Energy accounts for 15% of food and drink manufacturers’ costs, the scope to ease pressure on margins is clear

With costs rising, skills hard to find, nimble new competitors and cash-strapped consumers, it’s a tough time to be a food and drink manufacturer.

With margins in the industry currently at 5.3%, as against a historical average of 6.3%¹ and energy typically accounting for 15% of operating costs, energy efficiency should surely be a prime focus.

It’s not that manufacturers aren’t aware of the issues. 56% say they believe investing in energy efficiency technologies to be ‘very important’ for their business.² Clearly there’s work to be done turning belief into action.

The pressures are rising

Underlying economic pressures like rising and volatile raw material and labour costs and increasingly cash-strapped consumers are compounded by political fallout from Brexit in the UK and protectionism in the US. 57% of UK food and drink manufacturers say they’re having problems recruiting,³ while in the US 47% cite availability of skilled workers as the biggest threat to profitability.⁴

Skills issues heighten focus on automation, as does the relentless pressure to innovate - margins and capex budgets are taking the strain. With energy prices unpredictable and likely to rise, improving energy efficiency has become imperative, and greater use of technologies like AI and IoT make efficient and flexible energy supplies crucial. Yet ageing and inefficient energy estates are all too often the norm.

 Start here, start now

When saving energy – and costs – there’s plenty of ‘low hanging fruit’ to begin with:

• Replacing old lighting with LED can boost energy efficiency by as much as 90%.⁵ Despite this, and the fact that potential energy savings of up to 75% can be gained from energy efficient lighting, just 21% of UK food and drink manufacturers say they’ve implemented it at all or most of their sites.²
• Installing motion sensors that ensure lights are on only when needed can save as much as 30%.
• 10% savings can be easily achieved through the use of effective process measurement and control.⁵
• Basic measures like maintaining refrigeration systems properly, implementing ‘on-demand’ air compressor management, and implementing regular maintenance on plant – there’s a whole range of simple solutions that can cut energy usage and costs now, and for good.

Then there’s a raft of gains available from new technology, whether generation technologies like solar and combined heat and power (CHP), or energy insight tools that help pinpoint energy usage right down to device level, enabling remedial action.

CHP delivers up to 40% reduction in energy costs with a capital payback in 3–5 years. A CHP unit we installed at one of Britain’s largest bakeries is saving £400,000 and over a thousand tonnes of carbon emissions a year, while sensors installed by another UK manufacturer to flag up errors within its cooling compressors enabled recalibration that’s saving them £115,000 a year, every year.

Saving money, boosting margins

We’ve worked extensively with leading food and drink manufacturers to help them identify where their energy’s being used, enabling efficiency-boosting remedial action. We help ensure a flexible and reliable energy supply to support increased automation and the use of advanced AI and IoT technologies.  And we help them implement and optimally exploit the latest technological developments, cost-effectively, with generation and efficient-usage technologies that deliver ongoing savings, year after year, and relieve the pressure on margins.

Our Perspectives Series article provides more information about how we can help you implement process changes and exploit the full potential of new technology to reduce your energy usage, cut bills and rebuild your margins.

¹ Kill Or Cure, OC&C Strategy Consultants, 2016, ² Energy Advantage Research, Centrica Business Solutions. Statistics based on a six country survey of more than 1,000 energy decision-makers in large organisations, ³ 2017 Food & Drink Report, BDO, 2017, ⁴ Food & Beverage Monitor, RSM, 2017, ⁵ Food & Drink Processing Sector Overview, The Carbon Trust, 2012