Drinks firms urged to raise procurement control

31 January 2013
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31 January 2013 | Anna Reynolds

Drinks companies need to increase control over procurement by improving transparency with suppliers, according to a report by Rabobank.

In the report Thirsting for Growth, the bank’s analysts forecast the outlook for three areas of the sector – soft drinks, coffee and tea, and alcoholic beverages. The report found a key concern for all drinks manufacturers in 2013 is security of supply. To tackle this, supply chain management and strategic development experts have initiated ‘strategic sourcing’ of agricultural commodities.

Ross Colbert, global beverage strategist for Rabobank and lead author of the report, said in a statement: “Strategic sourcing requires beverage companies to re-evaluate their procurement processes through the lens of global supply and demand, to better understand the impact of price volatility, security of supply and related risks.

This approach has led global brand owners to develop dedicated supply chains, where suppliers, processors, distributors and even retailers are more aligned and operate in a more integrated system.”

The global tea industry is set to face a shortage of supply as tea producing countries are expected to suffer a drop in production of up to 5 per cent in 2013, while demand will grow by 3 per cent. Further, consumption in India and China is outpacing domestic production, which will mean reduced exports and rising prices for both markets.

Beer is forecast to be one of the slowest growing beverage markets, primarily due to increases in excise duty. Regional and local spirits companies across Western Europe are expected to be affected, as larger, international spirits firms are better positioned to play the market. The wine industry will also struggle with a weak consumer environment and the need to continue developing emerging markets.

There will be continued growth in global coffee market, driven by consumers choosing to drink higher quality coffee and increased business from market leaders Starbucks and McDonald's.

In the soft drinks market, bottled water will continue to sell the most, with a projected growth rate of 5.4 per cent over the coming year. Fruit juice companies are beginning to invest more in growers, focus on market power and follow adaptive strategies such as ingredient substitution or reformulation, to manage supply and demand.

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