The global drive to lower costs of goods and services around the world, from reducing liquid cost for still drinks to clothing, footwear and cellular phones, may have encountered a bump on the road.
Whether it’s a bump or a bona-fide barrier remains to be seen, because things are very fluid at the moment.
The main culprit is, of course, the “trade war” tariffs imposed on an ever growing list of materials and products, affecting, among others, the food and beverage industries worldwide.
The trade war may affect this industry in more than one way:
How do companies react?
The trade war is driving companies, manufactures, and retailers alike, to develop new strategies in order to adapt to the new business climate. One of the trends is “Multi-Localisation”.
Multi-localisation consists of several directions.
- Adapting the product to local preferences: Learning local preferences and tastes, and acting on that data, can result in new products, more streamlined with the local consumers. A case in point might be the realization that a in India, for example, fruit drink compound is mixed with a carbonated drink, in order to add fruit content; this may present an advantage for a fruit drink manufacturer over a “classical” soft drink manufacturer.
- Local production: This re-thinking of mass market production could, on one hand, reduce transfer (shipping) and import (and tariffs) costs, and, on the other hand, reduce the environmental impact of long-range international transportation of goods.
- Buy local: Localisation may make it easier for companies to market their products online, where the bulk of purchases is likely to increase rapidly. This would also be considered a response to the growing trend of buying from local brands.
According to surveys, almost 90% of major global companies are considering localisation at some level. When push comes to shove, companies like GatFoods, which has local presence in Europe, are best poised for this change.
When considering the issue of raw materials for still drinks in this context, it is important to remember that reducing liquid cost for still drinks:
- Depends on the specialization of a company in using fruit drink compounds and bases.
- Provides operational ease of use.
- Provides a more stable and known liquid cost, thus avoiding price fluctuations, especially in the current global situation.