Supply Chain disruptions: New Study Clears Light on Root Cause of Increased Food Prices

TraceGains, one of the world’s only networked ingredient sourcing platform, today made public its 2022 State of Supply Chain Disruption Report, a survey based on answers from more than 300 food and beverage brands estimating the impact that macroeconomic necessities like ingredient availability and the pandemic have had on creation, product formulation, and the trickle-down effect on consumer costs and availability.

According to the findings, the increasing cost of ingredients pushes CPGs to adjust recipes or create new formulas altogether. Regarding the impact on innovation, respondents were nearly evenly divided between CPGs continuing to innovate and those making R&D cutbacks. Lessons learned for the future include more significant supplier diversity and enlisting contract manufacturers to protect against future supply chain disorder.

“As customers, we feel the pain of supply chain issues each time we walk out of a grocery store,” TraceGains CEO Gary Nowacki said. “This survey relieves light on the problem directly from a CPG brand’s philosophy, and lets other foods and beverage companies know they’re not sole in this fight. Forward-thinking brands have employed this unfortunate time as a wake-up call to modernize antiquated procedures and those who already have are much better positioned to mitigate disruptions with as little impact as feasible.”

Price of Conducting Business

The one thing affecting almost every CPG business? Higher ingredient prices. New product evolution and recipe modifications have been instrumental in reimbursing for this and ingredients lacking like sunflower oil, wheat, and stevia.

• Nearly 90% of survey respondents admitted that higher prices have shaped how they do business today. 37% of CPGs acknowledged altering more than 20 recipes or product formulas, while another 25% reversed between six to 20.
• Roughly two-thirds (65%) were forced to increase prices in the last two years.
• Nearly 50% completely stopped production on some products, and another 46% confessed they could not keep up with customer demand.

Pace to Innovation

In the last 24 months, supply chain disruptions have rapidly escalated due to the lingering COVID-19 pandemic and the ongoing conflict in Eastern Europe, which have greatly affected CPG goods production. However, while 35% of organizations relented to R&D cutbacks, nearly as many (36%) insisted that they’ve revved innovation, underscoring the stark difference in how some companies have coped during these difficult times.

Fate of the Supply Chain

As CPG brand leaders equip for what’s next, increasing supplier diversity is the most influential strategic shift. This is followed by leveraging contract manufacturers or third-party manufacturers that make precise components or products over a specified period.