Variables Will Have Immediate Impact on Food Service in 2025

It's no surprise that the food industry will be impacted by many variables this year including inflationary trends, tariffs and other policy changes, as well as labor costs, and climate change.

"Variables that will have an immediate impact on business in 2025, " said Phil Kafarakis, president & CEO of the International Foodservice Manufacturers Association (IFMA). "Whether or not the proposed tariff hikes come to be, several serious strategic issues continue to be debated in food company boardrooms that now require immediate decisions and alignment on action plans."

He suggests variables operators should focus on are those that have an immediate impact on business including raw ingredient prices, farm-related issues such as the harvest and changing weather, and labor costs.

"Raw materials, particularly core items, will continue to be expensive," Kafarakis added. "Between continuing inflation and disruptive weather patterns, the growing cycle has left food manufacturers weighing whether consumers will continue to buy product at these increased price points. Layering on the political environment with tariffs will only complicate the supply chain further. If tariff hikes take place in the late spring, for example, the growing season will feel immediate impact; the affected countries, particularly Mexico, aren’t going to stand around and take it. Prepare for high commodity prices in the new year."

Labor will continue to be a problem across the industry, particularly with volatility across the foodservice chain. 

"Beyond the proposed immigration crackdown, organized labor is methodically activating strikes not only in stores (e.g., Starbucks), but also across the supply chain within distribution centers and with drivers (e.g., Sysco and Amazon)," he said. "Getting qualified labor to work on farms continues to be difficult, too: wages are going up, unions are becoming more active, and the fact is that not many people want to go into the fields and pick fruits and vegetables here in the U.S. These important drivers will continue to pose problems for the industry in 2025."

Additonally, Kafarakis noted that to be prepared for 2025 and a new administration, some companies made serious job cuts such as Cargill with the same happening at Tysons and Smithfield, while Unilever and Nestlé are in the midst of reorganizations. 

The regulatory landscape will also impact the industry in 2025. 

"Regulatory policy that has been signed into law and is now heading into compliance stage—namely, the new definition of 'healthy' and FSMA204 traceability—will throw a monkey wrench into the innovation and product development cycles in big companies," he said. "Rather than innovating and growing, manufacturers will shift to compliance mode. Given the economics of the expected changes, particularly removing ingredients that keep products fresh for longer—food will be more expensive for everyone. Subjecting the processed food industry to these new requirements could have long term-ramifications and a huge legislative battle tying up food companies in compliance. Product recalls and market withdrawals that were major stories in 2024—McDonald’s onions, Boars Head deli meats and produce-related products—haven’t helped the situation."

Kafarakis  said a sluggish legislative environment is holding up almost $120 billion in federal funding to help food-insecure Americans. After three years, the Farm Bill still hasn’t passed, leaving farm subsidies hanging.

"The Childhood Obesity Act is beginning to sound reminiscent of the cigarette industry. The food stamp program and SNAP—the Supplemental Nutrition Assistance Program that gives needy children free breakfasts and lunches at school—are both waiting for funding. The underlying problem is inflation. All of this will play out in the next year, though it will take some time. The ongoing inattention to the impact of weight-loss drugs (GLP-1 medications) to product lines will further complicate business in the foodservice industry."