Rising Costs Lead to Ingredient Reformulation

Food Science

Nearly 90% of manufacturers surveyed by TraceGains said higher ingredient prices have shaped the way they are doing business today. For many, this includes modifying or creating new formulas altogether and making research and development cuts.

In TraceGains “2022 State of Supply Chain Disruption” report, which surveyed more than 300 food and beverage manufacturers, the report found new product development and formula modifications have been critical to compensating for higher ingredient prices, according to the report. Thirty-seven percent of companies acknowledged modifying more than 20 formulas. A quarter admitted to modifying between six and 20 formulas.

Two-thirds of companies also said they were forced to raise prices in the last two years. Almost 50% halted production on some products. Another 46% said they have been unable to keep up with consumer demand. Respondents were evenly split between CPGs continuing to innovate and those making R&D cutbacks.

TraceGains also asked respondents about lessons learned for the future. Increasing supplier diversity was the most important strategic shift followed by leveraging contract manufacturers. Nearly 7-in-10 companies said they plan to expand their supplier networks in the next 24 months. Some 41% plan to change or eliminate product offerings altogether.

“As consumers, we feel the pain of supply chain issues each time we walk out of a grocery store,” said Gary Nowacki, chief executive officer of TraceGains. “This survey sheds light on the problem directly from a CPG brand’s perspective and lets other food and beverage companies know they’re not alone in this fight. Forward-thinking brands have used this unfortunate time as a wake-up call to modernize antiquated operations and those who already have are much better positioned to mitigate disruptions with as little impact as possible.”