By Steffen Weck

Whatever newscast you tune into, no matter who you talk to on the street or over lunch, the refrain is the same: Times are tough. The worst recession since the 1930s has taken its toll in every major industry — food manufacturing being no exception.

Cutbacks in production are common these days, as brand owners take a serious look at less profitable or non-essential lines in favor of more profitable or value-brand products. Attention is paid to producing these products with fewer manufacturing associates, expecting those remaining to pick up the extra workload.

That’s the bad news. The good news is that the picture doesn’t have to be so bleak. By looking closely at your production process, your objectives (both short- and long-term) and by using common sense, food manufacturers can ride out this downturn and emerge the wiser for it.

Reduction, Your New Best Friend

You’ve heard the term “reduce, reuse, recycle” in terms of eco-awareness. The modern adage can and should be applied to business practices, too. The first line of defense in a tough economy is to find ways to reduce excess money and/or time expenditures from any area of your business.

Reducing the amount of packaging, for example, is one way to make a big impact on the bottom line. Packaging in bulk or changing the materials could save companies millions. Some water-bottle companies are doing this, saving not only on materials but on shipping.

Another place to seek spending cuts is in indirect expenditures that account for half of the budget for most manufacturing companies. Finding better sources for the goods and services you engage can lead to huge gains, not only in the short term, but over the long haul.

And as far as taking on any additional debts, beware. Signing on the dotted line for long-term financial commitments is probably not a wise move right now, as capital spent is not easily recovered. Economic slumps do turn around eventually, but there’s no telling when that might occur. Some economists don’t think we’ll hit “bottom” and start growing until 2010. There may be better times than these to invest in growth. For the time being, simply keeping operations operating is not a bad goal.

Product-Line Rationalization

Identifying opportunities to reduce complexity in the manufacturing process (or “product-line rationalization”) is a great way to trim operations budgets. Consolidating two similar products or formulations into one that is equally accepted by the consumer, for example, can be highly effective. Often, product proliferation occurs with little regard for existing product lines. It is wise to identify the true cost of manufacturing each product separately. Too often, manufacturers “line price” new products with little regard for their unique processing complexities.

Stay Informed to Stay Afloat

The Food Marketing Institute (FMI) in cooperation with The American Meat Institute (AMI), recently published a study sponsored by Sealed Air’s Cryovac Food Packaging Division. The study found that shoppers are eating out less and cooking more, and are trading down, substituting and eliminating, though their overall spending amount is roughly the same, at about $91 per week. And the expenditure may not have changed, but the way shoppers spend certainly has. Consumers are using more coupons, buying only off their list, and choosing store brands more often. Arming yourself with statistics like these and staying abreast of the latest studies on consumer spending helps you make informed decisions. Being nimble when it comes to speed to change is important, too. Making sure that your operation is able to incorporate product modifications (including both cost and quality improvements) in our volatile, unpredictable marketplace is paramount.

Quality: Non-Negotiable

Without a doubt, product quality should never be offered up to the sacrificial alter. A brand owner, tempted to improve margins, risks losing consumers if product attributes are even perceived as having been altered. Brand owners must tread carefully, for a penny saved in the short term may be the beginning of an unstoppable decline in consumer confidence.

And what of price reduction? There is tremendous pressure, both real and perceived, to reduce prices. A nervous brand owner or manufacturer with excess line time may see price reduction as their only alternative in a sluggish economy. But reducing price can turn a customer off from the product if he or she perceives a decline in quality. Instead, consider perhaps a temporary increase in serving size. This can be perceived as a economical partnership, the brand owner helping the consumer stretch their budget.

Steffen Weck is founder of consulting firm Food Business Consulting based in Kansas City. He can be reached at weck@foodbusinessresource.com.