
The tariffs have also affected imported food and beverage products, as many manufacturers depend on aluminum and steel for their packaging. In the face of tariffs on these materials, increased import costs are passed on to domestic businesses by aluminum can and other packaging manufacturers.4
As of July 2020, the unemployment rate in food and beverage manufacturing was 8.7% compared with 10.2% for all other industries.1
Like many industries, food and beverage manufacturers are dealing with significant worker shortages. There are many reasons for this, but trends that affect manufacturing — including the aging workforce — are significant contributors.3 Many employees are retiring, and businesses are having difficulty recruiting younger workers. Recruiting is particularly challenging when it comes to finding skilled technical workers, such as maintenance workers and technicians who run and maintain automated equipment.
As a result of recruiting challenges, more companies are being forced to get creative with their hiring and onboarding practices. Many have invested significant time and money into training programs to ensure that new, inexperienced workers have the education and skills necessary to complete their jobs safely.
Additionally, food and beverage manufacturing is historically a low-margin industry that struggles with rising wages. The industry has also traditionally relied on immigrants when it comes to filling vacant roles. However, continued immigration issues are impacting the industry’s ability to secure talent.
Consumer trends in the food and beverage industry
The manufacturing industry has long been one to embrace changes in consumer preferences and new technology. The following are some examples of trends impacting the food and beverage sector:
- Food source transparency — Consumers of today are more interested in where their food comes from. Food and beverage manufacturers that claim to offer organic, regional and cruelty-free foods may be challenged to prove this. Blockchain technology, which uses encrypted data at every stage of the production process, can help businesses verify claims they make regarding their food and beverages, improving consumer confidence overall.
- Sustainability5 — Younger generations with ever-increasing buying power value sustainability. Sustainability can be achieved in several ways, starting with packaging, including using paper-based packaging that is more environmentally friendly. Furthermore, sustainability extends all the way down the supply chain. To ensure sustainable practices, manufacturers are now measured by multiple metrics, including greenhouse gas emissions, product recyclability and waste generation (e.g., water contamination).
- Online and direct-to-consumer (DTC) sales6 — Another growing trend relates to online and DTC sales. Especially given the COVID-19 pandemic, purchasing food and beverages online has become increasingly common. Moving forward, this trend may make food manufacturers more open to selling directly to consumers.7 PepsiCo Inc. and Kraft Heinz Co. are already selling DTC. But selling DTC isn’t simply limited to large companies, as smaller manufacturers have been able to accomplish this through brand awareness.
- Innovation and upstarts3 — In recent years, larger food and beverage manufacturers have been challenged by upstart companies. These manufacturers have responded in a number of ways, including purchasing the upstarts as well as starting their own competing brand designed to look and feel like an upstart. However, purchasing an upstart can turn consumers away, as the business is now associated with a larger company.
- The Internet of Things (IoT)8 — More and more, organizations are leveraging IoT devices. For instance, some manufacturers are installing sensors on individual pieces of equipment, which in turn promotes interconnectivity and easy access to real-time data. With more data at their disposal, manufacturers can make their supply chain more efficient, leading to significant savings. A critical benefit of IoT devices in food and beverage production is how they improve processes that involve expensive, complicated equipment. In many cases, if one piece of equipment goes down, production may be brought to a halt for a significant amount of time. IoT can help equipment run optimally and ensure that service and maintenance can be performed when needed. Additional benefits include improved quality control, and worker and food safety.
Insights on major lines of coverage
Fire – Food and beverage manufacturing may have higher exposure to fires, as their work frequently involves large-scale cooking that requires ovens, fryers and vats.
- Precautions: Businesses should use a fire suppression system appropriate for the hazard. This system should be installed and maintained properly. Cooking equipment used in food and beverage production should be maintained by qualified employees and contractors.
Refrigeration systems – Perishable materials may need to be stored on-site using refrigeration systems, either before or after production. Large commercial refrigeration systems may require the use of hazardous chemicals such as ammonia. A release of these chemicals could be hazardous, not only to the business’s property, but to their employees and the general public as well. Additionally, a refrigeration system failure can result in a large loss of product or create food safety issues.
- Precautions: Proper maintenance of refrigeration systems is critical. Qualified employees should implement a preventive maintenance program to keep these systems running properly. Additionally, an emergency response plan must be in place in case an accidental release of a refrigerant or hazardous chemical occurs.
Storage of materials – Depending on the food or beverage being produced, materials stored for production may create additional fire hazards. Materials such as sugar or flour can create combustible dust exposures.
- Precautions: Proper storage and good housekeeping are critical to reducing fire and related hazards. Businesses should implement a program to control potentially dangerous dust. Among other things, this program should account for removing dust from elevated surfaces (e.g., on top of equipment and rafters).
Business interruptions – Food and beverage manufacturers often have automated operations. Equipment breakdowns not only halt operations but can also lead to food and material spoilage if the breakdown isn’t addressed quickly.
- Precautions: Food and beverage manufacturers should have a preventive maintenance program in place to keep equipment in good working order. They should also have a contingency plan in place should the equipment be placed out of service for an extended period.
Machine guarding – Many food and beverage manufacturers have automated processes in place. Automated equipment may run at high speeds, creating multiple machine guarding-related hazards.
- Precautions: An extensive machine guarding program should be in place to ensure that all equipment is guarded properly. Additionally, a lockout/tagout program must be in place for employees who will need to repair or maintain equipment as part of their job. Above all, a written safety program, documented training and well-communicated procedures can help prevent injuries.
Material handling – Powered industrial trucks or forklifts may be used to move raw materials to production lines or finished product to shipping areas. Additionally, depending on the sophistication and automation of the operation, there may be manual material handling concerns, especially if employees are moving heavy materials by hand or engaging in highly repetitive tasks.
- Precautions: A training program for powered industrial truck operators must be in place. Powered industrial trucks should be on a preventive maintenance plan and accounted for in an inspection program. For tasks related to manual material handling or repetitive movement, an ergonomic analysis should be conducted.
Chemical exposures – Food and beverage manufacturers often use cleaning and sanitizing chemicals to ensure food safety. This can expose employees to potentially harmful substances. Additionally, some processes may expose employees to hazardous materials. For instance, certain flavorings have been shown to cause serious respiratory illnesses.
- Precautions: A hazard communication program is necessary to protect employees from chemical exposures. This program should be written and account for safety data sheets, proper labeling practices and employee training. In some cases, air monitoring may be necessary to determine employee exposure to chemical hazards. If exposures are at a dangerous level, businesses will need to provide proper ventilation or respiratory protection.
Excessive noise – For food and beverage manufacturers, production lines may create significant noise exposure. In fact, many processes and machines that create loud noises can cause permanent hearing damage.
- Precautions: A formal hearing protection program may be necessary if noise monitoring practices indicate that high noise levels are present on the production line. This program will require businesses to provide hearing protection, train employees on noise hazards and regularly monitor noise.
Commercial motor vehicles – In general, auto exposures vary depending on how the manufacturer ships their product. In some cases, food and beverage manufacturers may operate a fleet of commercial vehicles that include small box trucks or tractor-trailers. For businesses using commercial motor vehicles, common concerns include regulatory compliance, distracted driving and unsafe driving behaviors. Accidents involving commercial motor vehicles tend to be particularly costly due to the damage they can cause. Furthermore, accidents involving commercial vehicles are the target of expensive lawsuits.
- Precautions: Food and beverage manufacturers operating a commercial motor vehicle fleet need to have a formal fleet safety program in place. They must ensure that drivers have valid licenses and acceptable driving records, particularly concerning violation and accident history. Additionally, businesses should consider using GPS and telematics with their fleets to monitor unsafe behaviors, and all drivers should be trained on defensive driving techniques.
Passenger vehicles – Passenger autos used by sales staff may or may not be owned by the company, which can create unique exposures.
- Precautions: Companies need to ensure that drivers have valid licenses and acceptable driving records regarding violations and accidents. Above all, drivers should be trained on defensive driving techniques. For drivers using their own vehicles for company purposes, the company should ensure that adequate insurance is in place.
Product liability/completed operations – Food and beverage manufacturers have significant product liability exposures, particularly given how harmful contaminated food and beverages can be to consumers. In general, contamination can occur throughout the production process. It can be caused by pests, material mishandling, poor sanitation practices or tampering. In fact, contamination that occurs during the production of animal-based products is more likely to cause serious, potentially deadly illnesses. Typically, automated processes are less likely to result in contamination than manual processes. Another product liability concern is false advertising, especially when it comes to nutritional claims.
- Precautions: A robust food safety program must be in place. This program should account for the following elements at a minimum:
- The inspection of incoming materials
- Pest control
- Quality control
The program should also meet Food and Drug Administration standards, along with any state or local regulations. Additionally, firms should have a recall program in place to respond to reports of contamination or other food safety issues.
Premises – Premises liability is not a major exposure for most food and beverage manufacturers, as these operations typically do not allow visitors. For larger operations, there may be some exposures related to the use of railroad spurs. Other food manufacturers may operate a small showroom or retail space where slips, trips and falls are of concern.
- Precautions: If tours are given, visitors must be kept out of hazardous areas and away from chemicals, machinery and material handling equipment.
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