Eat, drink and be merry: A festive food sector focus

What better time of year to celebrate the health and wealth of food and drink manufacturers in the UK than over the festive period of Christmas and New Year? As we glut on turkey and mince pies let’s save a slice of celebratory cake for Britain’s biggest manufacturing sector.

While other manufacturing sectors have struggled to avoid contraction in recent years, the food and drink sector has proudly posted growth figures, for both domestic and international sales, throughout the recent recession.

Did you know?

The UK food and non-alcoholic beverage industry exported goods to the value of £6.1bn in the first half of 2013

UK food and drink manufacturers used TWh40 of energy, equating to a sector energy bill of £1.4bn, in 2012

Of course, you say. Everyone’s got to eat. Food manufacturers have got it easy – not so.

The sector has had to respond to reduced disposable income, pressure to influence consumer waste, rising expectations over delivering nutritional value and escalating energy costs in order to remain competitive.

In certain areas it has responded in magnificent style. Product innovation has made food generally cheaper, healthier and more convenient for an increasingly time-pressed, urban population, both in the UK and abroad. The chilled ready meal is a particular UK success story with British supermarket shelves stocked with a far wider variety of meal options, representing varied global cuisines and catering to more dietary requirements than almost any other nation.

The upshot of this is that recipe and packaging development is the daily bread of the average UK food and drink manufacturer. The sector as a whole introduces 1,500 new products every year, either to appeal to developing consumer desires – and spending power – or to accommodate new regulation and targets on salt and fat content.

A new age of steam

The PDX Reactor was invented in 2005 by Pursuit Dynamics, a Cambridge-based technology company which went into administration earlier this year.

The technology cost around £60m to develop and relies on a clever bit of IP which injects accelerated steam into recipes at incredible speeds and then quickly manipulates the flow of liquid foods to slow, mix and cool them, thereby controlling the cooking process. The innovation has no moving parts.

As demonstrated in the main body of the article, the technology offers significant energy savings on conventional cooking processes. But these savings are matched, if not exceeded, by efficiencies in cooking cycle time, and manufacturers often also find that integrating the technology frees up shop floor space for additional capacity or other operations since the equipment is quite compact.

With such an array of investment incentives behind it, it seems astonishing that just 20 manufacturers worldwide have embraced the opportunities it offers to redefine competitive advantage in the production of soups, sauces, pasty dished and beverages (see a video about the implementation of PDX at brewer Shepherd Neame at bit.ly/PDXatShepNeame).

Those close to the technology development and marketing strategy say the slow uptake is partly due to a miscalculated sales strategy which was unattractive to manufacturers. Sources say this involved demands for ongoing revenue cuts per unit sold after installation.

Technology solutions provider Olympus Automation plans to rectify the damage done and maximise the latent potential of this UK patented innovation.

Olympus bought the IP behind the PDX Reactor from a failing Pursuit Dynamics for £160k this May. It now hopes the technology will form a core strand in its strategy to triple its business in the next three years. Exports will be a key component in achieving this, as will a new partnership with Siemens and funding from the Technology Strategy Board.

The deal struck with Siemens extends an existing relationship between the two companies and ensures PDX is backed by a strong delivery and installation proposition with an accompanying control solution (bit.ly/PDXPartnership).

The TSB grant will deliver almost £700,000 to Olympus and its research partners, the University of Lincoln and manufacturing company Bakkavor, to support a £100,000 research project into advanced mixing and cooking technology.

Facing up to challenges in other areas is taking longer, though islands of excellence – usually in larger firms with more resource – do exist.

For instance, while energy efficiency in food manufacturing is improving, the sector still holds huge scope for more widespread adoption of energy efficient production, distribution and storage technologies which could reduce its costs and increase its competitiveness.

The food and drink sector accounts for around 20% of UK greenhouse gas emissions, so there is a strong incentive for government to encourage more food manufacturers to invest in becoming more energy efficient, thereby helping to meet its stringent environmental targets.

In 2012, food and non-alcoholic drink manufacturers spent around £1.4bn on energy, compared to just short of £1bn on automation–including instrumentation and low voltage control equipment – despite the fact that these kinds of technologies often have significant energy saving propositions.

For instance, the PDX Reactor, a technology which uses high pressure steam to cook soups and sauces far quicker than is conventionally possible, has the following energy saving propositions across a variety of products:

  • 600kg meat sauce, 20% energy saving
  • 1000kg béchamel sauce, 40% energy saving
  • 1000kg cheeses sauce, 40% energy reduction
  • 1000kg Tomato Sauce, 20% energy reduction
  • 1000kg Goulash Soup, 25% energy saving

Yet PDX equipment, which has been on the market for a decade or more, is used by just 20 food and drink manufacturers globally.

In part, this poor uptake is due to an unpopular marketing strategy pursued by the technology’s originator Pursuit

Dynamics (see box), but it is also down to a general reluctance in the sector to make capital outlay when margins are tight and contracts with supermarket customers unstable.

In TM’s Automation and Robotics supplement earlier this year, Grant Collier, marketing director at the Process and Packaging Machinery Association told the magazine:

“We hear time and again that the ability of supermarkets to withdraw contracts at short notice is putting food manufacturers off making up front investment in automation. Some food manufactures have even said they do not wish to disclose information about their enquiries into automation because they fear supermarkets will make it an excuse to squeeze them further on margins.”

For Jim Mosely however, this is no excuse for holding back on investment. The CEO of the Food and Drink Federation and managing director of General Mills UK says: “That tension between manufacturer and retailer will always be there. There will always be tough negotiations to be had over who gets what sized slice of the pie. But that is not a reason for a manufacturer to not invest in a technology which is going to make them more efficient or could grow their business.”

Mr Mosely says SME difficulty in accessing cash and an economic background which discourages experimentation are bigger barriers to a more technologically sophisticated food and drink manufacturing sector in the UK.

“In recession, when cash is hard to come by, people are easily tempted to go back to tried and tested methods for improving their products, rather than experimenting with the implementation of something entirely new,” he observes.

Anecdotally, Mosely agrees that this could put the UK at a disadvantage compared to global competition in the international food market. “The levels of incredible capital

The PDX Reactor. A revolution waiting to happen for many food manufacturers.

investment I have seen abroad are fantastic,” he enthuses.

“The automotive and aerospace manufacturing industries are renowned for being technologically advanced, but food manufacturing is equally deserving of that reputation – or should be. I’ve seen factories where there is barely a single person on the shop floor.”

Perhaps this is part of the reluctance? Food manufacturers don’t want to run into trouble with unions?

“Not at all,” says Moseley – as long as investment is closely linked to a growth agenda.

“General Mills’ Jus’ Roll factory in Leeds is the biggest local employer – you might therefore expect resistance every time we implement an automation solution. But in fact, our investment is linked to maximising sales, therefore the business grows and in reality you often find you could keep everyone employed and take extra people on because you are meeting the demands of a bigger business.”

Wasting Away

The food industry has recently come under intense pressure to reduce the amount of wasted food as population growth puts new stress on global food security and governments seek to eliminate unnecessary greenhouse gas emissions. What are manufacturers doing to help?

In January this year the Institution for Mechanical Engineers published a shocking report which revealed as much as 50% of all food produced around the world never reached a human stomach due to issues including inadequate infrastructure, overly strict sell-by dates and buy-one- get-one free offers.

Global Food: Waste not Want Not mainly criticised the excesses and profligacy of supermarkets and consumers, but manufacturers too were made to think again about what they can do to reduce waste, in the factory, at the retailer and after sale.

The battle against waste in the factory has long been waged by food manufacturers whose market is generally characterised by slim margins and, more recently, very volatile ingredient prices.

But rising expectations around influencing waste in the distribution network and in supermarkets, as well as with the consumer are newer trends.

The manufacturer’s main weapon in these areas is shelf life, which it can extend either through the use of preservatives, or through packaging innovations.

The latter is a less controversial route and, in the wake of the IMechE report, the Waste and ResourcesAction Programme (WRAP) launched a ‘Fresher for Longer’ campaign to put renewed energy into packaging innovation to reduce waste.

Experimentation with barrier films and new methods for modified atmosphere packaging are core activities in the programme. But there is also exciting research taking place into the use of nanotechnology to make packaging which indicates when food is beginning to spoil.

The Courtauld Agreement, a voluntary action programme on food waste stewarded by WRAP, recently released figures which indicate smarter packaging is making an impact. Between 2010 and 2012 it helped reduce avoidable household food waste by 5.3%.

Festive free-for-all

But despite manufacturers’ best efforts to curb consumer wastefulness, certain times of year, namely Christmas, seem to provoke particularly wanton squandering of food.

Our lead interviewee this month, Jim Moseley, is quietly confident that food waste at Christmas is on a downwards trend – partly helped by reduced disposable income.

However, even if this is true, last year’s figures from Wrap show that there’s s a long way to go before the amount of food thrown in the bin over the festive period ceases to turn the stomach with moral disgust.

According to WRAP Britain bins and annual average of:

  • 2 million turkeys
  • 5 million Christmas Puddings
  • 74 million mince pies

To read more about manufacturer action on food waste see Will Stirling’s article ‘Beneath the bin lid’ at bit.ly/Beneththebinlid.


Santa’s little helpers

How do manufacturers cope with Christmas consumer demand?

Many food and drink manufacturers come under intense pressure to meet demand over Christmas. It’s not unusual for manufacturers of pastry, party food and alcoholic beverages to make 40%-50% of their annual sales in December, while manufacturers of more overtly seasonal products like Christmas puddings rely on the festive period for even more of their revenues.

This creates big cash flow management challenges – not to mention production capacity conundrums, but manufacturers have become practiced in planning for the festive peak. The increasing use of ‘implants’ with retail customers has been a big factor in improving responsiveness.

Many manufacturers of key brands or products now have employees who work within supermarket planning and marketing teams.

They help them to understand the production implications of mooted price campaigns or shelf positioning and feeding back final decisions to their organisations in a timely and coherent manner.

Of course, building stock is an option for some manufacturers, but for those seeking lean operations the option is unattractive. Laying down large amounts of finished goods months in advance of their sale is also unkind to cash flow and so is best avoided where possible.

As with many manufacturing challenges, successfully overcoming them finally comes down to people and the determination and skill of shop floor workers.

This is why one UK-alcoholic beverages manufacturer chose to implement a workforce solution which is unusual for the sector, but which guarantees it has its best staff on hand to help at times of greatest need – rather than diluting its expertise with temporary workers at Christmas.

The manufacturer’s system places all permanent staff on salaried pay – so they receive 12 even payments throughout the year, smoothing cash flow despite volatile demand for labour.

Shift plans are plotted annually – with some room for flexibility. On average, each employee will work 40 hours a week, but in reality, this is reduced in periods of low demand and increased at peaks like Christmas so that employees will work a maximum of 48 hours – or four consecutive 12 hour shifts in a week.

The result is a win-win situation according the company’s manufacturing director. The employer gets reduced variability in cash flow and access to an experienced workforce when it most needs it. Employees get regular pay and the ability to plan their work-life balance clearly.