There’s no doubt that 2023 was an interesting year for food and beverage manufacturers. There were companies that had a good year in terms of sales, which is how this list is determined, but generally speaking, sales were down compared to 2022. One might assume that a dip in sales would mean a respective dip in growth or revenue, but many companies were touting the opposite. What were the reasons that sales were down? How were companies able to turn a profit despite the downturn? What areas of the globe saw better success? Let’s take a look.

Inflation in the Food and Beverage Industry

If there was a single word that could be used to describe the economic climate and what was driving business decisions this past year, it’d be inflation. Shocker, right? Material and ingredient costs were up everywhere, which cut into overall revenues. What was driving inflation also shouldn’t be much of a surprise—the continued war in Ukraine was cited by multiple companies, as were weather conditions that affected production.

The U.S. Bureau of Labor Statistics says that inflation in 2023 was slowing compared to previous years, but the Consumer Price Index was the third highest since 2007. Overall, the U.S. saw inflation increase by 3.4%, with food and beverage prices increasing by 2.7% last year. That increase in prices for consumers is reflective of food and beverage companies increasing product prices to offset their own rising material costs.

According to Nestlé’s 2023 annual review for its group sales, “Organic growth was 7.2%. Pricing was 7.5%, reflecting cost inflation over the last two years. RIG [real internal growth] was –0.3%, impacted by soft consumer demand, capacity constraints and a temporary supply disruption for vitamins, minerals and supplements in the second half.”

The good news is that, according to accounting firm KPMG International, “The Global Economic Outlook forecasts see world inflation averaging 5.0% in 2024 and 3.9% in 2025, down from an estimated 6.5% in 2023 and 8.0% in 2022. Risks are on the upside, however, as any further shocks to energy prices—or a more persistent domestic inflation in some countries—could derail the relatively smooth return to central banks’ inflation targets next year.”

Putting a Premium on Pets

Where were companies seeing gains? As Nestlé mentioned in its report, soft consumer demand impacted growth, at least when it came to products for human consumption. The company says that the largest contributor to its growth last year was its pet care group. This was the second year in a row that Nestlé’s Purina PetCare was the biggest contributor to the company’s organic growth. It’s not surprising, considering that there have been more product introductions in the pet food segment compared with human food from 2019 to 2023, according to Mintel Consulting’s Lynn Dornblaser. According to the company’s research, consumers are willing to pay more for premium pet food products, including clean labels. “In the U.S., 23% of pet owners are looking for products with limited ingredients lists,” says Dornblaser.

Nestlé Purina announced in May of this year that it was investing CHF 200 million (approximately $230 million) to expand its pet food plant in Silao, Mexico, and has invested more than CHF 700 million in the plant in the past 10 years. So, it’s clear that the company’s pet food business has been good for some time.

Mars broke into the top 10 this year, up from number 12, buoyed in part by Mars Petcare, which expanded its Nutro range with Nutro So Simple, a range of dog foods that are formulated with a handful of key ingredients. At the end of 2023, Tyson Foods, which came in at number five on our list for the second year in a row, announced that it had invested in insect ingredients company Protix, whose products will primarily be used in the pet food, aquaculture and livestock industries.

Consumer Habits Changing

As consumers spend top dollar on premium products for the furriest members of their households, they’re starting to be more discerning when it comes to F&B purchases for themselves. It’s this search for value that has put a dent in the sales for many manufacturers.

This isn’t to say that consumers aren’t spending. In its 2023 Consumer Pulse Survey, McKinsey & Company found that consumer behavior was oftentimes confusing and, in some cases, downright contradictory. “According to the results of our latest U.S. Consumer Pulse Survey,” write the authors, “they’re worried about rising prices and job security, yet they’re optimistic and still spending. They’re switching to less expensive brands to save money, but they’re also willing to splurge on certain goods and services.”

The Hershey Company’s consumer insights team did its own survey, and came to the same conclusion. Its survey found that consumers are more apt to buy in bulk, share experiences with friends and relatives, and that wellness continues to be a high priority for many.

Making Money, Not Necessarily with Products

The question is how, with high inflation and consumers being more selective, were food and beverage companies able to turn a profit? The answer is by looking within themselves.

No, it wasn’t an examination in the existential sense, but a look at their own operations. We’re seeing something similar now with the wait-and-see approach to construction projects that’s happening this year, as reported in our 47th Annual Plant Construction Survey.

In their report to shareholders, AB InBev’s Marty Barrington and Michael Doukeris, respectively the chairman of the board and CEO, say, “Our top-line increased by 7.8% in FY23, with revenue growth in more than 85% of our markets, driven by a revenue per hl increase of 9.9% as a result of pricing actions, ongoing premiumization and other revenue management initiatives. Volumes declined by 1.7% as growth in many of our emerging and developing markets was primarily offset by performance in the U.S. and a soft industry in Europe.”

PepsiCo’s chairman of the board and CEO, Ramon Laguarta, says of his company’s 9.5% organic revenue growth, “Our results reflect more than $1 billion in productivity savings, while minimizing waste across our value chain.” Some of PepsiCo’s cost-saving initiatives included increasing productivity, focusing on cost control and speeding up the company’s digital strategy implementation.

“We remain focused on what we can control. One of our priorities is to execute with excellence,” says Donnie King, president and CEO of Tyson Foods, Inc. “Our operations have improved across the business, and we have a long runway of opportunities to perform better. Controlling the controllable extends to capital allocation as well, where we will remain disciplined with CapEx and working capital. We continue to execute our multi-point plan focused on efficiency and modernization. You've seen us take bold actions to improve performance, and everything remains on the table to drive operational excellence and address inefficiencies. Our plan is working, and we are seeing tangible benefits of our efforts to end fiscal 2023.”

Tyson announced in the third quarter of last year that it would be closing four chicken plants in North Little Rock, Ark., Corydon, Ind., Dexter, Mo., and Noel, Mo. While the announcement isn’t reflective of the company’s 2023 financials since the plants weren’t to be closed until this year, it’s another example of what companies were doing operationally. Another example is the closing of Smithfield Foods’ pork-processing plant in Charlotte, N.C., which occurred in December. In each case, production was shifted to other facilities to create a net gain in overall production and cost reduction.

Mergers and acquisitions continued to play a large role in a company’s finances. In the UK, finance advisory firm Oghma Partners says, “[T]he key issues that impacted M&A in 2022 dragged over into the start of 2023 with inflationary cost pressures, the cost of living crisis and the increased cost of debt suppressing the higher value deals in the first half of the year. However, deal volume increased compared to 2022, 116 deals for 2023 (an increase of 57%).” The firm believes that this increase in activity in part reflected pent-up seller activity and, in addition, the sad bonus of a large numbers of businesses acquired out of administration.

In the past year, to name a few, Batory Foods announced that it had acquired food ingredients distributor Tri-State Companies, Nestlé announced that it was acquiring a majority stake in Brazilian chocolate company called Grupo CRM, Cal-Maine Foods acquired Fassio Egg Farms, Kerry Group sold its Sweet Ingredients portfolio to IRCA, and Mars acquired Kevin’s Natural Foods and Champion Petfoods (prior to this year’s acquisition of Kellanova). The M&A business is alive and well.

Inflation is still high in 2024, and the impending presidential election has put many capital expenditures on hold as companies wait and see how it all shakes out. Additionally, there’s been a sizeable acquisition and multiple plant closings. We can only wait until next year to see how these have affected revenues. For a more in-depth look at our Top 100, check out our webinar on Sept. 19.