A County Councils Network and Newton Research Programme
Future Factory
Supercharging digital innovation in food and drink manufacturing
November 2024
Contents
About Newton
About The FDF
06 05
Executive summary
Activating acceleration Foreword from Junaid Mujaver, Partner, Newton
08-09 The critical role of food and drink manufacturing Introduction to the sector 10-13 From great to groundbreaking A compelling case for transformation
Newton partners with clients in strategic delivery across the public and private sectors, unlocking complexity to create meaningful and lasting impact. Throughout its 20+ year history, Newton has shaped and delivered programmes across leading retail and manufacturing supply chains, public sector organisations and defence and infrastructure organisations. This work delivers real impact, including better value offerings for consumers, over £1.5 billion savings on a national defence programme, and more than £1.6 billion savings across the public sector, while also improving outcomes for thousands of people. Newton believes so strongly in what can be achieved together with clients, that it stands by the founding idea of Newton – guaranteeing its fees against delivering real, measurable outcomes.
The Food and Drink Federation (FDF) is the voice of the food and drink manufacturing industry – the UK’s largest manufacturing sector. We contribute over £38 billion to the country's economy, supporting half a million jobs and driving growth at home and abroad. For more information on the FDF and the industry we represent, visit:
§ International comparisons: G7 economies and beyond § Comparison with other advanced manufacturing in the UK § Spotlight: Can better automation unlock value?
fdf.org.uk.
14-20 Closing the action gap Obstacles to overcome
§ Commercial environment First move momentum vs. firefighting § Capabilities Industry evolution vs. talent attraction § Solutions Legacy systems vs. modern solutions
newtonimpact.com
21-26 A kickstart to transformation Ideas to spur on change
§ Vanishing horizons Proving impact today § Activating talent Spotlighting purpose and progression § The new rules of engagement Collaboration from farm to fork Conclusion From Karen Betts OBE, Chief Executive, Food and Drink Federation (FDF)
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Be part of it Contact details
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About the Future Factory research programme
BECOMING WORLD LEADERS WOULD UNLOCK £7-14 BILLION OF VALUE FOR THE UK ECONOMY Executive summary Compared to other G7 countries and Europe, the UK performs well in terms of the gross value added (GVA) per employee, with only USA, Canada, Netherlands and Belgium performing significantly better. If the UK is to transition from great to world-leading, this could unlock a further £7-14 billion of value for the economy, representing a 22-44% improvement (2-4% annual improvement above inflation over 10 years). Food and drink manufacturing has huge investment potential Compared to other UK advanced manufacturing, food and drink has only seen 27% of the investment that transport and engineering has over the last 20 years. However, food and drink manufacturing has returned £9 for every £1 invested in that period, with transport and engineering returning £5 for every £1. How well is the industry adopting automation, digital and AI? Now, after a period of turbulence, the industry is innovating extensively including in the use of AI as it moves into a new era. From manufacturing, R&D, procurement, commercial and the supply chain, there are great success stories across the industry in companies of all size. While these technologies hold enormous promise, their adoption is not without challenge. There are three key obstacles standing in the way of sweeping transformation: 1. Proving return on investment quickly enough 2. Attracting top talent to drive digital transformation 3. Integrating innovative solutions into legacy systems
The Future Factory research programme underpins this report – as well as informing discussions at the follow-up roundtables with senior industry leaders and the final recommendations to the UK government. It is based on interviews with: § Senior leaders including managing directors, supply chain and procurement leaders, data and analytics officers and site managers at 30+ UK food and drink companies, covering big players and growing businesses including Aldomak, Britvic and Associated British Foods
Research programme
Report
Can the digital age propel UK food and drink manufacturing from great to ground-breaking? The question is, how can the industry overcome these obstacles so it thrives in the digital age? The answer lies in investing strategically and collaborating closely. To unlock the sector’s full potential, a united focus is required, with everyone also playing their own role in the transformation: § Businesses can overcome legacy infrastructure challenges by taking a long-term vision while implementing digital solutions iteratively and delivering tangible business outcomes; § The sector can work together to activate talent, drawing the right people in by focusing on purpose, the opportunity to work on complex manufacturing problems, the real world impact the sector offers, and creating a culture where diverse talent can thrive; § And if the system comes together as a whole – manufacturers, retailers, suppliers, technology and government – to rewrite the rules of engagement on how we collaborate, we can supercharge collective productivity and growth. If the UK can direct investment and resources to the right places to overcome industry challenges, the food and drink manufacturing sector has a remarkable opportunity to set a global example of how digital transformation can drive true economic growth.
Public bodies, including Innovate UK Business Connect, the Manufacturing Technology Centre and Advanced Manufacturing Research Centre (AMRC)
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Roundtables
§ Recruitment and innovation experts such as Wilton & Bain and Sheffield Hallam University Advanced Food Innovation Centre FDF members also provided views on the food and drink manufacturing industry through detailed questionnaires. These qualitative insights, and Newton’s 20 years’ navigating complicated systemic challenges, have been synthesised with a detailed literature review and analysis of key economic and industry indicators. This approach aims to provide a robust, data-driven, insight-led perspective on the productivity, performance and potential of the food and drink manufacturing industry as benchmarked against other countries and manufacturing areas.
Food & Drink Technology Task Force
Recommendations to UK government
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Foreword
Inspiring innovation uncovered in the Future Factory research programme
ACTIVATING ACCELERATION Not long ago, sensors to capture granular reasons for downtime and waste losses were a Willy Wonka fantasy. Now, we barely raise an eyebrow when we find out generative AI is being used to develop recipes. Factories are identifying preventative maintenance using audio capture? Of course, why wouldn’t they? AI, digital technologies and automation are revolutionising food and drink manufacturing. They’re boosting productivity, efficiency and innovation across everything – from supply chain management to demand forecasting, product development and quality control. These are undeniably exciting times in the UK’s largest manufacturing sector. Transformation is widespread and certainly not limited to large organisations. I spoke to an inspirational confectionery manufacturer as part of the industry-wide research for this report. This particular business successfully drove year-on-year growth by identifying and automating bottlenecks and then reinvesting profits to drive further productivity. The next step is to use generative AI to answer detailed technical specification questions where it once took decades of experience to acquire the knowledge. It’s truly impressive. After a period of extreme turbulence marked by economic uncertainty, a cost of living crisis, global geopolitical instability, labour shortages and changing consumer priorities, we’re entering a critical period. The industry hums with opportunity. Advanced technology, like robotics and AI, is poised to take it into a new era. So, as businesses, as an industry and the country as a whole, how can today’s innovative digital solutions be used effectively to fulfil food and drink manufacturing's full potential? The first step in the research programme for this report has been to build a case for increased focus and investment in food and drink manufacturing. Benchmarking with leading world economies over the coming pages reveals that while the sector already performs strongly among G7 countries , improving productivity and becoming world leading could unlock an additional £7-14 billion in value for the UK economy.
Smart factory A drinks manufacturer is achieving an Amazon-style, lights-out smart factory, powered by sensors, software and automation and scaling the approach across its portfolio.
Looking to other industries, transport and engineering manufacturing has received 3.6x the investment over the past 20 years, generating £5 of value for every £1 invested. In contrast, the food and drink sector’s return on investment is markedly higher, at £9 for every £1, representing a significant investment opportunity before returns diminish. The data demonstrates what we all instinctively feel: now is the time for focus, with AI and other digital solutions being key levers to improving today’s productivity and efficiency challenges. To find the best places to hone in on and how to overcome the obstacles holding businesses back, the research programme opened up discussions with senior leaders at the heart of the issue from right across the UK. Food and drink manufacturers also contributed through in-depth questionnaire responses. This report reveals their thoughts. It then outlines practical strategies for sustaining momentum in AI and automation, drawing on Newton’s 20 years’ walking the factory floor and helping organisations embed innovations to increase performance and profitability. Thank you to everyone who has taken part in the programme and especially to the team at the FDF who supported the research. Improving collaboration and championing industry brilliance has been consistently called for. That’s why this is not a one-off report but part of a dynamic campaign with the FDF to spur on meaningful business and industry change. In light of the government’s recent Industrial Strategy Green Paper, the timing could not be better. There’s no doubt in my mind: this is the moment to harness the full power of AI, automation and digital to create a food system fit for a fast-changing world. Junaid Mujaver, Partner, Newton
AI-powered strategy AI is being used to support commercial strategy – from determining pricing strategy to optimising product range and distribution.
Optical sorting Enhanced with AI, optical sorting is being used for the delicate jobs of classifying and grading fruit.
Product development AI is creating new food and drink variants – predicting flavour, texture and aroma preferences for consumers across the world.
Technical specifications Small and medium-sized enterprises (SMEs) are using generative AI to supplement technical knowledge.
ESG reporting Generative AI is interpreting raw product specifications to automate Environmental, Social and Governance (ESG) reporting.
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THE CRITICAL ROLE OF FOOD AND DRINK MANUFACTURING Introduction
Adapts fast to the future With the UK committed to achieving net-zero emissions by 2050, food and drink manufacturers are stepping up sustainability efforts. Global manufacturers and small enterprises alike are adopting renewable energy, upgrading to energy-efficient machinery, and implementing advanced recycling and waste-reduction systems. By going green, the industry not only meets regulatory requirements but also gains a competitive edge. Companies are also investing in technology to stay competitive. Robotic arms, precision packaging machines and automated sorting systems have become staples in modern production lines. The payoff is efficiency: faster throughput, reduced error rates and lower operational costs. Employees are freed up to focus on higher-value work. The UK’s food and drink manufacturing sector is more than a source of employment and exports. It is a foundation of economic stability, growth and innovation across the country. As the government pursues its Industrial Strategy, supporting this sector could yield outsized returns in productivity, sustainability and community resilience. Through investment in automation, digitisation and sustainable practices, UK food and drink manufacturers are not only safeguarding the country’s economic future but ensuring a more resilient, secure, greener one. This is an industry that the UK can ill afford to overlook.
Artificial intelligence is also finding its place in the sector. Machine learning algorithms forecast demand, optimise inventory and identify quality issues early. Predictive maintenance powered by AI keeps production lines running smoothly by diagnosing potential faults before they disrupt operations. These digital tools enable manufacturers to keep goods competitive in both domestic and international markets. With the use of data analytics, businesses can make informed decisions at every level, from improving product quality to reducing waste. Digital twins – virtual replicas of production environments – are helping companies trial and improve production processes before implementing them in real life. The result is greater productivity and more efficient use of resources across the board.
Drives regional economic growth and job creation Each direct job in the sector supports more than three jobs elsewhere, making it a multiplier of local prosperity. It creates well-paid, reliable jobs and long-term careers in communities often underserved by other industries. Jobs range from entry level work on the factory floor right through to highly skilled roles in engineering, food science and digital technology. By purchasing domestic agricultural output, the sector also supports the UK’s farming community, creating a virtuous cycle of local sourcing and production. At a time when the government’s growth and opportunity missions seek to bridge regional inequalities, food and drink manufacturing offers a model of local economic growth. Feeds the UK every day and in times of crisis By sourcing locally and internationally, the food and drink sector provides variety but also stability, cushioning against potential shocks. During the COVID-19 pandemic, the war in Ukraine and post-Brexit trade shifts, for instance, manufacturers demonstrated their resilience, swiftly adapting to supply chain disruptions and market volatility, keeping shelves stocked and the public reassured. Fuels export growth The UK’s food and drink products are prized worldwide with exports reaching a record £25 billion in 2022. Rising demand leads to increased production and more jobs, further solidifying the industry’s role as a driver of economic growth.
£38 billion gross value added (GVA) to the UK economy 17% of UK manufacturing GVA – thebiggest manufacturing sector
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12,515 businesses
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474,000 people employed
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Truly national, in all parts of the UK
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£24 billion of food and drink exports to over 200 countries 70% of UK land usage is in agriculture, with food and drink manufacturing the largest customers Around a quarter of UK's domestic CO2 emissions are from the food sector, with the ability to have a huge impact on Net Zero
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Sources: FDF, Food Foundation, gov.uk
Food and drink is the largest manufacturing sector in the UK, accounting for almost 20% of total manufacturing and generating more than £142 billion in turnover. Nearly half a million people in over 12,500 businesses – ranging from heritage brands to innovative startups – are employed in the sector. For every £1 the sector generates in gross value added (GVA), an additional £2.48 circulates back into the economy through supply chain activity and employee spending. Food and drink manufacturing is an undeniably powerful engine for economic growth, and its impact cannot be understated.
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A COMPELLING CASE FOR TRANSFORMATION From great to groundbreaking
No country provides a perfect benchmark, with differences in consumer preferences, size of economies and the scale of imports and exports. However, they do provide an indication of the value that can be generated by more productive food and drink manufacturing sectors. Looking at macroeconomic differences, the Netherlands is the most productive, but highest salaries are in Switzerland. The US is the largest food importer and exporter by value. However, both the Netherlands and Belgium also have significant export levels relative to their economic size, which can be attributed to their strategic location, efficient logistics networks, and specialisation in the manufacturing of particular products. Consumer behaviour also differs significantly. North American households appear to be more price sensitive, while the Swiss and the Dutch have a strong preference for own-label products. If the UK was to move to achieve the average North America productivity, that would represent a 22% improvement or a 2% annual improvement above inflation over 10 years, generating a further £7 billion of value for the economy.
While if it was to reach the average productivity of the world leading Dutch and Belgian food and drink manufacturing sectors, that would bring a 44% improvement or 4% annual improvement above inflation over 10 years, representing £14 billion of extra value for the economy. Such growth would strengthen the UK as a world leader in food and drink manufacturing, enhance food security, provide the potential to increase exports and support the UK economy. 2. Comparison with other advanced manufacturing in the UK In interviews with manufacturers, innovation hubs and academics, transport and engineering manufacturing was often brought up as a key comparator. Transport and engineering is a wide category, consisting of multiple manufacturing sectors from automotive, other transport, computer, machinery and electrical equipment. Although not exactly like-for-like, there are similarities in workforce demands, supply chain dependencies, regulatory pressures and technological advancement.
By going from great to groundbreaking, the food and drink manufacturing sector has the potential to unlock £7-14bn 1 of extra value for the UK economy Based on an extensive literature review and study of economic and industrial indicators, the research programme set out to quantify the potential of the UK’s food and drink manufacturing industry by comparing its performance internationally and domestically with other advanced manufacturing sectors. These are the findings. 1. International comparisons: G7 economies and beyond It’s noteworthy that the UK is more productive than its G7 European counterparts while having fewer employees.
Our research found that the UK’s food and drink manufacturing industry performs relatively well amongst its G7 peers. Only North America and Italy have a more productive industry, while France and Germany have lower GVA per employee (Chart: Labour productivity in the food and drink manufacturing in the G7 economies). Our labour productivity measure is gross value added (GVA) per employee 2 , adjusting GVA figures to remove consumer goods price level differences between countries. Labour productivity in the food and drink manufacturing in the G7 economies, 2022 3
Expanding the same view to other European countries, the food and drink sectors in the Netherlands, Belgium and Norway are performing better than the UK. The UK sits above both Spain and Poland which have similarly sized workforces, but a smaller output per employee (Chart: Labour productivity in the food and drink manufacturing in European economies).
Labour productivity in the food and drink manufacturing in European economies, 2022 4
Comparison of food and drink manufacturing industry characteristics across different nations 5
UK relative to G7 countries
£120,000 UK relative to European economies
£120,000
2.5m
0.6m
% of consumers who would switch to less expensive foods to save money
Private label value share in consumer goods (%)
Adjusted GVA per employee
Average annual salary per employee
Value of food imports (m)
Value of food exports (m)
Country
£100,000
£100,000
0.5m
2.0m
£80,000
£80,000
0.4m
1.5m
£102,720 £91,630 £89,201 £75,248 £69,731 £68,815 £67,308 £66,674 £62,704 £62,117 £58,096 £57,389 £53,376
£39,914 £35,916 £40,430 £50,057 £43,679 £22,261 £31,486 £51,004 £44,678 £28,490 £21,742 £12,376 £26,614
£80,943 £42,601 £81,558 £39,817 £8,334 £50,471 £60,578 £12,189 £13,699 £60,276 £43,915 £27,392 £94,842
£106,795 £47,487 £172,147 £60,541 £12,297 £51,933 £27,468 £8,447 £17,993 £69,256 £53,944 £41,392 £77,208
45.2% 39.8% 18.9% 18.5% 23.0% 30.2% 44.0% 52.3% 34.0% 34.4% 45.6% 27.2% 41.4%
43% 39% 66% 66% 27% 43% 34% 37% 37% 36% 38% 46%
Netherlands
£60,000
£60,000
0.3m
Belgium
1.0m
£40,000
£40,000
0.2m
US
0.5m
Canada Norway
£20,000
£20,000
0.1m
£0
£0
0.0m
0.0m
Italy
UK
Switzerland
Denmark
Adjusted GVA per employee Number of employees
Adjusted GVA per employee Number of employees
France
Spain
1. Opportunity calculated by multiplying the number of UK employees in the food and drink manufacturing industry by the median GVA per employee of Northern American countries (US and Canada), and the median GVA per employee of smaller, more successful European economies (Netherlands, Belgium, Norway). 2. Gross Value Added (GVA) measures the value generated in the production of goods and services. It is one measure of overall economic performance. GVA is displayed per employee for comparison across countries. 3. Data sourced from: UK GDP (low-level aggregates), Office for National Statistics (2024), JOBS03: Employee jobs by industry, Office for National Statistics (2024), JOBS04: Self-employment jobs by industry, Office for National Statistics (2024), Enterprises by detailed NACE Rev.2 activity and special aggregates, Eurostat (2022), Value Added by Industry, U.S. Bureau of Economic Analysis (2024) Labour Force Statistics from the Current Population Survey, U.S. Bureau of Labour Statistics (2024), Labour productivity and related measures by business sector industry and by non- commercial activity consistent with the industry accounts, Statistics Canada (2023), Canada GDP deflator, Trading Economics (2022), Price Level Indices, OECD (2022) 4. Data sourced from: UK GDP (low-level aggregates), Office for National Statistics (2024), JOBS03: Employee jobs by industry, Office for National Statistics (2024), JOBS04: Self-employment jobs by industry, Office for National Statistics (2024), Enterprises by detailed NACE Rev.2 activity and special aggregates, Eurostat (2022), Price Level Indices, OECD (2022)
Poland
Germany
5. Data sourced from: UK GDP (low-level aggregates), Office for National Statistics (2024), JOBS03: Employee jobs by industry, Office for National Statistics (2024), JOBS04: Self-employment jobs by industry, Office for National Statistics (2024), Enterprises by detailed NACE Rev.2 activity and special aggregates, Eurostat (2022), Value Added by Industry, U.S. Bureau of Economic Analysis (2024), Labour Force Statistics from the Current Population Survey, U.S. Bureau of Labour Statistics (2024), Labour productivity and related measures by business sector industry and by non- commercial activity consistent with the industry accounts, Statistics Canada (2023), Canada GDP deflator, Trading Economics (2022), Price Level Indices, OECD (2022), Annual Survey of Hours and Earnings, ONS (2022), Occupational Employment and Wage Statistics, Bureau of Labour Statistics (2022), World Development Indicators, World Bank (2022), Private Label Value Share of FMCG in Europe, Statista (2024), Private Label Share of Consumer Goods in the US, Statista (2024), Private Label Market in Canada, Statista (2022), The State of Grocery Retail, Europe, McKinsey and Company (2023), The State of Grocery Retail, North America, McKinsey and Company (2023)
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There is an opportunity to invest more in UK food and drink manufacturing before we achieve diminishing returns. The imperative is to create the right investment environment, direct investment in the right areas and enable innovation that drives productivity. This report further explores the obstacles being faced by manufacturers that need to be overcome. Spotlight: Can better automation unlock value? Across manufacturing sectors, robot density in the US and EU is substantially higher than in the UK. Using digital and AI technology to invest in the right areas to automate and optimise supply chain and commercial decisions can be a key enabler to help the UK food and drink sector unlock its economic growth and productivity potential.
Food and drink has only seen 27% of the investment that transport and engineering has over the last 20 years. Despite this, GVA in food and drink manufacturing has increased 149%, compared to 163% in transport and engineering in the same period (Chart: Investment and GVA by UK industry over time). The respective Compound Annual Growth Rate (CAGR) of GVA in each sector has been 2.0% in food and drink manufacturing vs. 2.5% in transport and engineering manufacturing.
When compared with transport and engineering, food and drink manufacturing has generated more value added per unit of investment over the last 20 years 6 . For every £1 invested, £9 has been returned in food and drink manufacturing, compared to £5 in transport and engineering (Chart: GVA to investment ratio by UK industry over time). As more investment is made, we expect it to have a diminishing return which is reflected in ( Chart: GVA to investment ratio by UK industry over time). Looking at a shorter time horizon over the last five years, food and drink manufacturing returned £7.40 to every £1 invested, vs. £3.80 in transport and engineering, demonstrating 1.95x greater return potential in food and drink manufacturing.
Investing in automation and so prioritising productivity and growth will secure the food and drink manufacturing
Food and drink generally across the world has lower robot density compared to other manufacturing sectors. This trend reflects the challenges with predictability and variation of demand in some areas of the sector, as well as the complex manufacturing environment given the high number of products and nature of handling food.
industry’s competitive edge, at home and internationally, cementing its role as a critical contributor to the UK economy.
Investment and GVA by UK industry over time
Investment and GVA in the last 20 years (axes in £m)
£80,000
£30,000
£60,000
£20,000
Worldwide robot installations in manufacturing by sector, 2022 10
Robots installed per 10,000 employees 9
£40,000
£10,000
100 120 140 160 180
£20,000
US
£-
£-
2004 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Food and drink manufacturing investment (£m)
Transport and engineering manufacturing investment (£m)
EU
Food and drink manufacturing GVA (£m)
Transport and engineering manufacturing GVA (£m)
0 20 40 60 80
GVA to investment ratio by UK industry over time 8
UK
£10 £12 £14
World Average: 151
£0 £2 £4 £6 £8
= 50 Robots
2004 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Food and drink
Transport and engineering
Food and drink last 20 years average
Transport and engineering last 20 years average
6. Gross fixed capital formation (GFCF) has been used as the investment variable. 7. Data sourced from: Business Investment by Industry and Asset, Office for National Statistics (2024)UK GDP (low-level aggregates), Office for National Statistics (2024) 8. Ratio of investment per employee and GVA per employee for each industry over the past 20 years. Data sourced from: Business Investment by Industry and Asset, Office for National Statistics (2024), UK GDP (low-level aggregates), Office for National Statistics (2024), JOBS03: Employee jobs by industry, Office for National Statistics (2024), JOBS04: Self-employment jobs by industry, Office for National Statistics (2024)
9. World Robotics: Industrial Robots, International Federation of Robotics (2022) 10. World Robotics: Industrial Robots, International Federation of Robotics (2022)
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TO UNDERSTAND HOW ALL THIS POTENTIAL CAN BE FULLY UNLOCKED, THE RESEARCH PROGRAMME SPOKE TO INDUSTRY LEADERS ABOUT WHAT OBSTACLES THEY FACE. Closing the action gap
FIRST MOVE MOMENTUM VS. FIREFIGHTING Obstacle 1. Commercial environment
Proving a significant return on investment (ROI) in a sufficient time frame is one of the greatest challenges facing food and drink manufacturers when adopting technology. Implementation costs are seen to be high compared to perceived benefits 11 , and without short-term gains, long-term investment becomes challenging. This issue was raised repeatedly in industry interviews and is compounded by quarterly shareholders’ review cycles, private equity ownership, and consumer and government expectations around ultra-low food prices. Keith Thornhill, Siemens' Head of Food & Beverage, UK and Ireland, put it succinctly: “Companies can’t see the wood for the trees because they are forever in firefighting mode. It’s like trying to redesign a plane while it's flying.” The highly competitive, fast-moving nature of the food system disincentivises innovation particularly for mid- sized organisations predominantly selling private label products directly to retailers on short-term, open-book contracts. This unpredictable environment can limit innovation as suppliers lose interest. It is difficult to commit to significant investments without the assurance of long-term business stability. “SME’s and midcaps are often firefighting focused on getting the orders out on time with little to no headspace to think about the longer term,” believes Bhavnita Patel, Sector Development Manager for Agri-Tech at the Manufacturing Technology Centre. “A frequent blocker to process and technology projects is that everyone is looking for short-term returns on their investment of between 12 months and two years.” However, if an organisation wants to invest in new technology, such as energy efficient ovens or an automated packaging line, it typically requires sizeable upfront capex for benefits which might not be realised fully for >10 years."
When it comes to automation, the industry was one of the early adopters of the technology, and it knows how to automate effectively when conditions align. If there is an issue, it is that engineering solutions do not always perform well out of the gate, slowing integration processes. In some cases, the lower cost of some labour proves a tempting potential short-term solution. For digital and AI, the landscape is more nuanced. Three quarters of the leaders in the research revealed that they can see the benefits of digital and AI solutions and how they can support their company’s strategic objectives. Most have already identified exciting opportunities for their business. However, full maturity is a way away. Just half are confident that their business knows the right approach to implementing and effectively deploying newer technologies. There is an action gap between digital enthusiasm and actual implementation. Three key interlinked reasons for this gap emerged during industry interviews, each of which can be overcome with a joined-up industry-wide approach.
The picture is similar in SMEs and private label companies . Businesses generally target two-year ROI for automation projects, making it challenging to justify investments in advanced technologies that require a longer horizon to demonstrate value . Andrew Martin, Head of Food and Drink at the Advanced Manufacturing Research Centre (AMRC) calls it the “valley of death” and sees it on a daily basis: “Businesses have a great idea but can’t get it to the point where it’s commercial,” he says. “Suppliers are disincentivised from investing too much because of open book agreements. Retailers control the market and, yes, they want innovation but want to know they’re going to get something back.” “In other sectors,” Andrew continues, “everyone knows they have to make enough money to invest in new technology so there’s enough space in the marketplace. In food and drink, the cash left can be miniscule so they might spend money on recipe development, rather than tech.”
11.Konur, S., Lan, Y., Thakker, D. et al. Towards design and implementation of Industry 4.0 for food manufacturing. Neural Comput & Applic 35, 23753–23765 (2023)
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INDUSTRY EVOLUTION VS. TALENT ATTRACTION Obstacle 2. Capabilities
Making the business case Business cases for investment look very different in other advanced manufacturing sectors such as aerospace and automotive because organisations are delivering a small number of very high value items making technical innovation easy to link back to value.
In food and drink, while marginal gains may be small individually, they accumulate across large volumes, resulting in significant overall savings that, although complex to model and track, contribute to substantial returns.
A third of senior leaders who took part in the research admit the biggest issue holding back digital and AI solutions is the lack of skilled labour to even identify the scope for such work. Attracting highly skilled talent, especially outside London where most food and drink manufacturing takes place, is a struggle. At the moment, the proportion of employees in food and drink manufacturing lacking key skills is 11.8% – more than twice the national average of 5.7% 12 , and higher than all but one other manufacturing subsector. Labour and skills shortages continue to hold back growth and productivity with an estimated loss of £1 billion in output in 2023 due to these shortages 13 . There are many interconnected reasons behind the challenges facing talent attraction in food and drink manufacturing. Almost a third of the food and drink manufacturing workforce is estimated to reach retirement age by 2033-35 14 . Replacing more experienced parts of the workforce can be difficult as new talent isn’t fully aware of the meaningful, long-term career opportunities available in the sector. As a result, other advanced manufacturing sectors are gaining the upper hand in recruiting domestic talent in engineering and science.
A post-Covid shift in work expectations also plays a role. Many professionals now expect remote work options, but most fast-moving consumer goods (FMCG) sites require on-site presence, often in remote locations. These settings can be less attractive to new graduates eager to start their careers in urban areas. The geographic spread of the industry also makes it difficult to upskill as it can be challenging to form sufficient apprentice cohorts to sustain consistent, high-quality training. Additionally, there’s a significant gap in salary expectations between the UK and other markets, particularly the US. Concerns are growing that recent budget changes may make it even harder for UK businesses to remain competitive in attracting and retaining skilled talent. It becomes a Catch-22: businesses must allocate extra resources to attracting and recruiting the right people, diverting budget from innovative tech and digital where these people would do their best work. Some businesses end up focusing instead on low-cost, labour-intensive technologies 15 . This dichotomy is brought to life starkly in one particular business who contributed to the research. It’s harder to recruit people into one of its factories so automation has been ramped up there to meet demand. This has also meant investment has had to be put on the backburner at its other site.
While a challenging situation, industry research clearly shows that investment in food and drink manufacturing offers strong returns. As explored in the vanishing horizons section of the report, making a successful business case in this sector is more than possible by focusing on real, tangible business outcomes.
12. 13.
Department for Education, Employer Skills Survey (2022)
FDF State of Industry Survey, Q1 (2024)
14. Food and Drink Sector Council: Preparing for A Changing Workforce (2019) 15. Lloyd, Caroline, Payne Jonathan, Food for thought: Robots, jobs and skills in food and drink processing in Norway and the UK, New Technology, Work and Employment (2021)
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LEGACY SYSTEMS VS. MODERN SOLUTIONS Obstacle 3. Solutions
With students showing little interest in FMCG, university courses focus assignments elsewhere, and so students miss the chance to consider the fascinating, meaningful problems of food security, healthy eating and sustainability.
Dario Riccomini, Managing Director of Scottish confectioners, Aldomak says it is difficult to attract the right talent: “We need generalist, multi-skilled engineering talent who do not need to be told what to do but are solution focussed and self starters. But many of those people want to work in automotive and aviation.” This rings true based on insights from universities and students alike. University attempts to get food engineering courses off the ground have stumbled as there has not been enough interest from undergraduates, while engineering courses tend to focus on the knotty problems in automotive and aeronautical. Project engineers, scientists, lab technologists and plant engineering technicians often do not even consider entering the food manufacturing industry 16 .
Nearly all (85%) of food and drink businesses who were part of the research programme are using automated business reporting, with 1 in 3 running initiatives to implement AI and data science solutions. But, while there is clearly growing demand, there is a wide variety of maturity in the industry. Some companies use digital twins and simulation to model processes and create capacity to allow for growth, while, at the other end, some struggle to obtain accurate measurements. Implementation of new technology can be challenging in any industry, but it is particularly so in food and drinks manufacturing. Food products are fragile meaning any machinery needs to handle delicately 17 . The industry is highly regulated, with production processes being tightly controlled. Machinery must adhere to strict health and safety policy 18 . There is huge variability in food items compared to other manufacturing industries that are successfully using robotics and autonomous systems 19 . In some cases, automation has already been implemented in what is a mature manufacturing sector, so the challenge then becomes how to modernise factories with legacy assets. Specialised food and drink manufacturing technology is also harder to come by than in other industries 20 . The off-the shelf technology products that do exist require complex customisation which often don’t easily integrate into existing, legacy machinery and data systems.
Raising awareness of the meaningful career opportunities within the sector is becoming increasingly urgent, as is expanding the use of AI, robotics, and automation to enable employees to focus on areas where they can make the greatest impact. Practical steps organisations, the industry and the government can take to overcome these capability hurdles are outlined in the activating talent section of this report.
16. Labour shortages are stifling economic growth for the UK’s food and drink producers, FDF, (2023)
Many technology products are not in a “hand able” state, believes Dario Riccomini from Aldomak: “The software I have engaged with has unnecessary conversions to fit a standard which I then have to convert back to something that makes sense,” he says, and he’s frustrated. “We keep talking about Industry 4.0 and 5.0 but we’ve not even made it to 2.5 as a sector.” What these firms are experiencing is not unusual, according to Bhavnita Patel from the Manufacturing Technology Centre. “Off-the-shelf products to help across manufacturing do exist, but they’re not always being used properly or to their potential,” she says. “Many organisations have invested in Enterprise Resource Planning (ERP) systems, for instance, but few are using them effectively. Getting the basics right is essential but, quite often, I see businesses still running on basic spreadsheets.” Companies know they need to be outcomes-focussed with automation and AI initiatives, looking for value on the profit and loss sheet. But the technology often depends on the foundation of existing infrastructure. Solutions can’t be built on quicksand and accelerating AI opportunities relies on solid data and systems.
17. Onyeaka, Helen, Phemelo Tamasiga, Uju Mary Nwauzoma, Taghi Miri, Uche Chioma Juliet, Ogueri Nwaiwu, and Adenike A. Akinsemolu. 2023. "Using Artificial Intelligence to Tackle Food Waste and Enhance the Circular Economy: Maximising Resource Efficiency and Minimising Environmental Impact: A Review" Sustainability 15, no. 13: 10482. 18. Dora, M., Kumar, A., Mangla, S. K., Pant, A., & Kamal, M. M. (2021). Critical success factors influencing artificial intelligence adoption in food supply chains. International Journal of Production Research, 60(14), 4621– 4640.https://doi.org/10.1080/00207543.2021.1959665
19. Dora, M., Kumar, A., Mangla, S. K., Pant, A., & Kamal, M. M. (2021). Critical success factors influencing artificial intelligence adoption in food supply chains. International
Journal of Production Research, 60(14), 4621–4640. https://doi.org/10.1080/00207543.2021.1959665
20. Lloyd, Caroline, Payne Jonathan, Food for thought: Robots, jobs and skills in food and drink processing in Norway and the UK, New Technology, Work and Employment (2021)
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Sue Whalley, Group People and Performance Officer at Associated British Foods believes leadership buy-in is crucial: “Post-Covid and Ukraine, we’ve got more headspace to invest in innovation. For example, we’re now running AI pilots in a range of areas including for commodities purchasing, treasury management and how we might leverage more technology for product development and for smart factories. We’re in an exciting moment.”
Leading the change Even with the right technology, success depends on how well organisations manage and adapt to the changes, fostering a culture of collaboration and embracing new ways of working. Vanshi Suvarna, Group Chief Information and Transformation Officer at Britvic emphasises that the biggest challenge lies in getting people to adopt and effectively use new technologies. It’s key to work together to build strong data foundations: “It’s complex integrating various data sources, both internal and external, to generate meaningful insights, requiring significant time and resources to manage and potentially delaying the realisation of benefits from digital initiatives. Technology these days works. I have not found a single technology that doesn’t work. The problem is the change management of people.” Keith Thornhill from Siemens believes leadership, culture and people set the environment for business improvements, but tech will be a significant enabler in solving many sustainability and productivity challenges. “Tech is creating the demand but tech alone is not a golden bullet,” he says. “What technology and consulting organisations can do is provide the headroom for leaders in this industry to get on the front foot.”
A kickstart to transformation How can the industry overcome the interconnected commercial, capability and solution obstacles and close the action gap? The research programme highlighted three key focus areas for businesses, industry and the government.
To unlock the full potential of automation and AI, companies need to build strong data foundations, optimise existing investments and focus on outcome-driven initiatives. But, success will also depend on leaders fostering a culture that embraces change and thrives on collaboration, so providing better demand signals to technology companies, academia and entrepreneurs. The next section outlines how technology and people-related challenges can be collectively overcome.
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PROVING IMPACT TODAY Vanishing horizons
SPOTLIGHTING PURPOSE AND PROGRESSION Activating talent
Start specific with a long-term vision. By tackling tangible business problems, manufacturers can generate value quickly, building momentum to replace legacy technology without the risk of a full-scale overhaul. This prevents the need to ask for huge sums of money for a dream scenario, such as to transform whole systems, improve system resilience or become future fit: these are not business outcomes. With a vanishing horizon, over time technical debt is reduced with incremental implementation. It’s a better frame, bringing technical teams together where everyone is speaking the same language. The research programme highlighted a large bakery manufacturer as an example of this strategy. It was interested in implementing robotics, but it was still largely working on paper and, perhaps unsurprisingly, had issues with communication. The company decided to invest first in digital screens with Chromecast software. Overnight, this improved how everyone shared and recorded information. That momentum has since been used to install the right robotics as leaders realised they better understood what they needed to do with technology.
How can businesses, industry and the government rewrite the narrative on food and drinks manufacturing so talent realises the incredible innovations and new thinking taking place? “Food industry issues are just as interesting as those in automotive and aviation,” believes Dario Riccomini from Aldomak. But does talent know how interesting and multifaceted a career in the industry can be? Feedback from graduates suggests that food and drinks manufacturing rarely or never features in engineering courses. There is an opportunity for companies to feed their biggest issues into local universities and further education colleges to build food-specific content into science and engineering courses, to offer work experience and industry placements and to partner on hands-on research. Amanda Johnston, Co-Director, Advanced Food Innovation Centre at Sheffield Hallam University believes food engineering isn't understood as an academic discipline in the UK nearly as well as it is in other parts of Europe, the Republic of Ireland, and the United States. Added to that, it fails to attract talent because the food manufacturing industry gets such negative press. Promoting purpose Organisations in the research programme who were confident in their recruitment and retention strategies believe their success is due to their clear, compelling direction and strong purpose. Jason Rommer, partner at recruitment consultants, Wilton & Bain, agrees: “Attraction is helped by the scale and scope of work – is it truly transformative? Food and drink is hugely important and interesting to people outside their careers so why aren’t we all tapping into that potential?”
How do you get a data driven digital transformation off the ground in an organisation as complex and global as BP? One of the largest companies in the world, it took this ‘vanishing horizons’ approach to improve reliability and safety in plants. It started with connecting existing data sets in one platform to provide visibility and focus, bringing experts together to spark new ideas and thinking based on the data, creating a multitude of use cases that improve business outcomes and then improving data with the aid of sensors for these use cases. It’s enabled them to move from more reactive to preventative ways of operating to unlock value. To help a leading UK manufacturer of pastry and plant-based products understand store shoppers, Newton started by switching the company from Excel to machine learning to speed up calculation time by 1,000 times. We could then quickly cluster stores based on shopper missions, analyse product performance and spot and replace underperforming products. These changes led to a 3% net margin improvement. With all the focus on big data, it's important not to lose sight of the power of a well curated small data set and the value it can bring. Growing data availability and quality internally over time, supplemented by strategic data partners with relevant data can add value incrementally while modernising overall data infrastructure. For example, at one drinks manufacturer in the research programme, analytics allowed the commercial teams to see the operational impact of adding more lines, allowing a stock keeping unit (SKU) rationalisation programme.
Food and drink manufacturing challenges and opportunities rival any industry, and with a purpose to feed the nation and help tackle strategic challenges such as climate change and health, it offers incredible careers for modern and diverse talent. But the industry could highlight its value more, as well as ensure the sector’s challenges are embedded into education and training, producing technical, motivated, empowered talent at all levels. There is still more work to be done by manufacturers to showcase the fantastic career opportunities for young people with a wide range of skills – working closely with government and education providers. A recent industry- led campaign to attract new talent into the food industry, Mmmake Your Mark, is a positive example of what the food and drink industry can do to showcase what it has to offer. It could be built on further to attract highly technical and advanced manufacturing skills. Collaboration with technology companies can inspire talent into food and drink manufacturing. One of the food and drink manufacturers we spoke to, for instance, works closely with global technology product providers that will second their AI and data analysts to help grow their domain skills. Some of these people are fascinated by the purpose of the industry and stay on in the food and drink industry. Some of them return to the tech space, leaving with better expertise and helping create products that work better for the industry.
Building the business case with digital and data
Digital is an enabler, helping to build stronger business cases which bring together newer technologies and automation. It can reveal where to focus to achieve the next level of performance, although by itself, its impact is limited.
Businesses can overcome legacy infrastructure challenges by taking a long-term vision while implementing digital solutions iteratively and delivering tangible business outcomes.
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