Navigating global volatility in Q2
Chief financial officers (CFOs) and treasurers in the food and drink sector are facing an unprecedented combination of challenges.
Geopolitical turmoil, inflationary swings, climate events, and supply chain disruptions have become persistent threats to stability. At the same time, although interest rates are gradually declining in many regions, the high cost of capital from prior years and shifting consumer behaviors continue to squeeze liquidity and profit margins. This article analyzes the latest global developments affecting food and drink companies from a financial and supply chain perspective and offers strategic insights for senior finance leaders navigating this landscape.
Geopolitical volatility is having a direct and disruptive impact on food and drink supply chains. While the war in Ukraine initially triggered price shocks in energy, grain, and other commodities, attention is also shifting to instability in other regions. In parts of Africa, political unrest, military coups, and regional conflicts are disrupting agricultural production and export routes, creating delays and risks around food security. Meanwhile, shifting trade policies, such as potential U.S. import tariffs, and new trade agreements are altering cost structures and threatening domestic production in some markets.
Climate change has also emerged as a leading supply chain disruptor in 2025, with floods accounting for 70% of weather-related delays in 2024. These developments are lengthening transportation times, increasing compliance complexity, and raising prices for key inputs. Companies have had to rethink sourcing strategies, diversify supplier bases, and build buffer inventories. CFOs should collaborate with supply chain teams on scenario planning and develop contingency plans to ensure supply continuity.
Working capital strains, unpredictable lead times, and new tax and regulatory burdens are straining working capital across the industry. 41% of businesses are planning to cancel or scale back their planned investment for the year ahead in areas that would drive growth. Banks are more restrictive, and liquidity remains a concern. CFOs are responding by doubling down on internal working capital processes, such as improving collections, managing inventories, and negotiating payment terms. Leading companies are tracking key metrics (days sales outstanding (DSO), days payable outstanding (DPO) and inventory days) and implementing cross-functional task forces to optimize the cash conversion cycle.
Profit margins are under sustained pressure. With inflation easing, firms face consumer and retailer pushback against earlier price increases. However, production and labor costs remain high, creating a gap between pricing power and cost base. Smaller businesses lacking global brand strength are particularly vulnerable. CFOs should rigorously review cost structures and evaluate pricing strategies. Tactics may include targeted promotions, value packs, or manufacturing efficiencies. The goal is to balance cost containment with pricing models that support volume growth and profitability.
Financial stress extends across the value chain. Rising input costs and delayed payments have squeezed suppliers, increasing credit risk. A failure at one node, like a packaging supplier or distributor, can have cascading effects across the chain.
CFOs are monitoring counterparties more closely, using tools like credit assessments, early payment programs, and trade credit insurance. Some are partnering with banks or fintech’s to enable supply chain finance solutions that provide liquidity to smaller vendors. Integrating financial risk into supplier evaluations and supporting critical partners can prevent major disruptions. Food and drink companies are increasingly turning to alternative financing solutions with factoring and supply chain finance growing in popularity to unlock working capital. For instance, supply chain finance allows suppliers to be paid earlier while buyers maintain extended payment terms. This improves cash flow for both parties.
Traditional trade finance tools such as letters of credit, inventory financing and (bank) guarantees are also seeing renewed interest. Companies are working with banks and fintech’s to expand credit access, manage disruptions, and secure international transactions. The key is to use these tools strategically, weighing costs against liquidity and risk management benefits.
Automation is crucial to counter labor shortages and improve efficiency. Manufacturers are investing in automation, including AI-driven maintenance, digital twins, and cybersecurity upgrades. At the same time, heightened regulatory focus on food safety is prompting investment in traceability and compliance systems ahead of the Food and Drug Administration’s (FDA) new requirements coming in 2026.
Sustainability and regulatory pressures are increasing import costs, adding to the financial burden of food and drink businesses. Despite this, companies are continuing to invest in sustainability through eco-friendly packaging and alternative ingredients to meet consumer demand and environmental targets.
CFOs and senior finance leaders should consider the following:
01
Diversify sourcing, develop contingency plans, and assess supply chain exposure to both political and weather-related disruptions.
02
Improve receivables, payables, and inventory management. Treat working capital as a strategic lever.
03
Align pricing to cost realities while protecting volume. Use data to monitor consumer sensitivity and retailer pressure.
04
Identify and mitigate credit risk in the supply base. Use financial tools to support critical vendors.
05
Utilize factoring, supply chain finance, and trade finance tools to strengthen liquidity and manage risk.
06
Upgrade technology and compliance systems to remain competitive and meet new regulatory demands.
07
Balance short-term costs with long-term gains in brand trust and regulatory compliance.
By focusing on these areas, finance leaders can steer their organizations through ongoing volatility with greater confidence. The food and drink sector will likely remain exposed to external shocks, but a proactive and agile finance function can safeguard financial health and support sustainable growth.
For further information on managing your risk in the food and drink industry please contact our team.
