Horizons August 2018

A monthly newsletter on Australian and international trends, innovation and other insights relevant to the Australian food market

Making news

Balancing drought – Imagery of starving livestock, desperate farmers and cracked barren paddocks have flooded Australian media in recent weeks. Farmers across NSW and parts of Queensland called for help and the public delivered; Go Fund Me pages were started, “parmas for farmers” at pubs became a thing, private and corporate donations of food, funds and fodder flooded in – so to speak.

But some farmers are speaking out against the portrayal of farmers as victims of the drought saying it damages the sector’s reputation. While acknowledging the struggle for a minority, more voices have emerged to point out that drought is not a natural disaster – it’s part of Australia’s climate – and the majority of affected farmers are coping well. Chief executive of Agribusiness Australia Tim Burrow also wants to remind the community that agriculture is a sophisticated $60 billion sector, with fewer than 1% of farmers in dire straits. Read more.

It’s a fine line between media coverage that raises awareness and messages that call into question the competence of farmers and the sustainability of agriculture in large parts of the country. While bridging the urban-rural divide and supporting those who are really struggling can be positive – is this portrayal accurate or helpful in the long run.

Ready for Woolies 3.0? – Australian retailer Woolworths has opened its most advanced store yet in Queensland, which includes an app facilitated drive-through service with dedicated parks to collect online shopping. It’s a next generation store according to Woolworths Queensland state manager Matthew Franich, created from listening to customers and understanding how their shopping expectations have changed.

The store has an onsite butcher, a machine making fresh flat bread, a cheese cave and flame-roasted rotiserrie chickens. It introduces a ‘Ready to Create’ meal kit bags, similar to Hello Fresh and Marley Spoon offerings – a first for a mainstream Australian retailer. The fresh produce area has the now mandatory “market feel” and there are a range of local products available at the Ascot store.

This latest incarnation looks to combine online and offline shopping, offer a more boutique feel with specialty and local products and provide greater service. It’s a step away from price competition but will it resonate with shoppers?

Roundup beat-up – A recent court case in California, determining that the use of Roundup caused terminal cancer in a Californian school groundskeeper may set a dangerous precedent for the use of widely used ag chemicals. Roundup, with it active ingredient glyphosate is widely used in agriculture, with benefits beyond killing weeds of reducing tillage, protecting soil structure and nutrients, ultimately increasing the storage of soil carbon.

While environmental activists including Greenpeace welcomed the verdict, farmers have called it wilfully ignorant of the science. Much of the plaintiff’s case was based on findings by the International Agency for Research on Cancer (IARC) that glyphosate is ‘probably carcinogenic’ placed in Group 2A alongside consuming meat and shift work! New Monsanto owner Bayer’s shares fell to a five-year low on the verdict, two San Francisco area cities have banned Roundup, while in the EU there are fears France will push through a ban on the widely used herbicide. Meanwhile the number of pending court cases has surged from around 5,000 to 8,000. Bayer intends to vigorously defend the case and all upcoming cases.

This could be a disturbing precedent for the agricultural sector – based on a flawed understanding of the science, the non-ag community seeks to eliminate a perceived risk because they see no direct benefit to them. This verdict must be challenged, but has the court of public opinion already ruled?

Did Millenials really kill Mayonnaise? – An opinion piece in Philadelphia Magazine has turned sagging mayonnaise sales into a generational and cultural battle that has gone viral. Senior editor at Philadelphia Mag Sandy Hingston drew a correlation between the falling popularity of her home-made mayo- based dishes at the annual family picnics to a rejection of US traditional values and community.  The internet was highly amused with Hingston’s juxtaposition of her ‘good son’ 25-year-old Jake who ‘works in computers’ likes mayo to her daughter, a ‘gender studies’ student who loathes it. Hingston rails against the rejection of mayo in favour of kefir, ajvar, chimcurri and gochugang.

Critics of the piece picked up on the thinly-veiled yearning for the homogeneity baby-boomer Hingston associates with bygone days of mayonnaise dominance. But is this really about rejection, or the embracing of cultural tastes that were often left behind by first generation immigrants who were desperate to fit in? Or could it be that Hingston’s daughter is just really tired of potato salad….

→ Having survived avocado-gate now it’s mayonnaise that has sparked a generational culture-war. Which food will be emblematic of all manner of social dysfunction next?

Discerning consumers

Where’s my ginger? – An American consumer has filed a lawsuit against the  owners of Canada Dry ginger ale, alleging the beverage does not contain ginger. The listed ingredients are carbonated water, high fructose corn syrup, citric acid, sodium benzonate, natural flavours and caramel colours, but no ginger? According to her lawyer, the consumer believed Canada Dry was made using ginger root, making it a healthier alternative to other sodas. Apparently, a 2011 commercial where a ‘ginger farmer’ pulled a root out of the ground which was then pulled up through a woman’s cooler of Canada Dry confused her.

It’s not the first lawsuit where consumers claim to be misled by marketing claims about products. Earlier this year, a similar suit in Missouri against Dr Pepper Snapple Group that produce Canada Dry was dismissed. In the suit, lab tests concluded the drink contains no ginger, but the company maintains ginger is used to make the “natural flavouring” in the drink.

Made from or contains..it seems a fine distinction, but could prove costly if this lawsuit is successful! However, if consumers are gullible enough to take marketing images as gospel, there are lots of companies in the firing line. The concept of the “reasonable person” must come into play.

Do more vegan products mean more vegans? – Recent Mintel research shows that the vegan product offering is growing and that Germany is leading the way, accounting for 15% of global vegan introductions between July 2017 and June 2018. Globally, 5% of all food and drink products launched in the period were vegan and 11% vegetarian. While vegetarian launches have stablised, the number of new vegan products has more than doubled in the past five years.

However, this doesn’t necessarily mean there are more vegans, Mintel’s Katya Witham said while strict veganism is still niche, more consumers are adopting ‘flexitarianism’. In the US, it’s claimed the number of vegans is about 20% of the number that have tried it and “lapsed” In Germany 20% of 16-24-year-olds purchased meat alternatives in the three months prior to Mintel’s 2017 survey, reflecting the rise of “ethical” consumerism. “The appeal of products without animal-derived ingredients extends far beyond the limited pool of steadfast vegans and vegetarians, carving a place within overall healthy and varied diets,” said Witham.

We are used to seeing reports of more vegan products as a sign of more consumers embracing the diet completely. This research indicates a more nuanced “flexitarian” approach to eating that incorporates more vegan options without abandoning all animal products remains the reality.

Is it a burrito or a lifestyle – Chipotle’s chief executive Christopher Brandt wants his company to be ‘not just a food brand, but a purpose-driven lifestyle brand’, adding Chipotle is to become a brand that consumer ‘want to wear’. It seems Brandt’s Chipotle is aiming to join the queue of companies with the desire to immerse themselves into consumers’ lives, including Godiva, Pizza Hut, IHOP and Blue Apron, all seeking a ‘deeper connection with consumers.’ The rise of lifestyle marketing is a result of companies worrying their brands are fading or losing customers in a crowded marketplace, according to a New York University professor of marketing. Brandt said Chipotle wouldn’t become a lifestyle brand overnight. The brand needs to find the right messages that will resonate with people. So far, this has resulted in ads on shows like ‘Real Housewives’ as they generate “chatter” and sponsorships of Fortnite players. Brandt said the company will keep “championing what makes Chipotle special.”

Given Chipotle’s recent challenges around not poisoning its customers, the vision of being a “lifestyle brand” seems lofty indeed.

How to raise prices – Gelato Messina is taking a different approach when it  comes to raising prices. The Sydney-based company took to its Facebook page apologising for the price rise, but explaining it was building its own supply chain which is expensive. To improve the quality of its product, Gelato Messina has taken on a dedicated dairy farm, and growing its own hazelnuts and strawberries, while offering cashless payments and deliveries for convenience all come at a higher cost. Based on the online responses, customers are (mostly) loving it.

It’s not the first time, the company has made a point of explaining their price increases thoroughly. In 2015, Messina raised prices for the first time since it opened in 2002.  Then, as for the latest price increase, competitor prices were provided indicating Gelato Messina’s prices were still reasonable. In another masterstroke, the latest price increases were skewed toward smaller serving sizes, prompting many online commentators to say they will be buying two-scoops and larger tubs in future! There goes the diet!

This gourmet gelato maker has made a practice of being transparent and even apologetic about price increases. This time it has also used the opportunity to inform its consumers all that it is doing to improve quality. 

Volatile world

Navigating war – In an opinion piece, former Australian PM Kevin Rudd sounds  a warning on the US- China trade conflict, and how it might escalate without effective diplomatic intervention. Rudd points out that that if the entire US$650 billion in bilateral trade was affected, the resultant marginal decline in growth numbers would soon affect wider sentiment and the real economy in a mutually reinforcing spiral. Rudd also takes issue with the simplistic Trump view that the trade imbalance means there’s a limit to the impact of China’s retaliation, observing tariffs could be imposed on any US components used in global supply chains. Rudd opines that President Xi can easily paint US aggression on trade as racist, aimed at thwarting China’s economic ascendancy – allowing him to hold out.

It seems for the time-being at least, US companies are continuing to bet on the Chinese economy’s continued transformation and growth. Starbucks is teaming up with Alibaba to deliver drinks and food in China, with expectation the market will surpass America. While Alibaba is scaling down its US footprint in response to the Trump administration attacks on China, there is no problem collaborating with US companies at home. Read more.

The path for the China-US conflict could go in a number of directions from here. One thing is certain, President Trump’s focus on winning and losing on bilateral trade flows is a huge over-simplification. Trade is not between countries, it’s between companies.

Turkey’s contagion – Earlier this month, the Turkish lira crashed against the US  dollar and while it has stabilised, the lira is still down, which paired with the country’s large dollar-denominated debts is raising widespread concerns. Financial experts worry that the turmoil in Turkey may spread to other emerging markets with vulnerable economies due to the post-global-financial-crisis influx of cheap cash from central banks. These funds, the result of quantitative easing efforts around the world, have fuelled construction booms and resulted in mounting debt. In Turkey it was estimated that in 2017, 90% of loans to Turkish real estate companies – which accounted for 20% of recent economic growth – are denominated in foreign currencies.

Globally the Bank for International Settlements estimates the amount of dollar-denominated debt in the world has nearly doubled to $11.4 trillion since the start of the recession of 2009, with emerging markets accounting for $3.7 trillion of the increase. This becomes an issue when US interest rates are raised, increasing the value of the US dollar and making it difficult for governments to repay debt with a depreciating national currency. A growing number of emerging markets are facing rising borrowing costs, diminished capital inflows as investors retreat, and unaffordable debt.

The Turkish crisis could be just the tip of the ice berg. Other emerging markets laden with investor debt and facing currency depreciation could be facing similar challenges.

 

Evolving models

Coles makes an Amazonian loyalty play – Australian retailer Coles is going the  way of Amazon, introducing a premium subscription tier to its flybuys loyalty scheme dubbed flybuys max. The subscription service will cost A$10 per month or A$99 per year and entitles members to a 5% discount on fresh produce, including meat. Members can opt to earn 10 flybuys points for every dollar spent on fresh food at Coles, compared to normal rate of 1 dollar per point and free home delivery of online orders over A$50. It also gives access to unlimited video streaming, discounted cinema and theme park tickets. The offer that resembles Amazon’s Prime subscription service is currently being tested with a small group before being rolled out nationally.

Aussie shoppers have been notoriously lacking in loyalty to the big supermarkets, who have been slugging it out on price. As it readies for an IPO, Coles is trialling something different to bolt on customers, but will shoppers buy it?

Kroger goes global – American grocer Kroger is opening a shop on Alibaba.com’s Tmall Global site, featuring foreign products. The deal offers Kroger a foothold in global sales alongside rivals Walmart who already have a number of partnerships in Asia. Kroger’s chief digital officer Yael Cosset anticipates Chinese consumers will embrace Kroger brands, which include natural, organic and free-from products. The plan is to launch the offer with a mix of dietary supplements and its private-label Simple Truth products. Through e-commerce Kroger plans to scale to reach new customers and markets where there are no physical stores – starting with China. The deal is just one of a string of announcements from the retailer, supporting its objective to redefine the grocery experience through its own brands.

Claimed as evidence of the changing structure of global retail, but TMall is a really busy place. The challenge will be how to get noticed!

One-stop protein shop – Tyson Foods accounts for 20% of all meat consumed in the US and employs 122,000 employees. CEO Tom Hayes is pursuing “sustainable proteins” maintaining Tyson’s size means the industry can’t change if the company doesn’t lead. Tyson has targeted antibiotic and greenhouse gas emissions, endorsed an animal bill of rights, raised plant efficiencies and expanded its organic offerings. Now Tyson is shifting from a meat grower and processor to a protein producer to “actively disrupt ourselves”.

Tyson is a seed investor in Future Meat Technologies and has a stake in Memphis Meats – both developing lab-grown meat substitutes, as well as plant-based protein start-up Beyond Meat.  While an investor for the time-being, Tyson will eventually bring meat-free production in-house once they mature. “If we can grow the meat without the animal, why wouldn’t we?” Tyson is developing its vegetarian brand Green Street, formulating protein bowls of lentils and peas that will hit stores in 2019. While Hayes can’t imagine a meat-free world, he expects meat-free proteins to become a substantial part of the market, and a variety of approaches will be critical to long-term success.

In an effort to avoid a Kodak moment, Tyson is investing in a number of meat substitutes and strengthening its vegetarian protein offerings. Along the way it is attempting to establish its sustainability credentials for meat.

More from less

Open sesame – A Queensland farmer has teamed up with university researchers, a specialised seed company and the local council to grow the first Australian commercial crop of black sesame seed. The crop is used for oil, in food flavouring and cosmetics and all of it is imported from the driest parts of India. But this could change as the seed is one of the most drought tolerant crops in the world. The trial crops were able to grow despite very little rainfall, leaving researchers and growers optimistic that black sesame could be harnessed for the region. Black sesame is valued at A$1,600/t, a high value crop worth five times standard sesame oil. On average 1ha can produce 4.5t of seed and up to 60% of its weight in oil. The trial of black sesame production is expanding in Queensland. The hope is the area will become the home to black sesame production for both domestic and international markets.

A crop that is high value and drought-tolerant? Seems too good to be true! Hopefully there are more opportunities out there that can be trialled and adopted.

Challenging the sustainability industry – In a Twitter thread, food safety  auditor Dr Sarah Taber accuses the sustainable food industry of “building redundant mini food systems to circumvent accountability for food safety.”  With 20 years of experience in the sustainable and conventional agriculture business in the US and internationally, Taber attacked local food hubs that are supposed to “shorten the supply chain” but instead add an extra layer of cost, waste and handling as opposed to stripping them out. According to Taber the “sustainability industry” is built on the idea that food is better when it’s run by everyman amateurs – but being “natural” and “human scale” is really about de-skilling food.

Taber maintains being truly sustainable, takes discipline and addresses all aspects, centre on accessibility for consumers not sellers. In contrast, food hubs often only service high-end consumers and only make sense if facilities are small enough to be exempted from food safety regulations they consider onerous.

This commentator challenges the home-spun, back to nature of the “sustainability industry” that has pushed locally grown food hubs, as being deliberately amateur – when true sustainability requires discipline and professionalism.

Disruptive technologies

Farm tech pays – Farming software company AgriWebb – based in Sydney – has  secured a A$14m investment, including the acquisition of FarmWizard, a cloud-based livestock and dairy management software. The platform digitises recordkeeping and uses audit and compliance data to help farmers improve productivity on farm.

According to co-founder Kevin Baum, farmers using the platform have seen up to 20% uplift in productivity. Baum says there’s a perception that farmers aren’t interested in new technologies, but actually they just don’t like bad tech. He said AgriWebb wants to build tools that help them take focus off “record-keeping and the onerous parts of the job.” Globally, AgriWebb is used on 2,700 farms, 1,700 of them in Australia.

Not sure this is disruptive but the productivity gains from users that is touted in this story is a disrupter of tradition. Cloud + farm analytics + smart software = $$

Personalised nutrition labelling – Good news for those with special dietary requirements, at least in the US. A new app called Pinto can scan any supermarket product, providing consumers with a personalised nutrition label that focus specifically on the ingredients and nutritional aspects they care about.  For diabetics, Pinto focus on added sugars and fibre content compared to carbs, while keto dieters receive information on net carbs, fat, protein and sodium.  According to Pinto founder and CEO Sam Slover, all the information was out there, but it wasn’t through a consumer lens. His company worked directly with food manufacturers and grocery stores to create a detailed database with all the information.  Users keen to track their diets can snap a photo of their lunch and the app uses AI to recognise foods and estimate its nutrition, tracking intake not just against calories but also dietary requirements and restrictions. Read more.

This app helps consumers with specific dietary needs focus on the aspects that matter to them. It facilitates a more personalised approach to nutrition. 

Cracking wheat – After 13 years of collaborative international research, bringing together more than 200 scientists from 73 research institutions in 20 countries, the International Wheat Genome Sequencing Consortium (IWGSC) has published a detailed description of the world’s most cultivated crop, the bread wheat genome. The breakthrough paves the way for production of wheat varieties that are better adapted to climate challenges, with higher yields, enhanced nutritional quality and improved sustainability.

Sequencing the bread wheat genome was previously considered impossible due to its size and complexity – it has 6 times the number of DNA base pairs humans have. To meet future demands of a projected world population of 9.6bn people by 2050, wheat productivity needs to increase 1.6% each year, preferably achieved through crop and trait improvement due to environmental concerns.

The exponential pace of genomic advances highlight what science can achieve through collaboration. This will enhance future breeding programs of this vital staple crop but how much more could be achieved with GM techniques?

Horizons August 2018 is Freshagenda’s monthly newsletter on Australian and international trends, innovation and other insights relevant to the Australian food market

Freshagenda’s Horizons August 2018 newsletter is a free publication on Australian and international trends, innovation and other insights relevant to the Australian food markets.

Our Horizons newsletter describes Freshagenda’s megatrends, describing how tech and innovation is shaping the food industry around the world. Our megatrends are; Discerning consumers, volatile world, disruptive technologies, evolving value chain models and more from less.

Horizons digs into our megatrends

Freshagenda identified a set of major megatrends affecting the future of food that combine to provide the key inputs to industry or enterprise strategic planning built on future scenarios.

In a paper outlining these megatrends, Freshagenda explains what they mean, how they are playing out, and how they fit together.  These forces might be nice to know, and great to stimulate thinking, but how do you harness them?

As shown in the process summarised below, understanding these forces, articulating how they are affecting your industry and business outcomes in future, and drawing insights from them to stretch future thinking, are a key component that can provide impetus and context to strategy development

 

Discerning consumers – A diverse set of influences

  • Increasing developing world affluence creating new consumers
  • New channels of influence on behavior and wants
  • More complex segments and preferences affecting value, ethics, health and indulgence
  • Competing demands driving greater needs for convenience
  • Aging demographics in developed world

 

Volatile world – Food markets are more complex and unpredictable

  • Climate change affecting stability of food supply
  • Food commodity markets more prone to price volatility and closely linked as intensification continues
  • Ad-hoc protectionism of farmers and consumers
  • Trade policy becoming more technical rather than fiscal
  • Geopolitical conflicts
  • Lingering economic and financial uncertainty post GFC
  • Resilience of traditional farming threatened by volatile returns

Disruptive technologies – Technologies rapidly reshaping life

  • Digital tools and platforms are changing engagement, behaviour and lifestyles
  • Advances in GE and GM know-how and applications
  • Advances in automation for production and processing
  • New substitutes (3D printing, synthetics)

Evolving value chain models – Redefining how to add and capture value

  • Shift in capital power
  • Risks being reassessed
  • Emerging preferences for capital investors
  • Emerging retail models
  • New forms of value chain integration

 

More from less – Limited resources and capacities

  • Growing populations – more mouths to feed over time from finite natural resources
  • Greater community concern for sustainable production systems
  • Sustainability agendas balancing “3Ps” changing value chain relationships
  • Policy unevenness and short-termism