Supply Chain Insight: Disruption, Costs, And Pain Points
Costs are a central concern for everyone in the supply chain—particularly due to freight, but also considering labor/human and ingredient costs and increases in international tariffs. Specialty manufacturers are seeking direct-ship opportunities with key retailer partners, as well as consolidated shippers to handle the delivery.
Category disruption continues, but some emerging brands still feel they have an under-tapped niche they can explore. Interviewees stressed how vital it is to offer something a cut above the competition, from specialized value-added service to new or improved innovation.
Interestingly, many specialty manufacturers, from established brands to a very new brand, wish they had more competition in their core category, noting that several solidly performing brands would drive the overall category’s growth over the next several years.
Here is some of what members of the supply chain had to say:
“Regarding competition, I wish we had more. I think all brands in plant-based foods have benefited in the last five years or so. It’s bigger now in natural stores and it’s growing in conventional stores. If you look at the plant-based set, the number of players is finite, with some legacy players, but none of the newer companies can grow quickly because there are no co-manufacturers with that capability in our category.”
founder and CEO, plant-based food brand
“We certainly continue to move certain business direct and remove the [distributor]. The costs being added on by distributors are only increasing as they continue to get squeezed by the large retailers like Whole Foods, Sprouts, or Albertson’s. It’s very shaky ground. If you’re importing any ingredients, there are certainly increased tariffs that are in play, but by far the biggest cost drivers right now are freight and warehousing. If you’re saving anything by scaling your operation, we find that you still don’t keep up with the other additional costs that are being added on.”
executive vp, natural/specialty food brand
“We want to make sure that we are growing our sales not only for us, but for our category and the retailer. If you’re just taking space on the shelf and you’re taking sales away from another super premium brand in your category, not bringing growth to the entire category, then it’s good but it’s not great. That means that the next brand that takes space will do the same thing. We’re going after the 1-2 percent of consumers that will be buying 50 percent of our brand sales, because they are committed to our brand and buying it regularly.”
director, specialty channels and analysis, dessert brand
“One of our non-traditional food retailers whose distribution centers we ship directly to, are in the process of having a carrier create a consolidation shipping program. In the future, I believe we’ll see more carriers create these programs for retailers to be awarded their entire freight business, and such efficiencies will be passed on to all.”
co-founder and CEO, condiment company
“The level and speed of competition has accelerated dramatically. Some of the impacts are a crowded marketplace, hotly contested shelf space, etc., and the path to market has become more expensive, with the speed and dollars deployed by emerging and investor-backed brands increasing the cost of obtaining and defending shelf space.”
president and CEO, chocolate and confectionery company
SFA members can purchase the 188-page State of the Specialty Food Industry Full Report and 5-Year Category Tracking and Forecasts here at a discounted member price to learn more.