Now, more than ever, food industry businesses need to focus on their finances to stay profitable and take advantage of strong opportunities. So let’s take an in-depth look at the challenges facing the food and beverage industry, and how businesses in the sector can manage their risk. The food and beverage sector is Australia’s largest manufacturing industry, accounting for 32% of the country’s total manufacturing turnover. According to the Australian Food and Grocery Council’s 2019 State of the Industry Report, the food and beverage, grocery, and fresh produce sector is worth $122 billion. The industry is made up of 15,000 businesses of all sizes that employ over 273,000 people.

A strong food and beverage industry are vital to the Australian economy, now more than ever. Some businesses are booming in the current climate, while others’ creativity and ability to pivot have kept them going. Regardless of the status of each individual business, the food and beverage industry as a whole is facing three unique challenges in 2020.  Most businesses are currently finding it hard to predict how much product stock to make or buy. Demand for some consumer staples like rice and pasta has rapidly increased. Meanwhile, demand for others has reduced – and for yet others, there’s been no change. Additionally, due to the global nature of the current situation, some exporters are seeing their markets completely disrupted.

Moreover, a changing customer base has also strongly impacted the demand for many products. For example, many restaurant and event catering supply businesses initially saw sales fall before creating new, flexible sales channels, such as online and local delivery, that have been wildly popular. Additionally, those businesses that supply staples to end consumers have struggled to meet the unprecedented increase in demand. The fluctuations in demand have been fast, unpredictable, and sizeable – changes which all have a significant impact on an industry that primarily trades in shorter shelf life goods. As businesses find a new ‘normal’ and begin to accurately forecast demand again, cash flow is needed to meet the new demands and opportunities for growth, as well as respond to fast-evolving sales distribution channels.

Disrupted supply chains are making it more difficult to meet fluctuating production levels for many in the food and beverage industry just now. Internationally-sourced ingredients and packing supplies may be taking longer than average to arrive with the reduction in flights and shipping. The same can be said for locally-sourced items, making the usual production lead times blow out.

Finally, even under normal circumstances, currency fluctuations can cause cash flow issues for businesses that either export or source materials internationally. Currency fluctuations mean many businesses are currently paying more than they usually would for imported goods and services, while also earning less from exports. Uncertainty has created downward pressure on the Australian Dollar with, as an example, the AUD/USD currency pair falling just over 10% between January and April 2020, from when news of the pandemic started to spread globally.  Without the cash flow to cover these often meaningful fluctuations, these businesses increase the risk of negatively impacting their bottom line during this extraordinary time.