Business interruption poses major threat to food and drink companies: WTW

According to the 2024 Global Food and Beverage Risk Outlook published by WTW, a global advisory, broking, and solutions company, nearly half (48 percent) of food and drink companies identified business interruption as the biggest internal risk to their success.

This was closely followed by supply chain risk, cited by 40 percent of companies. Managing turbulence and potential disruptions has become a standard practice in the food and beverage sector, driven by global instability, conflicts, climate change, and the cost-of-living crisis. As a result, companies are understandably cautious about their future.

Over 41 percent of food and beverage companies have identified increasing liquidity as a top strategic objective for the next two years, ensuring they have the financial resources to handle further shocks. Other key priorities include reducing costs, which 38 percent of companies are focusing on, and stabilising the business, a goal for 35 percent of companies.

In addition, companies are becoming increasingly hesitant about their ability to keep pace with rapidly changing consumer tastes and preferences, with 36 percent identifying this as a risk. However, this challenge also represents an area of opportunity, as companies can pivot to capitalise on the latest consumer trends.

More than half of the businesses surveyed (53 percent) view welcoming sustainability and health and wellness as a significant opportunity. Compared to 2022, there is less enthusiasm for plant-based meat substitutes, while interest in gut health, nutrition, and sustainable production among consumers has grown.

Regardless of the challenges, food and beverage companies are actively working to build resilience. Nearly half (47 percent) review their business continuity plans every six months, while 31 percent do so quarterly.

However, more than a quarter (29 percent) of these businesses reported that their insurance policies only cover property damage in the event of extreme weather, without including business interruption coverage, which is essential for recuperation and resilience.

“Many of the challenges food and beverage firms face today are of a different order from those they have overcome before. Geopolitical instability, conflicts and cost-of-living crises, alongside climate change, digitalisation and keeping up with the needs and wants of consumers is getting harder in a fast-changing world,” commented Simon Lusher, Global Food and Beverage Leader at WTW.

“While our survey shows that businesses are taking steps to become more resilient in the face of these challenges, as part of the process it’s a good idea to reassess the critical issues in the business, areas of focus, how they can manage the key risks they face, and where they might need more protection. That way, businesses are prepared for almost every outcome and operations can keep moving forward,” further added Lusher.

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