Inflation is a major challenge for food manufacturing companies in 2023. CFO’s and executives are dealing with the increasing costs of raw materials, labor shortages, and transportation problems that all contribute to rising costs. But According to Gartner, 74% of CFOs believe lower profitability is the biggest risk of input price inflation. How can CFOs at food manufacturing companies cope with this pressure and protect their margins?

Here are are some strategies that CFOs are using or can use to manage inflation and rising input costs:

Forecasting and planning: Some companies are using an inflation forecast to get a better understanding of how costs might develop in the months ahead. This helps them adjust budgets, pricing, and inventory levels accordingly. CFOs can also use scenario planning to prepare for different outcomes and contingencies.

Making a sales push: Another way to offset the impact of inflation is to increase sales volume and market share. CFOs can work with their sales and marketing teams to identify new opportunities, target high-value customers, and offer incentives or discounts to boost demand. They can also leverage data and analytics to optimize their pricing and promotion strategies.

Investing in digital transformation and automation: Digital transformation and automation can help food manufacturing companies improve their efficiency, productivity, and quality. CFOs can invest in technologies that enable them to automate repetitive tasks, streamline processes, reduce waste, and enhance customer experience. They can also use digital tools to monitor and manage their supply chain performance and risks. 

Being structured and targeted in price increases: Passing on the cost increases to customers is a common response to inflation, but it can also backfire if done poorly. CFOs need to be structured and targeted in their price increases, and avoid broad-brush approaches that are based on the cost inflation of the largest raw materials. Instead, they should consider the value proposition, elasticity, and competitive positioning of each product and customer segment, and tailor their price increases accordingly.

Retaining and attracting talent: Inflation can also affect employee morale and retention, as it erodes their purchasing power and reduces their real income. CFOs need to ensure that their compensation and benefits packages are competitive and aligned with the market. They can also offer non-monetary rewards, such as recognition, career development, and flexible work arrangements, to motivate and retain their talent.

Inflation and rising input costs are inevitable realities for food manufacturing companies in 2023, but they are not insurmountable. By adopting these strategies, CFOs can help their companies navigate the inflationary environment and maintain profitability and growth.