If the Cokevs. Pepsi wars invoke the ‘80s, other beverages have emerged as the victors of this decade: Illustrating the fact that the beverage industry is undergoing massive change, says John Deris, Sr. Vice President of National Sales of Fleet Management Solutions forRyder System, Inc., a global transportation and supply chain management company.
“It’s been tremendous,” explains Deris. “There’s more competition than ever, even though the big players are still the big players. Everything from growth in emerging markets to the cost of doing business in the U.S., to foreign companies coming here—it’s all having an impact on the sector.”
Which beverage is making the most waves? Water. Over the next two years, bottled water is expected to become the top packaged beverage within the U.S.—the segment grew by more than seven percent in 2015. Beer is expanding too, with the craft beer market topping $19 billion.
While growth in the soda and carbonated drink market is slowing, more than 4,600 new beverage products are being introduced every year. These changes, plus tougher demands from retailers, are increasing supply chain costs and putting pressure on existing infrastructure, says Deris.
He cites an example: At one time, beverage companies could deliver drinks to the retailer far less frequently than they do now. Plus, there were fewer items to ship from warehouse to store. Retailers now, though, are constantly re-evaluating store space, and thus asking for products to arrive at specific times and in exact numbers, says Deris.
All of that adds more costs to the supply chain.
“These things trickle down and it makes it more challenging,” says Deris. “The industry is becoming more consolidated, but the supply chain is getting more complex.”
Of Supply Chain Management, Water and Beer
As a result of these changes, companies big and small are outsourcing supply chain management in an effort to control costs. Among these experts is Ryder, with its focus on discovering supply chain efficiencies.
The Miami-based fleet management and supply chain solutions company has a long history of combined experience and expertise in this sector. Its first lease customer was Champagne Velvet Beer in 1938, and now Ryder serves more than 4,000 customers in the food and beverage industry, including all of Fortune’s top 10 U.S. food and beverage companies. With a network of millions of square feet of warehouse space, and hundreds of thousands of vehicles, Ryder helps its clients move their products faster and more efficiently.
“It’s the companies that are more fiscally sound that will survive in a world of consolidations and increasing competition,” says Deris. And LEAN is an example of that very soundness. “The evidence does show that companies that embrace LEAN can help drive efficiency throughout the supply chain and quickly improve profitability.”
An example: The Kemet Corporation manufacturing plant in Matamoros, Mexico—a Ryder client—cut logistics costs by 20 percent by cultivating a LEAN culture.
The LEAN Approach for the Beverage Industry
According to Ryder, the first action a company should take is to implement LEAN, a process developed by automotive companies to eliminate waste in the supply chain process. The idea is to get supply chains running at peak performance: If something doesn’t improve efficiency or speed to market, it’s eliminated.
Ryder has helped countless companies implement this strategy. “When a company starts down the path of LEAN they have to look at the big picture and see where waste exists through the entire process,” says Deris.
For example, the company takes a self-described “source to shelf” approach, which forces its clients to look at everything from raw materials and distribution channels to delivery methods and relationships with retailers. This will help businesses manage their inventory better and provide added value to their customers.
According to Deris, it’s the companies that quickly adapt to the industry’s new normal—more SKUs, mergers and retailer demands—that will stay ahead of changing trends and even create their own.
“Companies will have to increase their profitability and pick up more new product SKUs. But they need an efficient distribution system to do this,” he says. “It’s a matter of survival.”
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