Global food & beverage manufacturers look to smart finance to meet pandemic investment challenge

21 October, 2020

Companies that invest in agile technologies including automation, digitalisation and retrofit projects are best placed to react to shifting market demands with optimum flexibility and resilience. The size of the investment required is, however, considerable.

New research from Siemens Financial Services (SFS) estimates that the global investment challenge for food & beverage industry for digital transformation alone is over US$567 billion over the next five years.

Smart manufacturers are deploying new financing models, mainly from manufacturing-specialist financiers, to provide commercially sustainable ways of maintaining the momentum of technology and equipment investment.

Siemens Financial Services (SFS) has released a new whitepaper entitled Rising to the New Challenge: The role of smart financing in helping the global food & beverage sector navigate the economic ‘new normal’. This is the second in a series of insight papers on the automation, retrofit and digital transformation investment challenges faced by manufacturers.

The importance of agile technologies

The pandemic crisis and its economic aftermath make the importance of investing in agile technologies even more critical. Historic evidence shows that companies that continued to invest in previous crises emerged ahead of their competitors. Such investments typically enable manufacturers to achieve levels of operating flexibility that can cope with uncertain and volatile markets – a flexibility that is becoming an increasingly important competitive advantage as patterns of supply and demand, as well as working and labour practices, are likely to fundamentally change as the crisis recedes and businesses and consumers embrace ‘the new normal’.

The size of the investment challenge is, however, considerable. SFS has developed a model which conservatively estimates the size of the investment challenge faced by the global food and beverage manufacturing industry as it seeks to implement smart factory technology during the five-year period 2020-2024.

Expert commentators are advising companies to diversifytheir financing sources, nurture existing lines of relationship credit, and harness alternative financing sources, such as Smart Financing, to preserve existing lines of credit. New financing models to enable technology and equipment investment are often aligned to business outcomes, to integrate financing closely with the expected rate of return-on-investment delivered through the benefits of retrofitting existing installations and/or adopting new agile, digitalised technologies.

“The flexibility offered by upgrading existing platforms through retrofitting automation, or digitalisation can be a significant competitive differentiator during this crisis,” says Brian Foster, head of industry finance at Siemens Financial Services. “The ability to adapt swiftly and intelligently to rapidly changing markets remains an urgent need for businesses of all sizes. Smart finance enables sustainable investment based on clearly identified desired business outcomes for food & beverage manufacturers, facilitating access to the right technology and services with expert support from a specialist financier.”

Methodology

SFS has developed a model that conservatively estimates the size of the investment challenge faced by the Global Food and Beverage manufacturing industry as it seeks to digitally transform – even through the current economic difficulties. The model takes a variety of analyst predictions of the value of the global food & beverage Industry’s investment in digital transformation for the five-year period 2020-2024 inclusive. The resulting figure is then adjusted by the proportion of digital transformation solutions that the global food & beverage industry is already acquiring through smart finance. Additionally, the estimate is reduced to just half of the ‘available market’, to give a highly conservative view of the sheer scale of investment required even to reach 50% market penetration.

For further information, visit: www.siemens.com/newchallenge-food-and-beverage