SWOT ANALYSIS FOR FOOD INDUSTRY
SWOT analysis is one of the popular strategy tool which addresses strengths, weaknesses,
opportunities and threats used for businesses to plan their actions accordingly. It is designed to
facilitate realistic, fact based and data driven approach for analysing the strength, weaknesses
opportunities and threats for organization.
SWOT analysis was first used to analyze business however now it’s often used by individuals,
governments and non-profit organizations for defining better plans for better future. Food
industries are highly competitive industries with lot of competition in terms of products,
processes, markets and technologies etc. Right SWOT analysis would help food Industries to
make good strategic decisions related with production and distribution of the food products.
With respect to the clause requirement of context of organization in ISO 22000:2018 , this is
a new concept that urges an organization to conduct an analysis of its context and to identify
interested parties to understand the scope of the food safety management system. All this is
done to establish a clear focus on the processes and requirements needed to fulfill the objectives
of food safety. Top management in an organization is responsible for understanding the
context of the organization. It is because they are responsible for planning for the organizations.
Analysis of internal and external issues will lead to have organizational planning.
What is SWOT?
Strength:
Strength is an element which separates it from other competitors and in which organization
excels. Strength must be analyzed to decide how to use those results for business continuity
and growth.
Example:
What are we doing well?
What are our strongest assets?
Weakness:
Weakness stops the organization from performing at its optimum level. They are
the areas where the businesses need to improve to remain competitive. Weakness must be
analyzed to decide how to work on those results to achieve business continuity and growth.
Example:
What are our detractors?
What are our lowest performing lines?
Strengths and weaknesses are “internal factors” which take into account all the things that
business owner can reasonably control.
Opportunity:
Opportunities refers to favorable external factors that could give an organization a
competitive advantage. Opportunities must be analyzed to decide how to utilize this
opportunities for business expansion and growth.
Example:
What trends are evident in Marketplace?
What democracies are we not targeting?
Threat:
Threats refer to factors that have the potential to harm the organization. Analysis
of threats shall be done proactively to identify and worked upon it to eliminate or reduce
business risk related to business continuity and growth.
Example:
Who are are competitors and their market shares?
Any new regulations requirements that could harm the current operations. Opportunities and
threats are “external factors” which take into account things organization don’t have control
on but which will impact the business for better or worse.
Why to do SWOT analysis:
For systematic and detailed analysis of organization to make precise and better
decisions/strategy for organization.
Food safety management system (ISO 22000 2018) requirement related with context of
organization addresses the similar analysis to be done as a part of organizational risk
assessment.
It gives a clear picture in what you can excel and in what you need to have attention.
It may lead you to a previously untapped market or help you to to identify roadblocks that
could hinder productivity and profits.
By using SWOT analysis organization can reaffirm the industry positioning to use it to build
a strong foundation for business growth.
Food processing industry is a very competitive industry with so many E products
technologies etc. Right SWOT analysis would help industries to make good strategic
decisions related to to production and distribution of food product.
How to do SWOT analysis:
While doing SWOT analysis it’s better to co-ordinate with All the departments as it will
provide insights inputs from various perspectives.
Use brainstorming technique for generating list of ideas with respect to respect to strengths
opportunities weaknesses and threats for the organization.
Discussion of team members will lead to precise points related with mentioned aspects.
Draw a SWOT analysis Matrix for writing the points in respective categories.
Common examples of Strengths, weaknesses, opportunities and threats for SWOT analysis:
Strengths: (Helpful)
A. Established organization with popular brands and products.
B. Strategic location of plant.
C. Strong distribution network.
D. Strong brand
E. Low product cost
F. Loyal customers
G. Strong supplier relationships
H. Skilled and experienced manpower
I. Involvement of employee for improvements
J. Diversity of products
K. Strong social media influence
L. Minimum inventory cost
M. Latest technology with speed and capacity
N. Accreditation and certifications.
Weaknesses:(Harmful)
A. Newly established organization
B. Plant not suitably located
C. Cost of the product
D. Inventory cost
E. Weak brand
F. Limited cash flow
G. High level of debts
H. Low profit margin
I. Inadequate supply chain
J. Diversity of background of Manpower
K. Leadership issues
L. Centralized system for decision making
M. Frequent changes in management
N. Less involvement of workforce in improvement and problem solving
O. Old Technology
P. Unavailability of skilled manpower
Q. no certifications/ accreditation
No social media presence.
Opportunities:(Helpful)
A. New market for existing product
B. New products for existing and potential markets
C. Technology for high yield speed and cost reduction
D. New opportunities for marketing of product online and on other platforms
E. Social media marketing
F. High paying capacity of customers
G. Healthy and other new choices of consumers
H. Export of food product to other countries
I. Change in population profiles and lifestyles of people
J. Government subsidies for businesses and upgradation of setup
K. Contract farming supplier contracts
L. Partnerships and associations
M. Research and Development.
Threats:(Harmful)
A. Limited suppliers
B. Competition with respect to Products markets technology
C. Competition in supply chain
D. Changing taste requirements of consumers
E. Changing scenarios in government policies regulations
F. Government restrictions
G. Profitability of business
H. Situation like covid-19 and other emergencies
I. Evolving Technology
J. New hazards and food safety risks
K. Intentional activities To hamper food quality and safety
L. Political effect
M. Weak data security
N. Attrition of people
O. Factors like seasonality and weather impact on resource availability.
Conclusion:
Systematically conducted SWOT analysis will help to identify the crucial factors for a
business. These factors when further analyzed in terms of risk assessment and opportunity
assessments will help to develop a better planning for business. Planning shall further be
detailed in terms of actions which should address
What to do?
How to do?
When to do?
Who will do?
Objectives of the businesses should be in line with this action for precise monitoring and to
achieve the improvements. Thus SWOT analysis can be used a powerful tool for
organizational risk/opportunity assessments and action planning to address those risks/
opportunities.
Example
Introduction to Food and Beverage Industry
The food and beverage industry is the sub-category of the Hospitality industry such as hotels
and restaurants, where they serve their guests with a variety of food and drinks along with
other services. When we talk about the food and beverage industry, then it relies on two
major parts; production and distribution. However, production starts with the farmers and
fields, then transported to industries. After the process, you’ll get the distribution of orders
along with other stakeholders.
Food and beverage is a very competitive industry with a plethora of competitors in the
market. The right SWOT analysis would help you to make good strategic decisions. Like how
to identifies core strengths and weaknesses of the company, and to minimize threats and take
advantage of the opportunities.
It’s better to coordinate with all the departments while conducting a swot analysis, because it
would provide you an insight from the various perspectives.
Here’s a step by step swot analysis of the food and beverage industry.
Strengths of Food and Beverage Industry
Some of the strengths of the food and beverage industry are as follows;
Strong Distribution Network
Hotels and restaurants offering specific foods and drinks usually have chains and networks of
hotels across the country. Some brands operate at a global level. However, they have a very
good distribution system, which makes the products available to the customers regardless of
their location.
Costing
Since the products of the food and beverage industry produced at the economies of scale,
therefore, the prices of them are low. Cheap prices make products affordable to customers.
Relations with Suppliers
The relationship between the food and beverage industry has with its suppliers isn’t
temporary. In fact, it goes on for years supplying the same products day after day. When you
have reliable suppliers, then you wouldn’t face shortages and delays in the delivery of
products.
Return on Investment Period
Hotels and restaurants in the food and beverage industry require a huge investment to start,
and the minimum profiting period comprises of 5 years. Initial years would cover all the basic
costs and expenses, the balance sheet would remain equal in the beginning. Once it starts
profiting, you would earn a lot in the long term.
Highly Skilled Workforce
Chef, cook, waiter, and other staff, they may seem simple jobs. But they require a great
proficiency in the skill, only then they would be able to produce and deliver the quality
service.
Diversity
The interesting thing about the food and beverage industry is diversity. Its workforce usually
from different social, cultural, racial, regional, and ideological backgrounds, but they work as
one team under one roof. Diversity is not good for innovation and creativity, but it also boosts
the team spirit.
Market Expansion
When you have a strong diverse team, and also a diverse portfolio of products, then you can
easily expand business into different areas. That’s how McDonald’s has created a network of
hotels across the world.
Influence of Social Media
We’re living in the world of social media (Facebook, Instagram, Whatsapp, Twitter, etc) if
the food and beverage industry effectively uses these platforms. Then they can reach a much
bigger audience, and attract many new customers.
Weaknesses of the Food and Beverage Industry
Less Research & Development
The food and beverage industry usually doesn’t allocate a specific budget for research and
development. Chef and cook follow the specific cooking style and product the same product
over and over again. One thing we all know that customers usually get tired of the same taste.
If you don’t change or update products’ tastes, then they would go to the other brand.
Inventory cost
There should be a narrow margin between the supply of raw products, cooking, and
consumption. It would only be possible if you have a punctual supplier. If you’re unable to
find one, then you would have to pay for the unnecessary inventory cost. If business is big,
then it would be high.
High Rental Expenses
You would need a crowded public location to attract new customers. Rents are usually very
high at such places. Even a great portion of business profit goes to the payment of rents.
Less Profit
Having discussed earlier that hotels and restaurants in the food and beverage industry usually
required a huge investment, and their profit margin is very low in the beginning. Therefore,
you shouldn’t be completely reliant on one source of earning.
Limited Cash Flow
If you have started the business in the food and beverage industry without having done
sufficient planning in terms of profit period, inventory cost, and other miscellaneous
expenses. It’s highly probable that business would end up limited cash flow and borrow from
other loan agencies
Diversity
A diverse workforce is an asset to the company if people are educated, tolerant, and patient.
If not, then diversity would create a conflict among workers that would affect their
performance.
High Turn Over
Employees working in the food and beverage industry usually rely on the tips of customers,
because their hourly wages are very low. They are from the demographic of students and
part-time workers. Whenever they get a better opportunity, they leave it immediately.
High Market Share of some Products
When you have a diverse portfolio of food and drinks, then not all the items in the menu list
would attract a huge market share. Only some of the items on the list would become
successful. In the end, business would be relying on the few items to cover all the expenses.
Centralized System
The functionality and decision-making system of the food and beverage industry is
centralized. The management decides and the employees have to follow. Employees don’t be
involved in the decision-making process. Management remains unaware of the public interest
and employee’s lack of performance.
Opportunities for the Food and Beverage Industry
Online Store & Delivery
Most of the world-leading brands in the food and beverage industry are converting their
business online. Where people would have the option to choose any of their favorite food
items and place their order for delivery. store would receive the online order, process it, and
deliver the required food items on the customer’s address.
Technology to Reduce Cost
If the food and beverage industry adopts technology in the maintenance of recording, smart
broiler and ovens in the kitchen, and online ordering system. Then the whole business would
become efficient, there won’t be any delaying cost or kitchen-related safety incidents.
Although these events happen rarely; but when they do, then they cost business a lot.
Higher Income
The income of the ordinary working class has been increasing for the past few years, it’s
because of wage laws. When people have extra money, then they would spend by eating well.
More sales mean more profit.
Higher Population
Population across has been increasing across the world. Although it has many disadvantages,
it’s beneficial for the food and beverage industry. It is because a higher population means
more people to feed, more people means more sales.
Inflation and Interest Rate
Industrialization, mass production, and economies of the scale have lowered the per-item
cost. More businesses are proliferating because of the lower interest rate. Consequently,
people have more salaries and the products are getting cheaper. It’s a win-win situation for
the food and beverage industry.
Tourism
The tourism industry is directly linked with hotels and restaurants, and hotels offer food and
drinks. When the tourism industry has been increasing, more tourists are visiting different
parts of the world, staying at the hotels, and enjoying different types of local foods and
drinks.
Training the Employees
Training of employees may seem a waste of time and an expense. But it saves business a lot
of other costs like; proficient service, fewer incidents, and fewer turnovers. When you train
employees to perform better, actually you’re investing it in the future of business.
Threats to the Food and Beverage Industry
Competition
Technology and online shopping have made the entrance into this industry quite easier.
Resultantly, the food and beverage industry has become very competitive. Now, customers
have a plethora of choices to order one product. There are many brands offering the same
product.
Fewer suppliers
Since the market is very competitive, but the supplying sources of raw material are limited.
The functionality of business depends on the good relations you have with suppliers. If they
supply you the raw products timely, only then you’d be able to complete the orders on time.
Customers’ Changing Tastes
Since the market is crowded with many competitors and customers have many options to
order the same product. In such an environment, you have to be unique in terms of food taste.
Only then you would be able to capture the market share. Now, customers want not only food
but a unique and different taste.
COVID-19
A recent wave of Coronavirus (COVID-19) has caused the lockdown everywhere. Hotels,
restaurants, and tourism are badly affected by it. The food and beverage industry also goes
side by side. Those hotels that were offering online services are still running, and others have
to do the same in order to survive.
Conclusion
After carefully studying the swot analysis of the food and beverage industry, it can be
concluded that the food and beverage industry is a very profitable business. Although very
competitive and it requires a huge investment to start. But the current wave of COVID-19 has
affected it very badly. Online orders and home delivery is a very good option for the newcomers
and also for those that haven’t started it yet.
The term agribusiness is a generic one that refers to various businesses involved in food
production. Businesses do not exist in isolation - every business has suppliers of goods it needs,
and buyers of the goods it makes/sells - each having the same driving forces and critical
responses. The grouping of these businesses is called a chain of companies and tends to reflect
the industry the businesses are involved in. The agri-industry sector is a large, multifaceted
industry sector that exists worldwide, and involves a range of businesses that create industry
specific (e.g. grains, sugar cane, timber, dairy, cattle/meat, fruit and vegetables, cotton, wool,
to name a few) agri-industry chains that often exist across international boundaries.
SUPPLY CHAINS
A ‘supply chain’ when different actors are linked from ‘farm to fork’ to achieve a more
effective and consumer-oriented flow of products. Such supply chains may include growers,
pickers, packers, processors, storage and transport facilitators, marketers, exporters, importers,
distributors, wholesalers, and retailers. Supply chain development can thus benefit a broad
spectrum of society, rural and urban, in developing countries. A supply chain can be broken
into three major parts (components): upstream, internal, and downstream.
The upstream supply chain: The upstream part of the supply chain includes the activities of
a company (a milk producer, in our case), with its first-tier suppliers and their connection to
their suppliers (referred to as second-tier and third-tier suppliers). The supplier relationship can
be extended several tiers, all the way to the origin of the material (e.g., mining ores, growing
crops). In the upstream supply chain, the major activity is procurement.
The internal supply chain: The internal part of the supply chain includes all of the in-house
processes used in transforming the inputs received from the suppliers into the organization’s
outputs. It extends from the time the inputs enter an organization to the time that the products
go to distribution outside of the organization. The internal supply chain is mainly concerned
with production management, manufacturing, and inventory control
The downstream supply chain: The downstream part of the supply chain includes all of the
activities involved in delivering the products to the final customers. The downstream supply
chain is directed at distribution, warehousing, transportation, and after-sale services.
Supply Chain Management: The function of supply chain management (SCM) is to plan,
organize, and coordinate the activities along the supply chain. Today, the concept of SCM
refers to a total systems approach to managing the entire supply chain.
THE SUPPLY CHAIN FLOWS
There are typically three types of flows in the supply chain: materials, information, and
financial (money). In managing the supply chain, it is necessary to coordinate all of the flows
among all of the parties involved in the chain.
Material flows: These are all physical products, raw materials, supplies, and so forth, that flow
along the chain. The concept of material flows also includes reverse flows—returned products,
recycled products, and disposal of materials or products. A supply chain thus involves a product
life cycle approach, from “dirt to dust.”
Information flows: This includes all data related to demand, shipments, orders, returns,
schedules, and changes in the data. It also includes customer feedback, ideas from suppliers to
manufacturers, order flows, credit flows, information to customers, and so forth.
Financial flows: The financial flows are all transfers of money, payments, credit card
information and authorization, payment schedules, e-payments, and credit related data.
SUPPLY CHAIN MANAGEMENT AND ITS BENEFITS
Managing supply chains requires an integral approach in which chain partners jointly plan and
control the flow of goods, information, technology and capital from ‘farm to fork’, meaning
from the suppliers of raw materials to the final consumers and vice versa.
In order to react effectively and quick to consumer’s demand, supply chain management is
consumer-oriented. It aims at coordination of production processes. Supply chain management
results in lower transaction costs and increased margins. Because of the many activities and
aspects involved it demands a multidisciplinary approach and sustainable trade relations.
Supply chain partnerships are based on interdependence, trust, open communication and
mutual benefits. The advantages of the supply chain management approach are numerous.
Some important advantages are:
1. Reduction of product losses in transportation and storage.
2. Increasing of sales.
3. Dissemination of technology, advanced techniques, capital and
knowledge among the chain partners.
4. Better information about the flow of products, markets and
technologies.
5. Transparency of the supply chain.
6. Tracking & tracing to the source.
7. Better control of product safety and quality.
8. Large investments and risks are shared among partners in the chain.
SUPPLY CHAIN MANAGEMENT TOOLS
A range of new supply chain management tools have been developed over the past decade.
‘Efficient consumer response’ (ECR) has been developed to increase the consumer orientation
and cost-effectiveness of supply chains. New management systems have been implemented to
improve logistics, increase the use of information and communications technologies and boost
quality management (Lambert and Cooper, 2000). New generation cooperatives are emerging,
strengthening the position of farmers’ groups and strategic partnering and vertical alliances are
cementing sustainable partnerships throughout the supply chain.
Food safety concerns have led to the development of ‘integral chain-care’ tools such as social
accountability, good agricultural practice (GAP), total quality management, and HACCP
(hazard analysis at critical control points). Implementation of such tools throughout a crossborder supply chain enables chain partners to ensure the quality and safety of their products
and guarantees acceptable social chain performance. Supermarkets in Brazil and Thailand, for
example, have initiated total quality management programs and HACCP rules for perishables
like fresh fish and meat.
Retailers (e.g., Walmart, Carrefour, Royal Ahold, Tesco and Sainsbury) have increasingly
established their own quality standards (e.g., EUREP-GAP and BRC2) which suppliers must
meet. Tracking and tracing systems are used to certify the quality of products and ensure
transparency in the flow of goods throughout the supply chain. Implementing such standards
and systems impacts not only the organization of supply chains, but also financial aspects of
chain cooperation. These standards and systems are now being used in the agricultural sector
and have proven their value in cross-border projects. Sharpened requirements for standards
have prompted public and private actors to establish a variety of initiatives to build or
strengthen agri-supply chains.
Retail food store/grocery means any establishment or section of an establishment where
food and food products are offered to the consumer and intended for off-premises
consumption. The term does not include an establishment that handles only prepackaged,
non-potentially hazardous foods such as candies and other snack foods, roadside or produce
markets that offers only whole, uncut fresh fruits and vegetables for sale, or food and
beverage vending machines.
Significance of Retail Food Market
Retail food is one of man's most important expenditures because people need to eat to live
healthy lives. Most people purchase retail food items every week, including meat,
vegetables, fruit, milk, bread, eggs, snacks and many other items. Retail foods can be
packaged in boxes, cans, cellophane wrapping or cylindrical cardboard containers. Some
retail food like fresh vegetables are not individually packaged at all. Retail food has high
demand elasticity; regardless of the state of the economy, there will be a fairly consistent
need for retail food products.
Identification of Retail Food
Retail food can either be perishable or non-perishable, which is important for determining
the proper storage procedures and inventory methods for various retail foods. Products like
milk and eggs are perishable and only have a limited shelf life. They must be refrigerated at
all times. Expiration dates are clearly marked on these items. Boxed and canned foods also
have expiration dates but typically have extensive shelf lives. Because of the nature of retail
food, the FIFO (first in, first out) inventory method is used when stocking shelves. Thus,
older items are always pushed toward the front on shelves to improve grocery retail sales
and reduce waste.
Retail supply chain management
A strong and efficient ‘Retail Supply Chain Management’ and ‘Logistics System’ provides a
firm foundation and backbone for success in any kind of retail business whether the retailer
comprises of street vendors, local grocery stores, supermarkets, automobile showrooms,
internet kiosks, home appliance showrooms, direct marketers, etc. A ‘Supply Chain’ is the
sequence of organization of facilities, functions, and activities that are involved in producing
and delivering a product or service. A ‘Supply Chain’ is also known as ‘Value Chain’.
Supply Chain is the flow and management of resources across the retail enterprise for the
purpose of maintaining the retail operation profitably. ‘Retail SCM’ can be defined as the
management of a network of all retail business processes and activities involving
procurement of raw materials, manufacturing and distribution management of finished goods
to reach the end user. SCM is also called the art of management of providing the Right
Product, At the Right Time, Right Place and at the Right Cost to the Customer.
Retail Supply Chain Strategies are the critical backbone of retail businesses today. Effective
market coverage, availability of products at locations which hold the key to revenue
recognition depends upon the effectiveness of Supply Chain Strategy rolled out. Very simply
stated, when a product is introduced in the retail store and advertised, the entire retail stores
in the country and all the sales counters need to have the product where the customer is able
to buy and take delivery.
Any glitch in the product not being available at the right time can result in drop in the
customer interest and demand which can be disastrous. Thus, design of transportation
network and management assume importance to support retail sales and marketing strategy.
Inventory control and inventory visibility are two very critical elements in any retail
operations as these are the cost drivers and directly impact the bottom line in the balance
sheet.Inventory means value and is an asset for the retailer. Every retail business has a
standard for inventory turnaround that is optimum for the retailer. Inventory turnaround refers
to the number of times the inventory is sold and replaced in a period of twelve months. The
health of the inventory turnaround relates to the health of retail business.