The survey, which was compiled from over 300 executives from 65 countries in both food manufacturing and retail sectors, suggests that most suppliers believe that 2005 will be just as tough as last year. Over 67 per cent of manufacturing respondents placed retail-supplier relations as their most pressing concern.
"Perennial tensions between retailers and suppliers have been exacerbated by downward pressure on prices," said the report. "Further deflation is expected in certain categories in view of discount competition and increased global sourcing."
In addition, the emergence of discount competition has served to expose the complex buying practices of many food retailers. In some cases, this has involved fraud, notably at Ahold.
The long-termchallenge, says the CIES, will be to balance tough price negotiating withcollaboration in other areas - such as technical standards- to drive efficiency and differentiation.
With retailer responses also taken into account, the number one issue for the food sector in 2005 is competition. Many food retailers arestruggling with weak sales, while manufacturers are seeingtheir margins squeezed by higher commodity prices andlower shelf prices.
Technical standards also remain a top priority for retailers andsuppliers, according to the survey. Interest in this area has clearly been reinforced by the emergence of radio frequency identification. The consensus seems to be that benefits will be mostly felt in the supply side and particularly in high-value categories.
2005 will see RFID rolled out by a numberof major retailers with selected suppliers, through the use ofchips on pallets and cases, rather than on individual items.
Consumer health and nutrition has moved up sharplyin the overall ranking after a year of intense debatesurrounding obesity. The issue is a more immediateconcern for manufacturers - for whom it is the number three issue - asproduct makers.
Last year saw individual companies adapting their product ranges in accordance with current health trends. PepsiCo for example has removed trans-fat from its snacks in the US, while Kraft has decided to stop advertising in schools. But in the UK, manufacturer targets for salt reduction have been criticised as insufficient by the government.
But perhaps the most surprising statistic is that food safety and security has fallen out of the top five positions for the first time since 1999. This may show that it is a given, which is now well integrated intosupplier and retail strategies.
At the same time, the lower ranking alsoreflects the fact that nutrition has overtaken food safetyas consumers' main concern.
The main priority at the moment in Europe and the USis complying with new regulations covering traceability, orrecord keeping. The EU and the US have adopted similarrules that require food companies to keep records of theoperator immediately before them in the supply chain andthe operator immediately after them.
In Europe, while theapplication of EU law will vary according to the country,regulation 178/2002 has made it an offence to put unsafefood on to the market. In the US, the debate over thesafety of the country's food supply continues in the lightof the 9/11 terrorist attacks, and the industry remains indiscussion over the terms of a country of origin labelling("COOL") system.
Overall, the survey shows that food companies areexpecting 2005 to be a tough year. Price pressure andmulti-channel competition means that manufacturers will continue to struggle with ever-tighter margins. Nonetheless, the industry is quietly confident that achieving supply chain efficiencies and implementing global standards should signal the start of a recovery.
The 2005 CIES Top of Mind survey is based on the responses of 308 food business executives. The survey was conducted by email during late November and early December 2004.
Respondents were asked to pick a maximum of five topics from the list to indicate what will be top of their mind in 2005. Retailers made up 56.5 per cent of the respondents and manufacturers 43.5 per cent.
Paris-based CIES is the only independent global food business network. It serves the CEOs and senior management of 175 retailer and 175 supplier member companies, and their subsidiaries, in over 150 countries.