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Market News

 June 10, 2013
Food Safety - Consumers are demanding changes and Producers are listening

 Health conscious consumers are demanding safer and healthier foods at affordable prices and more transparency in the food production process and food producers are listening. Changes are being in food production processes, in product labeling and advertising, and more attention is being given to making food more nutritious.

But are these changes real and will they be enough?

Consumers are becoming increasing distrustful of false claims surrounding many foodstuffs and demands are growing for more transparency in the labeling of food products in terms of their nutritional value and production processes.

The distrust has been fuelled by concerns over potentially harmful effects of food additives and packaging, the excessive use of sugars and salts, and notable lapses in food inspections and quality controls.

Recent revelations about the adulteration of beef through undeclared horse meat in Europe this year, led to massive food recalls and changes in the consumer buying behaviour, as well as demands for better governmental oversight of meat inspections and certifications.

"It is also becoming ever clearer that we cannot tackle the big issues alone: much of our progress to date has come where we have worked with others. And at the end of the day, if we achieve our own sustainability targets but no one else follows, we will not have been truly successful." Paul Polman, CEO of Unilever
The production and marketing of organically grown or 'ethical' produced foodstuffs (i.e. under fair wage conditions or environmentally sustainable practices), have long been the mainstay of specialty 'health food' outlets. But rising consumer interest in healthier foods has led many large food producers to seriously rethink some of their business models.

Concerns over childhood obesity and obesity-related illnesses such as diabetes and high blood pressure, has highlighted the importance of healthier food options. It has also won the support of some very high profile advocates.

"We need every business in America to dig deeper, get more creative, and find new ways to generate revenue by giving American families better information and healthier choices. We know this can be done in a way that's good for our kids and good for businesses," wrote Michelle Obama, wife of U.S. President Barack Obama, in an article published in the Wall Street Journal.

How are companies responding?

Many food companies and retailers are revamping their business models to meet the consumers' demands. Unilever, one of the largest food companies of the world, recently launched a Sustainable Living Plan marketing campaign, targeting three key goals to be achieved by 2020:Helpingmore than one billion people improve their health;Halvingthe environmental footprint of production and use of their products; and Sourcing100% of their agricultural raw materials sustainably.

To date, according to the company's most recent sustainability report, much has already been achieved:

Nutrition- 90% of Unilever's leading spreads now contain less than one-third saturated fat

Safe drinking water- 35 million people have gained access to safe drinking water from Pureit water purifier since 2005

Renewableenergy now contributes 20% of Unilever's total energy use

Sustainable sourcing- 24% of total agricultural raw materials now being sourced sustainably, versus 14% in 2010

Paul Polman, CEO of Unilever, stated recently that collaboration with other organizations, like the Consumer Goods Forum, the World Economic Forum and others is important for achieving a change.

Unilever is not alone in changing its business model. Nestlé, the world's largest food producer, has also announced several targets for 2020, including better labeling of products, using sustainable palm oil only and cutting greenhouse emissions. Unilever's leadership in balancing competitive business strategies and sustainable development was recognized as a recipient of a GLOBE Award for Environmental Excellence in 2012.

By 2015 and 2016, the company wants to provide guidance on all children's products and guidelines on daily amounts on more products. (See GLOBE-Net article "Nestle sets social, environmental targets for 2020".)

As the world becomes more digitalized, several apps have been developed, e.g. to help consumers track and analyse their eating patterns. A new emphasis on interacting with consumers has also become a reality. Both Nestlé and Kraft opened up their respective recipe and ingredient data in 2012.

To provide consumers with more in-depth information concerning ingredients and nutrients in a particular food product, Nestlé has developed an app called 'GoScan'. The information is readily available to potential buyers by scanning the food bar code. To date, information on only a limited number of products is available and until Nestlé expands this coverage, consumers must still make their own purchasing choices.

Wal-Mart, the world's largest retailer, recently announced a series of initiatives to buy and sell more nutritious food products. . These measures include the reduction of sodium, added sugars and the removal of all industrially produced trans fats by 2015; the lowering of prices for healthier products; and better food labeling through a 'Great For You' icon that is placed on selected products.

Over the past two years, Wal-Mart U.S. has reduced costs to consumers for fruit and vegetables by $2.3 billion and it has opened 86 new stores in communities with limited access to nutritious food. It has also increased the charitable support for nutrition education programs.

Many companies, such as Disney, McDonalds and Coca Cola are changing their advertising to focus on healthy food choices - particularly for ads directed to children.

Besides the changing advertising, McDonalds also focuses on the issue of sustainable sourcing. One of their major efforts is to increase the sustainability of the coffee production. Recently, the company announced investments of $6.5 million over four-and-a-half years in a technical assistance program. This might help approximately 13,000 coffee farmers in Central America to produce and process more sustainably.

At CropWorld Global 2013, the annual agricultural industry event run by UBM Live, huge global companies like FERA, Bayer CropScience, Lindsay Irrigation, BASF and Coca Cola were among the many food giants showcasing initiatives for more sustainable and healthier food production and water usage.

"As we consider the rapidly expanding world population and the ever increasing demand for an abundant, healthy, and affordable food supply; it will be essential for industry, government, and other stakeholders to find new innovative ways of working together to yield sustainable agricultural solutions for the future. " Dr. Maximilian Safarpour - Director, Global Regulatory & Government Affairs, BASF Corporation
It is clear that many large food producers are responding to consumer demand for healthier and safer food, though strategies vary widely.

Clearer labeling of products, more information about ingredients, the reduction of added sugars, the increased usage of renewable energy, supporting apps for consumer information and shifting emphasis in advertisement toward health-oriented themes are all elements of the various new business models that have emerged.

But the transformation of the food supply sector towards safer, healthier and more sustainable food production processes has only just begun. The long term benefits of this transition will not only benefit for consumers, but will also assist suppliers of raw materials. More responsible management of food supply chains could lead to better working conditions for those growing and supplying raw food stocks.

But to maintain the momentum of change and to overcome lingering inefficiencies in the food supply system, greater interaction between governments, food companies and consumers will be essential. Political and community leaders worldwide are beginning to champion healthier futures for children by supporting early childhood education to promote healthy eating habits or to improve school lunches.

The benefits of healthier foods also extend to the companies that are responding to consumer demands. Winning the support of satisfied and trusting consumers will in the end have a significant payoff in long term profitability, proving ultimately that you can do well by doing good.