When weather, conflict, tariffs, and ingredient costs are outside your control, margin protection has to come from the spend you can still influence. For food and beverage manufacturers, that means turning fragmented indirect spend into a clear, classified, and actionable source of savings.
Store brands took a record 23.8% of unit share in the first half of 2026, loyalty to national brands fell from 21% to 10% inside a single year, and consumer goods prices have now run 3.4% above year-ago levels for three straight months (Food Industry Executive). Put those three together and you get a fairly blunt message about how much further price can be pushed, which matters a great deal if moving price has been your main instrument for protecting margin since 2023.
For most of that period it worked well enough. Costs went up, prices followed, and the gap between them stayed survivable. That arrangement has come apart faster than most annual plans assumed it would, and it has come apart for private label producers and co-manufacturers too, just from the opposite direction: the pressure arrives as a customer with more leverage than they had eighteen months ago and a much sharper opinion about what your costs ought to be.
The sector is already behaving accordingly. Roughly half of food and beverage processors are sitting on capital projects rather than releasing them, citing tariffs, Middle East disruption, ingredient costs and oil-linked packaging prices in more or less equal measure (Food Processing). When capital stops moving, the pressure to find margin somewhere else lands on procurement.
Three inputs, and no reason to expect them to settle together
There is an understandable temptation to treat the last eighteen months as weather that will pass. The difficulty with waiting it out is that the cost pressure is coming from three directions at once, and the three have very little to do with each other.
- Weather. The EU Commission has cut its wheat production forecast to 126.3 million tonnes, French maize conditions have fallen to a 13-year low with production potentially down as much as 30%, and US wheat planted area is now the lowest it has been since 1877 (The Scottish Farmer).
- Conflict. This one reaches you through freight. Spot rates from Asia to the US West Coast were up 276% against late February as of mid-July, with East Coast lanes up 232% over the same period (SeafoodSource), while Asia to North Europe has been running near $5,800 per FEU, roughly $3,000 above where it sat six weeks earlier (Freightos). Crude has climbed 20% off its early July low (Freightos). Even a manufacturer that imports nothing feels it, because domestic truckload and LTL indexes set new highs in Q2, with rate-per-mile up 10.1 points year over year and Q3 forecast higher still.
- Tariffs. Average US tariff rates are running between 10 and 13 percent, the highest since the 1940s (NBC News), and a 25% tariff on a range of Brazilian imports took effect on July 22. Rates move, deals land, exemptions appear and expire, which is why the Food Institute concluded that food companies can no longer assume trade costs will hold steady across the life of a purchasing contract or a capital plan (Food Institute).
Any one of these could resolve tomorrow and you would still be exposed to the other two. Building a 2027 plan on the assumption that all three settle at the same time is a bet, and the odds on it are poor enough that most procurement leaders would not take it if it were framed that way out loud.
What a dollar is actually worth
What makes indirect spend worth serious attention is where the money lands. A dollar taken out of indirect cost arrives at the bottom line whole, while a dollar of new revenue shows up carrying cost of goods, commission and promotional allowance with it. Divide one by your net margin and you get the amount of new sales required to match a single dollar of savings, which comes to twenty dollars at a five percent margin and closer to thirty-three at three percent.
Percentages travel better between companies than dollar figures do, so it is worth running it that way as well. Reducing indirect spend by ten percent, at a five percent net margin, produces the same profit as growing revenue by twice your entire indirect book. At three percent it is more than three times. Whatever your indirect spend actually amounts to, substitute the real number and the result is usually larger than people expect, and it is a useful thing to put in front of a commercial team alongside the question of what it would cost in headcount, promotional investment and time to deliver the same profit through sales.
The argument gets stronger, not weaker, as margins compress. Which is to say it is stronger this year than it was last year.
The categories nobody defends
None of this requires any individual line item to be large. A meat packer has no influence over the price of beef, but it has a good deal of influence over what the beef ships in, and taking a few cents out of the case and the banding (and considering the high volume of packaging) can significantly affect the margin that the commodity market has just taken out. Nobody downstream notices, because the packaging goes in a bin.
These categories tend to go unexamined for reasons that are structural rather than careless:
- They are fragmented. Hundreds of suppliers and small individual tickets mean no single invoice is ever large enough to trigger a review.
- They never touch the product. There is no reformulation risk, no regulatory requalification and no quality escalation attached to them, which is exactly why they also never generate urgency.
- They usually have no owner. Direct categories come with a category manager and a savings target, whereas packaging, MRO, logistics services and facilities frequently report to nobody in particular.
We worked recently with a European customer whose packaging category had gone four years without a competitive review, and the exercise returned 17% of annual category spend.
There is a timing argument here too. Resin, film and coatings all track crude, and crude has just moved 20% off its July low, so packaging costs are rising regardless of what procurement does about them. An unreviewed packaging book is a position that gets worse on its own. It is also becoming a more complicated category to manage, since a bipartisan bill to ban intentionally added PFAS from food packaging was reintroduced in the House on July 7, and a PMMI survey found only 7% of CPG companies report no trade-offs at all when shifting to sustainable materials (Food Industry Executive). Cost, compliance and material performance now collapse into a single decision, and teams without a clear view of what they currently buy will make that decision badly.
The part most teams have not finished
Everything above depends on the same foundation, and it is the step where most organizations stall. You need to know what you spend, with whom, on what and at what delivered cost, across the whole book rather than a sample or the top fifty suppliers, and classified consistently enough that a category resembles a category instead of four hundred unrelated transactions.
Most food and beverage manufacturers cannot produce that view today. Spend sits across multiple ERPs, gets coded differently from plant to plant, and a meaningful share of it never touches a purchase order at all. The problem does not disappear at smaller scale either, since a single-site manufacturer with one ERP and a capable finance team still usually cannot say what it spends on corrugated across all its suppliers without someone spending a week in a spreadsheet. Until that picture exists, indirect spend remains a theory and the margin inside it stays where it is.
The teams that get through the next two years with their margins intact will mostly be the ones that built that foundation while the pressure was still manageable.
Where Simfoni fits
Simfoni’s Strategic Spend Hub gives food and beverage manufacturers a single classified view of enterprise spend, built on a Snowflake-native architecture that handles multi-ERP, multi-site environments without a two-year data project in front of it. Virgil AI works on top of that view to find where the money actually is, and the platform closes the loop by carrying those opportunities through sourcing and into contracted, realized savings rather than stopping at a report. We back the outcome with a guarantee on ROI.
If your direct costs are being set by conditions well outside your control, the fastest available path to margin runs through the spend that is not.
