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The Post-COVID Future of Food Manufacturing

Nov. 19, 2021
The pandemic supercharged existing technology trends. One of them, a disaggregation in foodservices, is currently unraveling food production as we know it.

At a Glance:

  • The pandemic was a stress test for new business models and countless new technology-driven services in the food and beverage sector.
  • The next 30 years will see three broad food trends in food production that revolve around being portable, individual and sustainable—all of which affect manufacturing.
  • “The Great Resignation”—a mass exodus of labor over the course of the pandemic—is a bane that leaves manufacturers scrambling to solve labor issues.
  • Alongside the continued expansion of large-scale manufacturing, small-scale, localized manufacturing is on a growth trajectory.

When the pandemic was announced formally in the early part of 2020, the food and beverage industry placed an enhanced focus on sanitary conditions and food safety.

The U.S. Food and Drug Administration, which regulates the food products, issued new guidance related to food and beverage manufacturing operations, and increased the scrutiny of food packaging and distribution.

For manufacturing enterprises, the goal was not merely to survive the pandemic, but to come out stronger and better able to take on whatever came next.

Yet, for all its unique challenges, the pandemic also served to intensify some of the industry’s ongoing challenges derived from built-in features in the industrial food system. According to trends analyst Brad McKay, the two pain points—business resilience and labor shortages, which plagued Americans through the first half the pandemic—will linger into the new normal.

Business Resilience Versus Labor Shortages

The first of these concerns, said McKay, raised the question, “Do I have a business?” Wholesome Kids Catering, a Canadian food services facility where McKay recently served as president, shut down for three months at the start of the pandemic. “The economy shut down starting in March of 2020,” said McKay. “We didn’t know if we would survive as an entity. For a lot of businesses, certainly on the service side, where your activity is driven by humans serving other humans, we weren’t sure whether or not we would survive.” 

But as the economy started to open up and businesses reopened, recalled McKay, the concerns for decision-makers shifted to another focus: “Am I going to have an employee base?”

The labor shortage is the bigger concern of the two, according to McKay, whose 30-year career in food manufacturing and related industries straddles roles at Procter & Gamble, Del Monte/Nabisco, Novartis, Parmalat and Healthcare Food Services. Dubbed “The Great Resignation,” the exodus of workers from the labor pool over the course of the pandemic is creating hiring challenges at an unprecedented scale, McKay said.

Labor statistics have quantified the gap. Pre-pandemic (December of 2019), McKay said there was a balance of abut 5.9 million people looking for jobs. In July 2021, there were more than 10 million job openings, but only seven million people looking for work, he noted. In general, manufacturers are hard-pressed when it comes to finding workers. “Rates are going up and manufacturers are having to take hourly wages up to attract people at both the hourly and the salary levels,” McKay said.

With strikes ensuing at Big Food plants—including Kellogg, Mondelēz Nabisco, Frito-Lay and Coca-Cola—the state of wages, working hours and working conditions reflect a unique set of conditions between food manufacturers and labor this year.

Meanwhile, the Consumer Brands Association reported continued demand for consumer packaged goods; CPG products intensified supply chain and labor challenges during this period. The CBA report noted that demand jumped 8.7% in the second quarter of 2021, demonstrating the rollout of vaccines and widespread reopening of the country had little effect on demand. Moreover, the CPG industry, the largest manufacturing employer in the U.S., added only 12,000 jobs during the quarter, despite more than 800,000 openings in manufacturing.

This reality, explained McKay, underpins the understanding that when people have been home for a year-and-a-half, they may have moved on to doing something else or that they have adjusted their sense of work-life balance. The drive for material wealth, noted McKay, is adjusting from past generations, when success was measured by long years of service, big salaries and having two incomes per family. “People are now saying, ‘Maybe I don’t have to work so hard. Maybe I don’t have to work at all.’ And that’s making it very difficult to find labor,” he said. 

For manufacturers, it means the cost of labor keeps going up. “You might say, well, that’s great for digitization and automation—we don’t need to have as many humans,” said McKay. “But you still have to transition to that future world where you have an automated situation…So that’s the struggle right now for everybody. The absence of labor is creating all of these supply chain breaks—that we can’t get fresh fruit, we can’t get products because there aren’t people to run the factories that produce these things, there aren’t truck drivers…So, it’s very difficult to get going. I would say that the thing that keeps most CEOs up at night would be labor right now.”

Convert Long-range Forecasts into Food Production Opportunities

Over the long haul, the greatest impact on the industry is going to be the continued change in the consumer, according to McKay, who has written papers on the long-range approaches to food production. In general, he estimated the next 30 years will see three broad food trends in food production that revolve around being portable, individual and sustainable—all of which affect manufacturing. 

Knowing and understanding what society—and manufacturers—are trying to achieve with these trends will inform what role technology will play:

  • The first trend is that food is going become portable. “It will become portable because we no longer eat as a family anymore,” suggested McKay. “We eat on the run; we eat wherever we go; we eat in our cars. Food is going to become wherever-you-can-get-it. Think of what we can dream of through to a Star Trek universe, where food is instantly available in a replicator. So, halfway towards that day, we’re going to see food available wherever you are—vending machines or food ATMs. And whenever you’re hungry, food will be available to you.”
  • The second trend is that food will be individual. The June Cleaver family of four sitting around the table for Sunday dinner doesn’t exist anymore, said McKay. Instead, we see that dining practices have changed. “If you’re hungry right now, you need to eat right now,” said McKay. “Everybody’s on the run, and they want a meal that’s good for them, partly because it’s portable. The other reasons driving this [are] allergies or preferences. It is very difficult for manufacturers to cater to everybody’s needs because they are so very fragmented. That’s why the meal will be individual.”
  • The third trend is that food has to be sustainable. “At the rate of population growth, and if we are to propagate our species for more than 1,000 years, then we’re going to have to change the way we behave,” said McKay. “The planet can no longer support the amount of consumption that humans are doing.” For this reason, he said, all of our meals will have to be made in a sustainable way.

Desegregating Foodservices

In addition to these fundamental shifts, McKay identified two more trends connected to pandemic resilience planning.

The first is the shift from grocery stores to home delivery. Related to the growth of home delivery companies and meal kit companies, is the developing concept of transitioning from groceries to meals. “People are still buying groceries at the store, but increasingly they’re buying them online and having it home delivered,” explained McKay. “What they’re buying is changing. It’s moving from groceries that you cook yourself, to meal kits that are prepared for your cooking and, ultimately, to a hot meal (delivered that way) or a meal that you reheat at home.”

All of this is moving towards a convenience trend, McKay said. As food habits shifts from cooking at home to having food cooked by some company, it creates a manufacturing opportunity. “I would think in a period of time—it could be as early as 30, maybe 50 years from now—cooking your own food at home will be as rare as making your own clothes,” McKay said.

The cumulative effects of a need for convenience, such as having door-to-door delivery, particularly for those who are shut in or not mobile, serves to instigate the desegregation of foodservice between cooking and serving, said McKay.

These broad trends feed innovative new business models. The concept of the “ghost kitchen” (also known as a dark kitchen or virtual kitchen) is just one example of a professional meal preparation concept. With no retail presence required and set up for delivery-only meals, these vendors helped brick-and-mortar businesses recoup their losses and minimize employee layoffs

These entities are here to stay. In the future, these will be small cooking centers distributed throughout the community, and delivery companies, such as Uber Eats or Skip the Dishes, will deliver meals, said McKay. “This is how you’ll see the foodservice industry break apart.”

Automation Serves Small Manufacturers, Too

There’s no doubt the pandemic was a stress test for new business models and for countless new services. Technology, it turns out, is not inherently opposed to resilience and proved to be the driving force with which small-scale, localized industrial food manufacturers demonstrated how they could carve a niche alongside the continued expansion of large-scale manufacturing.

Undoubtedly, the rise and growth of “small” manufacturers has also been supercharged by the shrinking of the world economy into trading blocs or national blocs well before the pandemic hit, said McKay. The need for fast, agile production was established well before the pandemic, when geopolitical trends forced supply chains to source raw materials regionally and locally, with the desired effect of shorter production runs and more varied product lines.

Looking back, globalization was good for manufacturing, explained McKay, because manufacturers could produce one SKU, such as a coffee cup, in a day and ship it all over the world. But charging ahead, the small manufacturer will want the option to use locally sourced raw materials to produce 100 coffee cups for a local market. “And that’s purely a wonderful spot for AI, digitization and automation to be, he said. “There’s just too much data to collect and too much volatility in the information for humans to be able to process it.”

Bridging the gap, manufacturers can now rely on innovative technologies and automation to bridge the gap, suggested McKay.

“This is a huge change in how we think about manufacturing,” he said. “And it’s all landing on the lap as a huge opportunity for AI and automation.”

About the Author

Rehana Begg | Editor-in-Chief, Machine Design

As Machine Design’s content lead, Rehana Begg is tasked with elevating the voice of the design and multi-disciplinary engineer in the face of digital transformation and engineering innovation. Begg has more than 24 years of editorial experience and has spent the past decade in the trenches of industrial manufacturing, focusing on new technologies, manufacturing innovation and business. Her B2B career has taken her from corporate boardrooms to plant floors and underground mining stopes, covering everything from automation & IIoT, robotics, mechanical design and additive manufacturing to plant operations, maintenance, reliability and continuous improvement. Begg holds an MBA, a Master of Journalism degree, and a BA (Hons.) in Political Science. She is committed to lifelong learning and feeds her passion for innovation in publishing, transparent science and clear communication by attending relevant conferences and seminars/workshops. 

Follow Rehana Begg via the following social media handles:

X: @rehanabegg

LinkedIn: @rehanabegg and @MachineDesign

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