Supplier Consolidation in Food and Beverage: How to Unlock Procurement Savings

The impact of procurement cost reduction in the food and beverage industry

McKinsey has found that for food companies, every 1% improvement in direct material cost can improve net margin by 200 to 300 basis points. That makes ingredient procurement one of the most powerful margin levers in the industry. Yet many food and beverage manufacturers still find it difficult to fully capture this value.

This is not because the commercial opportunity is unclear, but because the data needed to identify and act on it is often fragmented, inconsistent, and stored in formats that are difficult to reconcile.

Why procurement savings are difficult to prove

A situation most procurement leaders will recognise:

A buyer is preparing for a supplier review. They are fairly sure the business is buying a functionally equivalent dairy powder from three different suppliers, at three different prices. The gap could be meaningful in a category with seven-figure annual spend.

However, the specifications are described differently in each supplier’s documentation. One lists protein content as a percentage. Another uses grams per 100g. A third includes it in a PDF product sheet that was never loaded into the ERP system. Pack sizes differ. Naming conventions differ. There is no clean, like-for-like comparison available.

As a result, the buyer enters the negotiation relying on experience rather than a fully comparable dataset. The savings opportunity remains difficult to quantify.

Why food and beverage procurement data is uniquely complex

Procurement data is complex in every industry. In food and beverage, it is often more difficult to standardise.

Ingredient specifications are highly variable. Moisture levels, ash content, microbiological limits, allergen declarations, and shelf-life conditions are not always described consistently, not only between suppliers, but sometimes between product lines from the same supplier.

A modified maize starch from one vendor and a functionally equivalent product from another may share very little common language in their specification sheets. The same applies across dairy powders, emulsifiers, fruit preparations, and packaging materials. 

According to McKinsey’s research on procurement data, the procurement function sits at the confluence of huge quantities of structured and unstructured data, and mastering it is what separates leading organisations from the rest.

The reality of supplier data in practice

Document quality varies significantly.

In our experience working on procurement data for major F&B businesses, the reality on the ground is far more complex than most people expect. Invoices and product PDFs arrive scattered across email threads, shared drives, and ERP attachments. Some contain detailed specification tables. Others include product photographs, packaging drawings, or even CAD images but no usable attribute data. 

One supplier document will list moisture content, ash percentage, and allergen status. The next, for a functionally equivalent product, will omit half of those fields entirely. Key attributes appear in some documents and are absent from others, with no consistency in format, terminology, or completeness. 

Before any comparison can happen, this information has to be found, extracted, and made consistent. That is the work most procurement teams simply do not have the capacity to do manually across hundreds of supplier relationships.

How supplier complexity builds over time

This challenge is often the result of normal business evolution.

• product range expansion
• acquisitions and inherited supplier bases
• local sourcing decisions
• temporary sourcing changes during supply disruptions

Over time, these layers accumulate.

To put this in perspective: one major UK food manufacturer was reported to be working with over 3,000 suppliers and set a target to cut that base by 50%.

The result is a procurement landscape where equivalent products are hidden behind layers of inconsistent, incomplete, and scattered data, and the commercial opportunity they represent stays invisible.

The real issue: unstructured procurement data

The challenge is not a lack of data, but a lack of structure.

Deloitte’s 2025 Global CPO Survey, covering over 250 procurement leaders across 40 countries, found that siloed working is the single biggest barrier to value delivery, cited by 57% of CPOs. A separate McKinsey study found that 21% of procurement functions have low data infrastructure maturity, with less than 70% of spend data stored in a single place. Even among those with better systems, the quality of the data – not just the quantity – remains the bottleneck.

Most food and beverage businesses already hold the information they need to make better procurement decisions. It exists in vendor submissions, pricing files, product specifications, pack format documents, and quality records. The challenge is that this information is scattered across systems, formats, and teams. Consolidating it into a single, structured, comparable view is the critical first step, and one that most organisations often skip or underestimate.

What is required to unlock procurement savings

The consolidation requires three things working together: 

• a data foundation that can ingest and standardise procurement data and documents across formats (regardless of whether they arrive as structured spreadsheets, unstructured PDFs, or image-heavy product sheets)
• domain-specific understanding of food and beverage specifications (not just generic data parsing)
• integration of expert judgement to validate that the comparisons are commercially meaningful

Technology alone does not solve this problem, nor does manual analysis. The unlock is building the data layer that allows procurement experts to operate with speed and confidence.

This is what Deloitte’s survey describes as the gap between investing in digital tools and actually delivering measurable procurement value. The technology exists, but without structured, domain-relevant data underneath it, the tools have nothing useful to work with.

What supplier consolidation analysis reveals

When you do the work of extracting, normalising, and comparing procurement data across a single ingredient category, the findings tend to follow a consistent pattern.

• multiple suppliers providing functionally similar products
• measurable price differences across comparable specifications
• significant share of the supplier base consisting of legacy additions: relationships that came in through an acquisition, a regional buying decision, or a short-term supply issue that was never revisited

This creates a much stronger basis for negotiation.

Instead of asking a preferred supplier for a better deal, the procurement team can present a specific case: these products meet the same specification, here is the price spread, and here is the volume we are prepared to consolidate.

In our experience working with major F&B businesses, a properly scoped category exercise can deliver 1 to 2% procurement savings within six months. That may sound modest, but on ingredient categories running into tens of millions in annual spend, and with McKinsey’s 200-300 basis point margin multiplier, the impact compounds quickly.

Industry trends: supplier and SKU rationalisation

SKU and supplier rationalisation is not a new concept, but the pace of action among major food companies has accelerated sharply.

• PepsiCo announced it is reducing nearly 20% of its US SKUs. 
• Nestlé reduced product variations by a fifth, with its CEO reporting that the reduction significantly increased supply chain service levels. 
• Unilever’s CFO stated that removing unprofitable SKUs was making the company leaner and sharper. 
• L.E.K. Consulting documented a case where a Fortune 500 food manufacturer’s simplification exercise unlocked a 14% increase in production capacity and $10M+ in annual EBIT improvement.

These are businesses with large, well-resourced procurement functions. For mid-market manufacturers, the opportunity is often just as significant, but the capacity to do the underlying data work is far more constrained. That is precisely the gap that structured procurement intelligence is designed to fill. 

As the Deloitte CPO Survey puts it, procurement teams need to do more with less, and they cannot get there without digital and data capability to support it.

Where to start with procurement optimisation

This does not need to begin with a transformation programme.

The best starting point is one category and one direct question: 

Do we have a clear, comparable view of what we are buying, from whom, and at what price and where equivalent products or supplier overlap exist?

A scoped, category-level assessment can answer that question in weeks rather than months. It gives procurement teams a concrete basis for action: 

• specific consolidation opportunities 
• quantified price variances 
• and a clear view of where complexity can be reduced without affecting product quality or supply security

The opportunity is almost always larger than the team expected. What is usually missing is the structured data foundation that turns procurement instinct into a credible, evidence-backed negotiation position.

About Datapao

Datapao is a Databricks-focused data and AI consulting and training company operating in the UK and across Europe, with delivery hubs in the UK and Central Europe.

Datapao works with food and beverage companies to transform fragmented procurement and supplier data into structured, comparable intelligence. We build the data foundations that let procurement teams identify consolidation opportunities, reduce unnecessary complexity, and move from instinct to evidence.

If you suspect there is value hiding in your supplier base but lack the structured data to prove it, we offer a focused single-category assessment to surface those opportunities.

Get in touch to discuss where to start.