In this episode of Navigating the Currents of Change, host Shaheen Chohan, VP of Market Analytics at Industrial Info Resources, joins Lubos Vozar, European Director of Research for Food & Beverage, to explore the trends reshaping the industry. From AI and automation to alternative proteins and renewable energy investments, discover where capital is flowing and how the sector is adapting to a rapidly evolving landscape.
[Intro] (00:00):
If you've been trying to understand what is driving the current rise in capital and maintenance spending across the European food and beverage industry, and whether the pace of this will continue going forward, then this conversation will help you uncover some of the main trends being seen.
Shaheen Chohan (00:33):
Welcome to Navigating the Currents of Change. My name is Shaheen Chohan, and I'm the Vice President of Market Analytics at Industrial Info Resources, a global provider of energy and industrial infrastructure market intelligence for more than 40 years. And to help me dissect some of those trends that we're seeing, I am delighted to be joined by Lubos Vozar, who leads our European food and beverage research, and also our European research operations. Welcome, Lubos.
Lubos Vozar (01:04):
Thank you for having me, Shaheen.
Shaheen Chohan (01:08):
Lubos, before we jump in to look at some of the project spending numbers and discuss some of those key trends — maybe you could just explain to folks who've tuned in what is the scope of our coverage for food and beverage? Some of those sectors and segments that you and your researchers are covering.
Lubos Vozar (01:24):
Of course, Shaheen. Our researchers cover the entire food and beverage production chain. We start from the agricultural produce, sugar plants, dairy processing, meat, poultry and fish processing, alcoholic and non-alcoholic beverages. And also we go all the way to final preparations, packaged foods, and then distribution and warehousing of foods.
Shaheen Chohan (01:50):
Now, getting into the discussion — I guess we can't really start talking about the broader outlook for food and beverage in Europe without mentioning tariffs. Now, we've seen President Trump release his next wave of tariffs on Europe. What kind of impact do you think those tariffs will have, specifically on different sectors, but also on the general pace and momentum of the capital spending that you've been seeing occurring over the last few years? Are we going to see some kind of impact on that from these tariffs?
Lubos Vozar (02:23):
I agree, you cannot really exclude the question of tariffs from this conversation. While the recently announced 15% tariff that has been put by the Trump administration on exports to the US will have some impact, producers of food and beverage production in Europe that would be more heavily dependent on exports to the US would typically be premium producers of produce, such as wine, spirits, chocolate or cheese. And these are all at the higher end of the market anyway, so we do not really see a massive implication on exports as such. There might be a slight hesitation and delay in implementing some of the investments, however. Out of the $62 billion worth of investments that we are tracking currently in Europe, we expect the vast majority to go through and receive final investment decision.
Shaheen Chohan (03:22):
Now, aside from the raised uncertainty from these current trade tensions, so to speak — are you seeing also any kind of shift or change in where capital spending is being allocated, I guess, from increasing scrutiny on food production across the food supply chain, associated with sustainability?
Lubos Vozar (03:47):
Absolutely. It is true that the energy transformation is a challenge, but a response from the industry that we see is one that embraces the change. There is a number of ways the industry can take advantage of the adaptation to the new norm, but we see a lot of photovoltaic installations, wind, and biomass. In fact, we're tracking over $2 billion worth of investment in this initiative alone. However, food and beverage is well positioned also in helping Europe gain self-sufficiency in energy production. It is an industry that is blessed with feedstock that is required for production of biomass and biogas, and therefore it is excellently and well positioned to be a part of the solution.
So at IIR we do track planned investment that is relating to these developments as well. There is also a wide variety of other initiatives that the food and beverage industry has taken on. So we are seeing installation of e-boilers, we're seeing installations of energy storage — both electricity and heat energy storage — which, in combination with planned power production coming from renewables or through power purchase agreements, provide for an immediate way how you can reduce your emissions from the operation.
Shaheen Chohan (05:20):
Now, Lubos, I guess a lot of where producers will focus their capital spending, where they're driving and pushing this investment, is, I guess, in response also to shifting consumer preferences — how we at home are shifting what we would like to consume, both from a sustainability perspective as well as, you know, dietary changes. Are you now seeing any new kind of breakout sectors that are emerging as consumer preference and tastes start to shift and change?
Lubos Vozar (05:53):
It's an excellent question, Shaheen. Obviously, consumer preferences have a massive impact on the investment in the industry. We are tracking almost $1 billion in initiatives, including plant-based foods. Insect-based foods are more — most recently, you have precision fermentation as a type of new foods. Some are adapting faster than others. For example, plant-based milk production, or plant-based milk alternatives, have been widely accepted by people already, and you see oat milk and rice milk and all sorts of milks in every supermarket these days. Insect-based foods are receiving a little bit more hesitation. However, we believe that consumer preferences are shifting towards more environmentally conscious decisions, and therefore, in the long run, we expect much more investment in this field.
Shaheen Chohan (06:57):
Now, I'd like to keep with that theme, I guess, of healthier eating. Are there any other noteworthy sectors that you have started to see more attention, capital flow going into, beyond, I guess, the alternative protein market? Is there anything else?
Lubos Vozar (07:09):
Absolutely. One of the most promising sectors would be fish farming, which has traditionally been located offshore. However, there have been significant environmental impacts associated with this type of production. So we do see a shift towards land-based fish farming through recirculating aquaculture systems, or so-called RAS, which allow the operators to have full control of all the environmental impacts associated. And on top of it, it provides for an amazing opportunity for circular economy. So these types of operations produce quite a large amount of waste, which you can use for producing biogas. Again, we see over $5 billion worth of investment, most notably in the Nordics, in the fish farming industry.
Shaheen Chohan (08:02):
Now, I do want to keep with the theme and look now actually more towards the beverage market. How are consumption habits changing the industry, and in particular capital spending — particularly now that we see large swathes of the population, certainly the younger generation, moving away from alcohol-based beverages. Are we starting to see the industry invest more production capacity in that part of the market?
Lubos Vozar (08:29):
You are correct, absolutely. The consumer preferences are shifting towards low and non-alcoholic beverages. Also, they are shifting towards low and no-sugar beverages. So the industry has to adapt, and we see a lot of beverage producers that are dedicating more and more production capacity towards manufacturing of these types of products. It is essentially helping them to stay in business and is allowing them to target a much larger consumer base in order for them to expand.
There is a number of initiatives that the European Union is currently undertaking. One of them would be for reduction of sugar content in sweetened drinks by up to 30% in some countries. We also saw voluntary reductions done by certain members of the Association of Soft Drinks Manufacturers, and essentially the entire business is reflecting the consumer preferences. Therefore, we see more and more investment in this sector as well.
Shaheen Chohan (09:47):
Now, I'd like to shift gears a little and look at some of the specific areas of investment that we're seeing — albeit different types of in-plant capital spending that you are now starting to see come back into the market. Obviously, post-COVID, there was a lot of margin and profit destruction. We saw a lot of the food and beverage workforce leave and potentially not come back. So there is a really big focus, I guess, on improving production processes and trying to support and bring back some of that margin. How are producers and manufacturers now kind of adapting to this post-COVID outlook?
Lubos Vozar (10:28):
Food and beverage, same as essentially every other industry, is moving towards a high level of automation. Certain parts of the food and beverage chain are easier to automate than others, such as warehousing, fill-and-finishing lines, or automated production lines. However, other spheres of the industry are more difficult to automate. That said, we are definitely seeing a trend towards more automation, even in sectors of food and beverage where it is hard to do so. We see autonomous harvesting machines, we see automated irrigation systems. Essentially every labor-intensive process that is currently in the food and beverage industry is heavily oriented towards automation in future. And we do track quite a lot of investment in this — we have, I think, $4 billion worth of investments in automated warehouses alone.
Shaheen Chohan (11:28):
And finally, I guess like all other industries, artificial intelligence is starting to play some kind of role, or it's certainly now part of the corporate agenda. How is the industry innovating, I guess, from a technology perspective, more towards the use of AI and, as you've already mentioned, automation? But will AI play a bigger role going forward? Do you think it will?
Lubos Vozar (11:58):
It already does. However, its application in the real world is still in infancy, so the industry is learning as we go — where would be the best application for it. AI has a fantastic ability to process large amounts of data. This helps the producers in the industry react in real time to consumer preference changes. It allows them to analyze the regulatory environment. However, on the production side of the sector, the applications are only slowly penetrating. We expect that AI, in conjunction with robotics, is going to play a huge role in future. And as every labor-intensive process, as I have said earlier, is going to be automated, AI will definitely help to improve this process much further and will bring more efficiency to the industry.
Shaheen Chohan (12:55):
So that brings us to the conclusion of our podcast. A very big thanks to you for sharing your insights and perspectives today — very much appreciated, I really enjoyed the discussion. And also a very big thanks to all of you who've tuned in. If any of you have any further questions about some of the points discussed today, then please do reach out to myself or Lubos via our contact details that you can see here. Thanks for joining us. I hope we have helped you all better navigate some of the currents of change that we're seeing.
If you've been trying to understand what is driving the current rise in capital and maintenance spending across the European food and beverage industry, and whether the pace of this will continue going forward, then this conversation will help you uncover some of the main trends being seen.
Shaheen Chohan (00:33):
Welcome to Navigating the Currents of Change. My name is Shaheen Chohan, and I'm the Vice President of Market Analytics at Industrial Info Resources, a global provider of energy and industrial infrastructure market intelligence for more than 40 years. And to help me dissect some of those trends that we're seeing, I am delighted to be joined by Lubos Vozar, who leads our European food and beverage research, and also our European research operations. Welcome, Lubos.
Lubos Vozar (01:04):
Thank you for having me, Shaheen.
Shaheen Chohan (01:08):
Lubos, before we jump in to look at some of the project spending numbers and discuss some of those key trends — maybe you could just explain to folks who've tuned in what is the scope of our coverage for food and beverage? Some of those sectors and segments that you and your researchers are covering.
Lubos Vozar (01:24):
Of course, Shaheen. Our researchers cover the entire food and beverage production chain. We start from the agricultural produce, sugar plants, dairy processing, meat, poultry and fish processing, alcoholic and non-alcoholic beverages. And also we go all the way to final preparations, packaged foods, and then distribution and warehousing of foods.
Shaheen Chohan (01:50):
Now, getting into the discussion — I guess we can't really start talking about the broader outlook for food and beverage in Europe without mentioning tariffs. Now, we've seen President Trump release his next wave of tariffs on Europe. What kind of impact do you think those tariffs will have, specifically on different sectors, but also on the general pace and momentum of the capital spending that you've been seeing occurring over the last few years? Are we going to see some kind of impact on that from these tariffs?
Lubos Vozar (02:23):
I agree, you cannot really exclude the question of tariffs from this conversation. While the recently announced 15% tariff that has been put by the Trump administration on exports to the US will have some impact, producers of food and beverage production in Europe that would be more heavily dependent on exports to the US would typically be premium producers of produce, such as wine, spirits, chocolate or cheese. And these are all at the higher end of the market anyway, so we do not really see a massive implication on exports as such. There might be a slight hesitation and delay in implementing some of the investments, however. Out of the $62 billion worth of investments that we are tracking currently in Europe, we expect the vast majority to go through and receive final investment decision.
Shaheen Chohan (03:22):
Now, aside from the raised uncertainty from these current trade tensions, so to speak — are you seeing also any kind of shift or change in where capital spending is being allocated, I guess, from increasing scrutiny on food production across the food supply chain, associated with sustainability?
Lubos Vozar (03:47):
Absolutely. It is true that the energy transformation is a challenge, but a response from the industry that we see is one that embraces the change. There is a number of ways the industry can take advantage of the adaptation to the new norm, but we see a lot of photovoltaic installations, wind, and biomass. In fact, we're tracking over $2 billion worth of investment in this initiative alone. However, food and beverage is well positioned also in helping Europe gain self-sufficiency in energy production. It is an industry that is blessed with feedstock that is required for production of biomass and biogas, and therefore it is excellently and well positioned to be a part of the solution.
So at IIR we do track planned investment that is relating to these developments as well. There is also a wide variety of other initiatives that the food and beverage industry has taken on. So we are seeing installation of e-boilers, we're seeing installations of energy storage — both electricity and heat energy storage — which, in combination with planned power production coming from renewables or through power purchase agreements, provide for an immediate way how you can reduce your emissions from the operation.
Shaheen Chohan (05:20):
Now, Lubos, I guess a lot of where producers will focus their capital spending, where they're driving and pushing this investment, is, I guess, in response also to shifting consumer preferences — how we at home are shifting what we would like to consume, both from a sustainability perspective as well as, you know, dietary changes. Are you now seeing any new kind of breakout sectors that are emerging as consumer preference and tastes start to shift and change?
Lubos Vozar (05:53):
It's an excellent question, Shaheen. Obviously, consumer preferences have a massive impact on the investment in the industry. We are tracking almost $1 billion in initiatives, including plant-based foods. Insect-based foods are more — most recently, you have precision fermentation as a type of new foods. Some are adapting faster than others. For example, plant-based milk production, or plant-based milk alternatives, have been widely accepted by people already, and you see oat milk and rice milk and all sorts of milks in every supermarket these days. Insect-based foods are receiving a little bit more hesitation. However, we believe that consumer preferences are shifting towards more environmentally conscious decisions, and therefore, in the long run, we expect much more investment in this field.
Shaheen Chohan (06:57):
Now, I'd like to keep with that theme, I guess, of healthier eating. Are there any other noteworthy sectors that you have started to see more attention, capital flow going into, beyond, I guess, the alternative protein market? Is there anything else?
Lubos Vozar (07:09):
Absolutely. One of the most promising sectors would be fish farming, which has traditionally been located offshore. However, there have been significant environmental impacts associated with this type of production. So we do see a shift towards land-based fish farming through recirculating aquaculture systems, or so-called RAS, which allow the operators to have full control of all the environmental impacts associated. And on top of it, it provides for an amazing opportunity for circular economy. So these types of operations produce quite a large amount of waste, which you can use for producing biogas. Again, we see over $5 billion worth of investment, most notably in the Nordics, in the fish farming industry.
Shaheen Chohan (08:02):
Now, I do want to keep with the theme and look now actually more towards the beverage market. How are consumption habits changing the industry, and in particular capital spending — particularly now that we see large swathes of the population, certainly the younger generation, moving away from alcohol-based beverages. Are we starting to see the industry invest more production capacity in that part of the market?
Lubos Vozar (08:29):
You are correct, absolutely. The consumer preferences are shifting towards low and non-alcoholic beverages. Also, they are shifting towards low and no-sugar beverages. So the industry has to adapt, and we see a lot of beverage producers that are dedicating more and more production capacity towards manufacturing of these types of products. It is essentially helping them to stay in business and is allowing them to target a much larger consumer base in order for them to expand.
There is a number of initiatives that the European Union is currently undertaking. One of them would be for reduction of sugar content in sweetened drinks by up to 30% in some countries. We also saw voluntary reductions done by certain members of the Association of Soft Drinks Manufacturers, and essentially the entire business is reflecting the consumer preferences. Therefore, we see more and more investment in this sector as well.
Shaheen Chohan (09:47):
Now, I'd like to shift gears a little and look at some of the specific areas of investment that we're seeing — albeit different types of in-plant capital spending that you are now starting to see come back into the market. Obviously, post-COVID, there was a lot of margin and profit destruction. We saw a lot of the food and beverage workforce leave and potentially not come back. So there is a really big focus, I guess, on improving production processes and trying to support and bring back some of that margin. How are producers and manufacturers now kind of adapting to this post-COVID outlook?
Lubos Vozar (10:28):
Food and beverage, same as essentially every other industry, is moving towards a high level of automation. Certain parts of the food and beverage chain are easier to automate than others, such as warehousing, fill-and-finishing lines, or automated production lines. However, other spheres of the industry are more difficult to automate. That said, we are definitely seeing a trend towards more automation, even in sectors of food and beverage where it is hard to do so. We see autonomous harvesting machines, we see automated irrigation systems. Essentially every labor-intensive process that is currently in the food and beverage industry is heavily oriented towards automation in future. And we do track quite a lot of investment in this — we have, I think, $4 billion worth of investments in automated warehouses alone.
Shaheen Chohan (11:28):
And finally, I guess like all other industries, artificial intelligence is starting to play some kind of role, or it's certainly now part of the corporate agenda. How is the industry innovating, I guess, from a technology perspective, more towards the use of AI and, as you've already mentioned, automation? But will AI play a bigger role going forward? Do you think it will?
Lubos Vozar (11:58):
It already does. However, its application in the real world is still in infancy, so the industry is learning as we go — where would be the best application for it. AI has a fantastic ability to process large amounts of data. This helps the producers in the industry react in real time to consumer preference changes. It allows them to analyze the regulatory environment. However, on the production side of the sector, the applications are only slowly penetrating. We expect that AI, in conjunction with robotics, is going to play a huge role in future. And as every labor-intensive process, as I have said earlier, is going to be automated, AI will definitely help to improve this process much further and will bring more efficiency to the industry.
Shaheen Chohan (12:55):
So that brings us to the conclusion of our podcast. A very big thanks to you for sharing your insights and perspectives today — very much appreciated, I really enjoyed the discussion. And also a very big thanks to all of you who've tuned in. If any of you have any further questions about some of the points discussed today, then please do reach out to myself or Lubos via our contact details that you can see here. Thanks for joining us. I hope we have helped you all better navigate some of the currents of change that we're seeing.
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*This episode is brought to you by Industrial Info's Latin American Office in Argentina.