Labor shortages, escalating costs and other pressures continue for food companies. Rising insurance premiums, particularly in areas prone to extreme weather or natural disasters, are adding strain to the industry. Yet, despite these hurdles, growth opportunities remain. By 2027, the global food and beverage market is projected to reach $9.2 billion, according to the Food and Global Beverages Market Report.

Organizations that adopt proactive risk management, workforce innovation and strategic cost controls will be better equipped to navigate today’s challenges. Here are four critical issues impacting the food and beverage market and strategies to address them effectively.

Shrinking profit margins

Rising costs from high-interest rates and energy demands are squeezing profit margins. Energy expenses alone are expected to outpace inflation, further straining budgets in food and beverage production.

Sophisticated inventory management can help optimize stock levels and cash flow, while financial tools like futures contracts can stabilize costs against market volatility. Additionally, insurance costs are eating into profits, with business interruption and stock throughput insurance becoming harder to secure.

To mitigate rising insurance costs, businesses can explore alternative risk management solutions. Working with brokers to design innovative insurance strategies—such as captives or layered coverage—can help control costs and maintain profitability.

Expanding risk factors

Food companies face mounting risks from supply chain disruptions, severe weather and cybercrime. Facilities must be fortified against natural disasters, and comprehensive supply chain contingency plans should be developed.

Food recalls from undisclosed allergens remain a consistent threat, emphasizing the need for regular audits and strong oversight. Cybersecurity is also a growing concern, especially for food and beverage producers reliant on legacy systems. Multi-factor authentication, endpoint detection tools and ongoing employee training are essential to mitigate cyber threats.

Catastrophe modeling and robust business continuity plans will also be crucial for long-term stability. These tools can help companies anticipate and address risks, ensuring smoother operations in an uncertain environment.

The tight labor market

In November 2024, there were 7.7 million open jobs but only 7.1 million unemployed workers, leaving industries like food and beverage struggling to fill physically demanding or hazardous roles. Labor shortages and worker walkouts have plagued food and beverage manufacturers and are likely to persist in 2025.

Automation and AI have alleviated some of these challenges, streamlining repetitive tasks and enhancing productivity. However, these technologies are no panacea; some businesses have reverted to human labor due to automation-related issues like product defects and higher costs.

To combat workforce shortages, companies can leverage data-driven insights to offer personalized benefits that prioritize employee health, safety and well-being. Such benefits not only improve retention but also enhance recruitment efforts by creating a more attractive work environment.

Building resilience

Weather-related catastrophes and cyberattacks continue to challenge the industry. From wildfires to floods, these events have reduced farm yields, making raw materials harder to source for food and beverage processors. Meanwhile, rising insurance rates for commercial property are adding financial burdens.

Specialized insurance products, like parametric policies that trigger payouts after predefined weather events, can provide crucial protection quick. Consulting with brokers to explore self-insurance, captives or layered programs can help businesses stay resilient.

Looking forward

As companies continue to hit challenges this year, it’s essential to address root causes proactively. Implement strong risk management practices, optimize employee benefits and training, and secure comprehensive insurance coverage. These steps can ensure not just survival but also success in an increasingly challenging market.