The Impact of Food Sustainability

We are rapidly entering a bright new era of food culture. The food of tomorrow will be markedly different from the food of the past.

The topic of food sustainability is perhaps the hottest trend in the food and beverage industry. Consumer preferences have radically changed the landscape of the food ecosystem from an industrial-scale supply and affordability paradigm to a trend toward a more individualized approach that prioritizes planet-friendly production techniques. This is expected to affect not just the various foods we consume, but also the beverages we drink. The food culture of the past prioritized predictability and consistency in our food supply, but the food culture of the future will emphasize variety and ethics.

It is important to understand the impact of the forces reforming the food and beverage industry as these trends are expected to intensify over time. Companies that adequately plan for the reshaping of the food industry will thus be much better positioned to flourish.

So, what exactly is the sustainability movement, and how might it impact companies operating in the farm-to-table continuum? In this discussion, we are going to focus on a few key facets of this evolution of the food of tomorrow.

To simplify this analysis, we will evaluate three main events of the food supply chain:

Sustainability starts in the soil. We are seeing a gradual, steady shift toward diverse farming solutions and away from the macro-farming (also known as factory-farming) format which still dominates overall food production. These practices maximize production and profits while minimizing costs, all at a huge scale. Criticism of these practices has intensified over time, with economists pointing to the severe harm to the environment, increased health risks, and a myriad of ethical issues regarding the treatment of farm animals.

Regenerative farming solutions embody that shift away from industrial-grade farming solutions toward smaller and local producers. Evidence-based research has consistently shown that mass production of certain cereal crops like wheat and barley requires huge amounts of synthetic fertilizer which destabilize water and soil quality. When also considering the energy costs of producing all that fertilizer, it has become eminently clear that mass-farming practices must change going forward. What the industry is seeing is an explosion in innovation; for example, using legumes or waste products to distill spirits as opposed to wheat and barley.

Sustainability trends for this next key area of the food supply chain often focus on replacing harmful packaging processes with solutions that minimize negative environmental outcomes. Compostable, biodegradable packaging made with recycled and/or waste materials have become vogue. These efforts tend to be combined with an increased focus on creating lighter and more efficient packaging to help decrease shipping and storing costs. And the continuing rise of more effective cloud-based data analysis, forecasting, and modeling tools has enabled companies to cut overall inventory without negatively affecting their ability to handle sales orders. The opportunity for continuous improvement is seemingly everywhere.

At the back end of the food production continuum is the focus on enabling companies to find solutions focused on sustainable consumption. Concerning this stage, we will discuss a couple of key trends.

The first is the shift away from animal products to plant-based alternatives. This trend appears to be largely the result of growing evidence that plant-based food alternatives to meat products tend to have fewer negative ecological impacts while simultaneously providing for better health outcomes. However, this shift does not appear to have dramatically reduced overall meat consumption in the United States. The counterpoint is that the plant-based meat alternative industry is expected to grow much faster than the meat industry itself, but it remains to be seen how quickly this happens. While Americans are not necessarily eating less meat, it does appear that shifting preferences will increase demand for poultry and seafood at the expense of beef. Also, consider the growing sector of the American consumer market which increasingly demands sustainable and humane production systems for the meat they buy. One of the key requirements is that the animal husbandry industry finds ways to decrease emissions. And these consumers are willing to pay premium prices for responsibly sourced meat. For now, this demographic appears to be concentrated in urban areas, but we expect this trend to increase heavily, especially looking into the mid-term.

Perhaps the most important consumption trend is the focus on finding solutions that reduce waste. What do we mean by the term “wasted food?” In general, this concept just refers to food that does not end up serving its intended purpose. When this happens, the excess food is managed in several different ways, including donations to food shelters, production of secondary products such as animal feed, usage as fertilizer, etc. Currently, only a small fraction of humanity’s wasted food ends up being repurposed into saleable products. As such, this represents a huge area of opportunity for entrepreneurs to capitalize on the sustainability trend. From an economic perspective, food waste is an extremely inefficient use of humanity’s resources, and it seems that solutions are popping up daily. These solutions are usually technology-driven and can deliver multi-faceted results. For example, let us imagine a startup that finds a way to harness a cereal crop’s natural defenses against aphids. This would result in decreased use of pesticides, a higher percentage of produce grown to reach the marketplace, and less food waste, which also means less irrigation water wasted. That company would be able to deliver a more nutritious product at a lower price point.

At all stages of the food production chain, companies are evaluating the payoff for increased collaboration. The challenge of making a real, positive, industry-wide change will require partnerships with other companies, NGOs, and even governments themselves. The collaboration will be necessary to embrace the challenges faced by the sustainability movement. This will be focused on finding ways to scale solutions. Scalability, in turn, is necessary because solutions are borne of innovation which tends to happen at a very small scale. From there R&D knowledge gains are directed to make those solutions feasible at a much larger scale.

We believe these trends present a considerable opportunity for companies operating in the food and beverage industry. With so many competing goals, there will also be considerable challenges facing companies operating in this ecosystem.

At Withum our goal is to always stay on top of emerging trends in the food and beverage industry. We are happy to discuss these topics and how your company can leverage these trends into opportunities for growth.

Author: Andrei Adams, CPA | [email protected]