Why traditional cost-cutting no longer protects food & beverage margins
Companies in the food & beverage industry are facing a fundamental shift in how they protect their profitability, according to a new study by EFESO Management Consultants, which suggests that leadership teams can no longer rely solely on short-term fixes and instead must develop an operating model capable of absorbing cost volatility and preventing friction by design.
Long-term profitability now means food and beverage players need to embrace ‘margin design’, which means structuring operations to absorb market volatility before it turns into permanent financial leakage.
While levers like procurement actions, selective pricing, and initial cost reduction are still crucial, the EFESO Management Consultants report says companies need to take a deeper look at “the operating choices that shape complexity, capacity, planning, reliability, logistics, and investment decisions over time.”
Many businesses expand their product lines to attract customers, but this often introduces quiet financial leaks. Optimizing these portfolios can yield significant rewards. For example, a confectionery company identified approximately $10 million in operating income improvements by reducing product complexity by 22%.
In another case, a cheese manufacturer slashed its product range by 40%. By eliminating low-performing products, the business achieved a measurable increase in earnings before interest and taxes. The research suggests that companies must evaluate the true cost-to-serve for each item rather than looking only at sales volume.
Restructuring the supply chain network
Many manufacturing and distribution networks have grown piece-by-piece over several years through mergers and acquisitions, leaving them poorly suited for modern economic realities. This lack of structural alignment often results in duplicate tasks and empty warehouse space. That can result in unnecessary logistics cost, duplicated activities, untapped capacity, and product flows that can be greatly improved.
According to EFESO benchmarks, redesigning these logistics networks can unlock dramatic savings. One frozen food company achieved a 16% cost reduction by optimizing its footprint. Meanwhile, a global operation lowered its overall operational costs by more than 23% while simultaneously improving its inventory management.
Stabilizing the factory floor
While most food and beverage brands have already implemented basic efficiency programs, EFESO findings show that the next wave of productivity comes from stabilizing daily operations. Unplanned downtime, schedule changes, and manufacturing errors quickly erode profits.
The data indicates that companies focusing on operational stability can expect productivity gains of 5% to 15%. Overall equipment effectiveness can also see improvements ranging from 10% to 40%. Ensuring that a factory runs reliably prevents rising raw material costs from compounding into severe operational losses.
The role of planning and technology
Unifying separate business functions is critical to stopping margin loss. Poor planning often leads to rushed shipping, excess inventory, and missed shipments, whereas disciplined planning protects cash flow.
The stidy also points out that capital investments must be tightly aligned with actual factory floor capabilities. When companies purchase advanced machinery or implement new AI systems without operational discipline, they risk locking in long-term inefficiencies.
“Ultimately, margin performance will depend not only on how external costs evolve, but on how effectively leadership teams manage the operating decisions that turn pressure into cost, value or leakage,” said Bas Koetsier, managing director and senior partner at EFESO Management Consultants.
“The real challenge is to identify where value is structurally lost, then translate that insight into aligned decisions, disciplined execution and measurable margin improvement that prevent those losses from recurring.”
