Horizons May 2018

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

Making news

Death knell for live trade? – The death of 2,400 Australian sheep on board a livestock carrier headed for the Middle East is the latest incident to spark community concerns about live trade. Footage recorded by a whistle-blower last August, was widely circulated in media, prompted Ag Minister Littleproud to launch an urgent investigation after his department failed to uncover animal welfare violations.
This isn’t the first incident where cramped and hot conditions have led to death on a livestock carrier. In its own analysis, Guardian Australia found that of 70 investigations into animal deaths during shipments, no punitive measures – fines or loss of export licence – were imposed on exporters. The paper suggests a conflict of interest within the Department of Agriculture, responsible for both regulating the live export industry and promoting the interests of farmers.
Meanwhile, the Australian Live Exporters Council (ALEC) has asked Littleproud to appoint an overarching inspector-general for the welfare of exported animals with ALEC chair Simon Crean saying the future of the trade depends on it. Read more.

This is a bad look for the livestock sector, that is already facing challenges from animal activists. While there are market demands for this trade, how sustainable is it when the industry is regularly exposed as falling short of community expectations?

Starbucks snags Nestle deal – Nestle will pay Starbucks US$7.15 billion for the exclusive rights to sell its packaged coffee and teas around the world. The deal ties Starbuck’s “premium” brand to Nestle’s global distribution network, bolstering sales of Starbucks coffee and Teavana tea through supermarkets and other retailers including in China. The deal also includes Starbucks-branded capsules for Nestle’s Nespresso and Dolce Gusto single-serve brewers, which it hopes will help curb competitor sales.
The deal will allow Starbucks to focus on its core US café business, where customer traffic has stalled in the face of increasing competition. The alliance is expected to boost Nestle in North America, particularly amongst younger consumers who have grown up with Starbucks. Starbucks will benefit in China, Nestle’s second largest market, where the coffee chain is looking to expand.

While Starbucks probably isn’t considered a premium brand to more discerning coffee drinkers, it will appeal to many consumers who want a piece of the experience. What does it say about Nestle’s Nespresso boutique strategy that was based on quality and experience? Maybe it’s just about finding a younger audience.

JD.com to blanket China – JD.com plans to open 1,000 convenience outlets per  day across China by the end of 2019, by opening franchise-based stores across China. The move into the offline market is a reaction to its competitor Alibaba’s investments in physical retail since 2015. According to CEO Liu Qiangdong the format has proved popular with Chinese migrant workers wanting to home to rural towns. JD.com receives 50,000 applications every day from people interested in running their own convenience store and the retailer also offers loans to get stores up and running.
Since November last year, 1,111 stores have opened, with 1,000 new stores being added every week as of last month. Along with its new convenience store roll-out, JD.com announced it is partnering with Chinese retail conglomerate CR Vanguard which will bring its retail shops to JD’s online-to-offline platform JD Daojia.

The plan is ambitious, but it will rapidly change the face of retail on the world’s biggest market. Chinese retailers continue to merge online and offline offerings as part of their expansion strategies.

Discerning consumers

Pret a Manger est attrapé – The British Advertising Standards Authority (ASA) has censured sandwich chain Pret a Manger for misleading consumers by stating on its website it makes “good, natural food” by making “proper sandwiches avoiding (..) obscure chemicals, additives and preservatives”. The ingredients in Pret a Manger’s sandwich bread are E472e, E471 and E300, which strengthen the dough and leaves fewer large holes, softens the crumb and helps dough rise. In its decision ASA said consumers understood the word natural to mean foods made with ingredients straight from nature and not foods containing E-numbers. The decision follows a complaint by food and farmer charity Sustain.
In 2015, the Real Bread Campaign approached Pret a Manger, urging the sandwich chain to remove artificial additives or alter its marketing claims. Coordinator for the campaign Chris Young welcomed the ban, saying it sends a clear message to food companies to either practice what they advertise or change marketing strategy. At the sandwich empire, the ads have been removed from the website and a spokesperson said its team were trialling other recipes for bread that don’t use emulsifiers. Read more.

The UK regulator has drawn a line in the sand for “natural” – it doesn’t include anything with an E-number. It’s another term that has meaning for consumers but no actual definition. If this approach was adopted how many other products would be found to be misleading?

Image beats evidence – A wave of anti-dairy sentiment is influencing Irish shopping habits, prompting the National Dairy Council to conduct focus groups with millennials to find out what influences their attitudes to food. Not surprisingly, online channels are the main source, preferred to traditional media such as broadsheet papers and TV news.
However, this makes the segment susceptible to misinformation when pseudo experts present animal abuse as normal farming practice without being challenged.  There is little appetite for scientific expertise, in fact many focus group participants didn’t understand what constitutes expertise. When an expert is measured on the basis of follower numbers, image trumps science for a group with limited connection to farming, and where the influencer business model is promoting processed food designed to deliver a perfectly toned body. This can lead to highly processed foods such as protein bars and almond milk being presented as much healthier options than cow’s milk and cheese.

The feedback from Irish millennials would be similar in most developed countries where short-cuts to health and status are prioritised. It is a mounting challenge to engage these up and coming consumers and restore trust in food production. Livestock farming in particular faces a major challenge. 

Wealthy consumers no wiser – A new poll from Michigan State University’s (MSU) Food@MSU initiative shows that while socioeconomics play a role in attitudes about food, higher income doesn’t always correlate with informed choices.  MSU found half of survey respondents earning more than US$50,000 annually believe they know more about global food systems than the average person. Only 28% of those earning less were as confident.
The sample of over 2,000 Americans revealed higher income earners had more access to information, making them more likely to be aware of terms like BPA or GMO, but were also more likely to be influenced by misinformation and pseudoscience. The MSU researchers theorise that affluent consumers are more likely to encounter unsubstantiated information online, from friends and family, and at outlets like farmers’ markets and Whole Foods. This results in persistent perception that organic or non-GMO products are healthier, or that “chemicals” should be avoided.

This study indicates that higher incomes does not correlate with a better understanding about food. Conversely, shopping at pricier outlets appears to expose consumers to more misinformation and fear about their food.

Coffee with a warning – A tentative US ruling may force coffee sellers to include warning labels, notifying consumers that known carcinogen acrylamide is produced during the coffee roasting process. The proposed ruling falls under California’s stringent proposition 65, which requires businesses to provide patrons with a ‘clear and reasonable warning’ about materials or ingredients that may affect health. More than 900 chemicals – acrylamide one of them – fall under proposition 65 and businesses who do not warn consumers open themselves up to lawsuits.
A group of coffee companies are appealing the judge’s decision, saying the trace amounts of acrylamide found in coffee don’t justify a label. They instead emphasise the “decreased risk of several major chronic diseases” associated with coffee consumption. The US Food and Drug Administration are still gathering information on the effects of acrylamide, but the agency does suggest ways of limiting consumption of the chemical, which is found in many fried and roasted foods.

The results of this Californian cancer labelling case will be eagerly watched. The question is, should cancer warnings be based on single ingredients with no regard to harmful dosage. Does this type of transparency add unnecessarily to consumer fears? 

Volatile world

Weighing Brexit costs – During the Brexit campaign, those favouring Leave  often used increased NHS funding as an argument to win over voters. Out of the EU, the Leave campaign argued, British citizens could have better funded health care as EU membership savings could be allocated to the National Health Service. Now a new study has quantified the effects of four different scenarios, and expressed them as a proportion of the NHS budget.
Thinktank Global Future analysed the four options available to British PM Theresa May and found the amount of money for spending on public services would actually fall under all four scenarios, even May’s preferred Bespoke option. Not surprisingly, Leave voters found the costs too high in a poll among 2,000 Britons. A poll of Leave voters found 72% of leavers thought May’s bespoke option was too high a price to pay and 78% felt it was worse than they had hoped for when casting their votes in the referendum.

While many “Remainers” have long argued that the Leave campaign’s promises misled voters, this analysis quantifies the possible scenarios – all result in less not more funding for the NHS. Could dawning Brexit reality lead to a re-think?

IMF fears trade meltdown – In its latest report, the International Monetary Fund (IMF) pointed to stronger business investment and trade that was buoying global economic growth. However, the growing likelihood of a trade war and policies overheating the US economy are on the list of concerns in the World Economic Outlook. Director of IMF’s research department Maurice Obstfeld said there was a particular risk that fears of a trade war could dampen business investment and spark a sell-off in stock markets.
IMF said protectionist approaches to economic policy could potentially break down multilateral, rules-based trading systems such as the World Trade Organisation (WTO). Meanwhile, the US President has cheered the country’s strong economy, spurred by tax cuts that only boost in the short-term. US President Trump’s “America First” approach to trade have put him at odds with trading partners and international organisations, which he has repeatedly criticized as being ineffectual and unfair.

The US has arguably been the key architect of many of the international institutions and rules that govern trade. The IMF warns these systems are in danger of being “torn apart”. What replaces them could be influenced more by China and others, rather than the increasingly insular US.

Evolving models

Back to the future – Described as “one of the most urban corners of Europe”,  Flanders is experiencing a boom in a new type of agriculture where farmers sell direct to consumers. Community supported agriculture (CSA) means no supermarkets, no fertilisers and no monoculture.  Since 2007, 45 CSA farmers have started farming directly to consumers in the region. CSA started in the US and the Netherlands, but has taken off in the Belgian region with more people eating CSA grown food in Belgium than in the UK.
While demand for vegetables grown by community-supported agriculture is increasing among medium to high earners, it’s not for everyone. Produce has to be paid for in advance, prices are high and land is limited. CSA farmers face competition from nature reserves, traditional farming, horse paddocks and urban development. The Flemish government has banned urban development in the region until 2040 unless an equivalent area is returned to nature. And while the vegetables from CSA farms take longer to prepare, it does provide some insight into how food is grown for city dwellers.

Community supported agriculture is a nice idea that is gaining a following. While it won’t feed the world, could it provide a much-needed understanding for urban consumers about the challenges of food production.

Positioning country – According to the Irish Times, Ireland is moving away from its food isle-image to becoming a food-processing hub. While companies such as Kerry, Glanbia and Ornua may be best known for their consumer brands, selling food ingredients worldwide is the real profit engine. In the past two decades Irish exports of food ingredients have more than doubled from €5.6bn to €12.6bn.
However, Emeritus professor of food marketing David Hughes warns Ireland’s shift to ingredients means consumers around the globe have no idea what Irish food is. Irish companies are good at researching, developing and patenting food ingredients, but a “clean and green” image isn’t cutting through. And while, there is almost full employment amongst food graduates in Ireland due to the country’s large food-processing sector, practically no consumers could name Kerry Foods as the maker of the spiced pumpkin flavour in Starbucks coffee….which could be a good thing!

Thinking about what the meaning is to the downstream customer and consumer, what cuts through and what won’t – or doesn’t need to. There is no point putting big investment into a brand because you feel good about your country, if it means nothing to a consumer!

Half purchased meals delivered? – Australia’s largest online food ordering platform Menulog believes half of all food service sales will move online over time. Recently, the online food platform kicked off a major marketing push after launching a new delivery offering to augment its online ordering service.

Menulog claims 25% of Australians currently order food online, but high smartphone use should increase that to UK-levels of 35% in the short term and eventually reach similar rates to travel bookings and job searches – where 50 to 70% of business has shifted online. Investment bank Morgan Stanley described the shift to online ordering as a “double-edged sword” for cafes and restaurants, increasingly feeling the pressure to move online, but risking loss of control over pricing, quality and customer data when signing up with app-based delivery services.

Is this futuristic visionary stuff…or a plea to help a business model that its parent paid too much for. Anyway – that’s a lot of bikes on the road carrying boxes!

More from less

Taking traceability further – As consumers increasingly demand transparency,   commodity trader Olam is launching a sustainable and traceable sourcing solution to track its raw materials through the supply chain called AtSource. For Olam, AtSource will enhance the trader’s ability to assess and positively influence the environmental footprint of its 4.7m farmers in its supply chain. Olam’s customers, processors will have the most comprehensive sustainable supply solution for their raw materials.
Meanwhile, French multinational retailer Carrefour is extending its use of blockchain technology into 8 more product lines, guaranteeing consumers complete product traceability. Carrefour already uses blockchain technology for its Carrefour Quality Line Auvergne chickens, but will begin to include cheese, eggs, milk, oranges, tomatoes, salmon and ground beef steak in France. Its system runs via a secure database and as such cannot be falsified. It’s also one of the first uses of traceability which is consumer-faced.

A commodity trader and a supermarket are moving to assure total traceability of their products and optimise supply chain connectivity. If successful, other traders and food retailers will surely follow.

Time to go Dutch? – The future of farming in the Sydney-basin is threatened by rampaging growth urban development. As the population grows, food production may be forced out by the new arrivals’ complaints about the noise and smell of farming. According to professor Priti Krishna from Western Sydney University’s School of Science and Health, the future of food production in Sydney’s basin lies in the intensification of horticulture. Other suggestions include creating a leading food hub by linking food processing to production, suggesting intensification much like in the Netherlands, which is the same size as the Sydney basin, and the second largest exporter of food in the world.
NSW Farmers chief economist Ash Salardini says the discussion should focus on how farmers should farm in the area and not if they should. The urban population is projected to grow from 4.9m people today to 8m people in 2050 and with poor infrastructure and urban planning, Salardini called for better leadership to fully reap the benefits of Sydney region’s A$870m farm sector.

There’s a limited amount of arable land in Australia and it is increasingly under threat from urban development in most major cities. Is Dutch-style intensification realistic? Should some land be quarantined for local food production rather than investor returns?

Coffee chains deal with waste – Two contributors to the world’s vast takeaway cup landfill pile have created initiatives to make recycling easier. In Australia, 7-Eleven is the largest seller of takeway coffee. It hopes to keep 70 million takeaway cups out of landfill every year, by placing dedicated recycling bins for takeaway cups and Slurpee cups in 200 7-Eleven stores, universities and schools all over Australia.
Meanwhile, the UK’s coffee chain Costa plans to recycle 500m coffee cups by 2020, simply by paying waste companies to collect cups and recycle them. By paying extra for every tonne of cups collected, the coffee chain hopes to make it financially more attractive to collect, sort and recycle the cups. Costa also offers a discount to customers who bring in a reusable cup. In the US, Starbucks has been pledging since 2008 to make a completely recyclable cup, and has yet to deliver, prompting activist to label the chain the “Cup Monster”. Read more.

The Costa commitment follows local efforts by 7-11 to cut coffee cup waste and tackle a growing recycling problem. As coffee juggernaut Starbucks demonstrates, it’s not a simple fix.

Disruptive technologies

Enzyme solutions – Scientists at the University of Portsmouth in Britain have  engineered a version of an enzyme that can digest plastic 20% faster than the natural variety. PETase, breaks down the polyethylene terephthalate (PET) into the chemicals that made the plastic container in the first place, which can be formed into new high-grade PET.
But while the discovery of the enzyme is interesting, there’s still a lot to do before PETase can become a useful enzyme. As it is now, 1 litre of the solution can only break down just a few milligrams of plastic per day, so before it can be commercially useful its plastic-digesting ability must be improved a hundredfold.

Plastic-eating enzymes have some way to go to be commercially viable, but at least it’s a start. More R & D funding needs to be pumped into the plastic waste problem!

A robot too far? – Restaurateur and engineer John Ha has developed a Penny, a  robot who serves tables at his Korean restaurant Kan Nam Tofu House in Milpitas, California.  Ha wanted to ease the workload of human servers, cut waiting times for customers and decrease costs for business owners with his invention.
The robot is designed to work in tandem with human counterparts and improve their work experience, while focusing on customer service. Ha says Penny doesn’t stop for cigarette breaks or leave early for an audition which makes it a stable employee. Penny is just another robot to join the automation of hospitality with robotic cooks already hard at work. So far Penny has been tested at Ha’s own restaurant, but it will be trialled in other Bay Area restaurants to test behaviour in different environments and with different types of food.

Now the robots are coming out of the kitchen. While there is certainly novelty value with this new front-of-house robot, for some consumers, dining out may be as much about human interaction as it is about food.

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

Our Horizons May 2018 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 May 2018 digs in to Freshagenda’s 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