Dive Brief:
- Skyrocketing demands for organic foods are disrupting the food supply chain by pushing the middleman out of the equation, Forbes reported last week.
- The U.S. organic market posted record sales last year, rising 11% from the previous year to $43.3 billion as millennial parents made their preference for sustainable and traceable products clear.
- Food processing companies are adapting to the shift in consumer by demanding machinery, materials and processes that prioritize industrial flexibility, minimize waste and optimize use of location, according to Area Development.
Dive Insight:
Decisions over the location of new distribution sites may be unique to the each manufacturer, but consumer trends are shared. Time-to-market requirements are shifting per distribution channel, and distributors are adapting.
A company making its name by citing its organic background, for example, would likely be best served by a distribution center in the Midwest, because of its ready access to both farms and large cities instead of near a port.
The rise of pre-portioned ingredient services, online grocery services and traceability demands have increased the necessity for strategic sourcing and location decisions. The increase in cold-storage and transport capacity have made sourcing closer to the farm possible. After all, one of the highest risk areas is the transport of raw materials since once the food is processed, various packaging and refrigeration strategies can be applied to keep the product fresh until it reaches the market.
However, any major sourcing decision still depends largely on labor availability. Area Development reports some food manufacturers rely on seasonal spikes for much of the year-round profit, and therefore must be located near a talented but seasonal labor force to tap into.
