Bridging the gap to create food transparency
Consumers have more buying power in today’s market, which enables them to nudge the food industry toward a focus on nutrition, sustainability and products that align with their daily preferences. Evidence of these changes can be found everywhere from the re-emergence of farmers’ markets to fresh menu options to heightened awareness of local sourcing and food transparency. According to the Future Consumer Index (FCI), 31% of respondents plan to spend more on fresh food, 35% say local sourcing of food has become more important and 57% say the behavior of a company is as important as what it sells. Food is a defining characteristic for most people, and they like being associated with brands that match their view of the world.
However, it’s not that simple. A noticeable gap remains between consumer intention and consumer action. FCI found that 83% of respondents would NOT pay a premium for more sustainable goods and services and 39% are happy to travel farther for groceries if there is better parking. These are data points that give producers, and those companies in the middle of the value chain, pause as they consider what’s next and where to invest, while questioning disruptions like the impact of last mile delivery and the shift of consumers going to food versus food going to consumers. Trends such as sustainability and the desire for fresh food and transparency are likely here to stay. How do you create a business model that can deliver on the expectations from a spectrum of consumers, while addressing a more connected ecosystem? Could we eventually see a bifurcated system in which both affordability-minded consumers and those willing to pay a premium for traceability and sustainably produced food can be served?
Here are some key questions that will need to be considered:
- How does the availability of data impact interactions with the consumer?
- Are consumers expecting change or more information, and are they willing to pay for it?
- In a connected ecosystem where roles are shifting, how will costs be shared across the value chain?
Producers have a lot more to think about in the face of ever-shifting consumer trends and value chain disruption. However, they also have a wealth of resources and strategic options they can pursue to respond to these market shifts.
How the future producer persona will drive a connected ecosystem to create food transparency
Farms focused on a primary crop or animal product for generations continue to uproot established operating plans in response to changing climates, rising production costs and shifting consumer preferences. For example, century-old dairy farms continue to supplement their milking parlors with diverse sources of income, such as crop production or, as of late, carbon sequestration. Changes like this present both challenges and opportunities that a connected ecosystem will need to address.
Open production capacity on farms could provide downstream customers the chance to partner directly with farmers to raise a new product and solidify a supply line that might be underserved by producers – generating a symbiotic relationship across the ecosystem. ² It is equally important to understand how consumer preferences drive upstream changes (all the way to farmers) and how they might reposition themselves with their customer and consumers in a reimagined food system.³
There is certainly a risk of profit pool shifts within the value chain. If more consumers want to get closer to their food and midstream to downstream companies are not willing to facilitate that connection, a portion of consumers may choose to find alternative options. Processors are developing their own branded products to put on the shelf and create new value for their own businesses. The relationship between producer and processor continues to evolve.
There was a time when processors held all the data and thus, greater control. Now and into the future, producers will have valuable data at their fingertips, enabling their own efficiency and profitability. Thus, the dynamics of the market could change dramatically. Traditional farmer and rancher suppliers, along with new suppliers like controlled environment agriculture and alternative protein processors, could become competitors due to their proximity to the consumer. The need to be nimble and flexible to changing roles in this connected ecosystem is only going to be more crucial in the years ahead.
Key questions to consider when developing future strategies in a highly connected ecosystem:
- How will the producers’ willingness and/or ability to pay, learn and implement the technology impact midstream and downstream companies’ decisions?
- In an asset-intensive industry, how must business models change to enable agility and efficiency while considering new methods of production like where the food is produced?
- What is more economically feasible – specialization or diversification?
Here is a look at how producers are beginning to leverage a more connected ecosystem to create additional value and more profitable operations, as well as what the embrace of market disruptors and emerging technology could mean for the rest of the value chain. These are just a few of the ways producers are beginning to shift, offering an indication of new ways of working.