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Things are really heating up in the world of heating, ventilation, and air conditioning. According to analysis from Research and Markets, the U.S. HVAC industry will generate nearly $70 billion in revenue over the next six years.
What drives these gains today, and how can HVAC manufacturers ensure their continued prosperity into 2022 and beyond?
Continue progress on energy efficiency
Residential and commercial HVAC use represents a considerable energy cost expenditure for investing families and business. Even though programs like Energy Star and manufacturer dedication to greener designs have cut significantly into consumption rates across markets, there’s still a long way to go.
Homes and businesses want the HVAC industry to deliver on efficiency.
Presently, the U.S. Department of Energy estimates 48 percent of household energy costs come directly from HVAC systems or appliances. A recent DOE report shows commercial energy consumption for space heating, space cooling, and ventilation currently stands at 5.53 quadrillion Btus per year, more than 30 percent of the sector’s total energy use.
Many manufacturers have already found a solution to an oft-cited HVAC problem in wall-mounted split model HVAC systems. These appliances close the wide gap between large commercial HVAC installations requiring ductwork and smaller residential products like window units or freestanding systems. Users can compartmentalize their HVAC energy consumption room by room and optimize use without worrying about window availability or floor space. Projected growth in construction over the next few years could push contractors and property owners to forego traditional ductwork HVAC for split models to keep costs low from the start. Manufacturers would be wise to add a split model design to their product line or develop new technology that offers the same middle ground between large and small units.
Secure products featuring smart connectivity
Even as it gains technological traction, the Internet of Things has already not only revolutionized manufactured goods the world over, it has forever changed how manufacturers develop and analyze their operations from supply to distribution.
Obviously, manufacturing isn’t the only industry interested in what the IoT has to offer, but HVAC manufacturers have a unique opportunity to provide its customers with value propositions once thought unachievable: Absolute oversight over HVAC usage and other data that can help achieve leverage against high energy rates.
However, a word of caution to manufacturers: Your IoT-enabled HVAC products will require high-level network security savvy. Remember Target’s 2013 data breach? Forty million credit card numbers were stolen from 2,000 store locations, all because of a single set of access credentials taken from a third-party HVAC vendor, according to an SANS Institute study.
Could breaches like this one, as well as many others bearing similar earmarks, prompt commercial businesses looking for cutting-edge HVAC solutions to throw the full weight of their IT teams behind all future investments? That is to be expected. HVAC manufacturers developing IoT-connected products should prepare for heightened scrutiny and offer bold new visions in return, including innovations that allow businesses to more easily monitor, analyze, and act on energy data with in-house expertise. Or, if the HVAC industry doesn’t want to lose profits from their newfound energy consultancy services, they should turn their attention internally to how they secure data from their clientele.
The U.S. food and beverage industry will have a lot to chew on in 2017, but some challenges may be harder to swallow than others.
Rise of the meal kit
For families everywhere, the all-in-one complete meal in a box delivered to your doorstep seems too good to be true. And in a sense it is – according to a 2016 study from market researcher NDP Group, only 3 percent of adult consumers in the U.S. have actually tried meal kits. Granted, that’s still millions of people, not counting the millions more who will follow suit when big-name food companies join in on the venture. And they definitely will.
While many meal kit startups struggle to scale with a meteoric spike in demand over the last few years, their presence alone has irreversibly reshaped the food and beverage industry and revealed a value proposition for the F&B establishment. Another study performed by Fast Casual found millennials “are twice as likely as their older counterparts to have used a meal kit service within the last three months.” Meal kits have piqued the interest of the now largest generation of consumers. The industry will have to respond somehow. But is the meal kit phenomena more than a mouthful for F&B companies? Can their appetite for high profits be more than enough to digest this new market?
“Evolving operations to accommodate meal kits has already proven risky.”
Evolving operations to accommodate such a product and service has already proven risky. While big names in food and beverage may possess the capital to survive the disruption, this seemingly small shift in consumer demand actually affects the full length of the traditional supply chain, from sourcing ingredients all the way to end-user distribution. With so much in flux, the potential for profligate spending or exorbitant management costs are high.
Businesses that have subsisted for decades on legacy suppliers will have to forge new partnerships. Production teams may require new assets to prepare and package their own meal kits, or at the very least, contend with a slew of new machine changeovers in need of standardization and continuous optimization. Direct-to-consumer delivery will, in most cases, assuredly call for an expansion of current logistics network, reliance on a third party for that crucial last mile, recruitment, and job training. It is reasonable to expect the food and beverage industry to focus its attention on reducing costs for conventional operations while it works out the kinks in new processes. Only then can they rival popular meal kit startups and familiar competition also looking to adapt.
Fall of the sugary drink
In 2016, the World Health Organization released a study calling for a 20 percent tax hike on sugary drinks to significantly reduce consumption and thus prevent health conditions like obesity, diabetes, and tooth decay from corroding global health.
Sugary drink taxes will push beverage makers to think outside the bottle.
Even though opponents to the WHO’s recommendation cite lack of evidence that regulation will actually curtail consumption, cities in California and Colorado have instituted taxes, according to Food Business News. Sugary drink taxes have also come to vote several times over the years, albeit unsuccessfully, and F&B interests will no doubt challenge taxes as government overreach.
Nonetheless, beverage makers targeted by such taxes should prepare for the worst and hope for the best. Operational cost-cutting measures today could feasibly soften the blow from a steep drop in consumer demand and free up funds for innovating new products that appease the thirsty masses and their low-sugar standards. To start, beverage producers should map out their production lines and look for major areas of material waste. Use the milk industry as an example: Research from Design World Online revealed inefficient plant designs can lead to about 3 percent product losses daily. Business leaders should focus their attention on equipment cleaning operations and packaging, then continue on from there.