Sustainability initiatives take center stage as the grocery industry prepares the food supply for the long haul.
That is the projected worldwide population in 2050, according to the U.S. Census Bureau and the United Nations. It is an estimated 50% increase from the six billion documented in 2000.
For the food supply chain this means one thing: By 2050 there will be approximately three billion more mouths to feed than just 14 years ago.
The weight of this challenge is not lost on retail industry players; in actuality it is one of the major driving forces behind the countless initiatives and programs aimed at creating a long-term solution for the worldwide food supply—in other words, a “sustainable” food supply.
What was once something of a buzzword, the concept of sustainability is driving companies to redefine business strategies and reevaluate production practices. It is driving the demand for renewable raw materials, the installation of energy-conserving technology and recycling innovations. Sustainability is motivating businesspeople to take better care of their employees, nurture their land and give back to their communities.
While it seems everyone—from farmers to manufacturers to distributors to retailers—is playing the sustainability game, there are a lot of questions to be addressed. The biggest being, simply, “What does sustainability actually mean?”
According to Arlington, Va.-based Food Marketing Institute (FMI), sustainability in the food chain is a triple bottom line issue. “We talk about it in terms of ‘business practices that respect the environment, society and bottom line,’” says Jeanne von Zastrow, senior director of sustainability at the association.
For retailers, doing business “sustainably” could mean energy-saving initiatives, hunger programs and food waste reduction efforts. Ask a manufacturer or distributor and the answer may revolve around product sourcing and carbon footprint; and for a farmer, fisher or rancher, much of it will surround environmental factors and supporting the community and workers.
Most importantly, there are the consumers who just want to feel good about their purchases and eating habits by selecting products and foods that feature sustainable sources and socially responsible labels.
According to a recent poll from Spring Hill, Tenn.-based marketing consultancy Good.Must.Grow., 30% of consumers plan on increasing the number of goods and/or services they buy from socially responsible companies in the coming year. However, this is one path that industry observers agree that they cannot sit back and wait for consumers to be the driving force.
“We cannot afford to wait for customers to demand this; it is in our own best interest if we want to have strong and successful companies to deal with these issues,” says von Zastrow. “It is hard to focus on the things that are urgent but not right in front of us, so it takes a long strategic view to understand the consequences and the future if we are not very proactive and not leading change. I think that’s the most challenging thing for all of us as an industry worldwide.”
When embarking on sustainable product sourcing and in-store programs, retailers often begin at the perimeter with the fresh categories, and work their way in. Seafood was the first supply chain FMI targeted when it introduced its Sustainable Seafood Toolkit. This year the organization built on those efforts with its publication, Fishery Improvement Projects: How Retailers and the Supply Chain Advance Seafood Sustainability, designed to develop collaboration and improve the environmental and social aspects of what is happening in the fishery supply chain.
According to von Zastrow, FMI is focusing on seafood primarily because it is the most complex product category sold in grocery stores. “If we can get seafood right, we can handle just about anything,” she says, adding that the organization will next focus on high-impact commodities like palm oil, sugar, soy and meat. “If we can get these difficult products right, then we have a model we can apply to others; it can become the Meat or Produce Improvement Project.”
Sustaining the perimeter
FMI may be leading the industry, but many commodities have been feeling the pressure from consumers for a while. The demand for healthier options in produce and—especially—meat are pushing producers to increase the supply of organic and all-natural alternatives.
Grass-fed and organic are two sub-categories in beef that are growing at a rapid pace, says Chris Anderson, director of marketing for Meyer Natural Foods. The Loveland, Colo.-based ranch has been “doing things the old fashioned way,” raising cattle naturally without hormones or antibiotics, for almost 30 years.
“We believe is it the right thing to do, but with consumer demand growing, it is something the whole industry is addressing,” says Anderson. “Currently the demand is far outpacing the supply for grass-fed and organic beef. In fact, there is very little of it available here domestically; it is very expensive and the climate in North America is not always conducive to raising cattle strictly on grass.”
He says consumer interest in this type of beef is driven by a number of concerns: Animal welfare, environmental sustainability and human health concerns, like GMOs, are a few.
Adding to consumer pressure, meat and produce are two categories that are very susceptible to environmental factors, such as climate change, droughts and floods.
Agriculture is actually one of the few areas of sustainability that has been officially defined. When it passed the Farm Bill, the USDA characterized sustainable agriculture as, in summary, “an integrated system of plant and animal production practices that over the long-term satisfy human food and fiber needs; enhance environmental quality and the natural resource base; make the most efficient use of nonrenewable resources and on-farm resources; sustain the economic viability of farm operations; and enhance the quality of life for farmers and society as a whole.”
Conducting business in accordance with these stipulations is a way of life for many agriculture companies. Take Limoneira, for example: The Santa Paula, Calif.-based company’s sustainability programs encompass everything from solar power, to organically recycling mulch, Integrated Pest Management, water conservation, workforce housing, employee benefits and community volunteer work, among many others.
“In the ‘old days’ it made good business sense to do the right thing,” says John Chamberlain, director of marketing for Limoneira. “It is really expensive to use all of these inputs, so if you can use less of them you are not only increasing your margin, but doing a good thing at the same time. I think most people understand that we have an issue with our environment and we have to take steps to manage that.”
Chamberlain emphasizes the importance that everybody comes to the table. “We are talking to our partners, customers and employees. Everybody is addressing their challenges in their own way; we are just one of the players. We want to point out what we are trying to do what is right, and we are learning as we go.”
Produce also suffers, more than other foods, from wastage due to the products’ perishable nature. Food waste overall is one of the biggest concerns in the sustainability arena, according to observers.
Mark Driscoll, head of food for London-based Forum for the Future, says there is a lot being done to address this in the U.S., such as a move toward locally resilient food markets and enhanced traceability programs. More so, companies are looking at ways to prolong shelf life and the impact that packaging has on produce freshness—and consumer perception.
A few years back, FMI, the Grocery Manufacturers Association (GMA) and the National Restaurant Association teamed up to address food waste. The organizations created the Food Waste Reduction Alliance, a partnership of about 30 companies from each of the three industries that explore ways of reducing the amount of food that finds its way into landfills by diverting it into sustainable uses, like compost and animal feed, says Meghan Stasz, a sustainability consultant for Washington, D.C.-based GMA.
This type of collaboration is critical for sustainability success, say observers. That could include companies and agencies involved in other steps of the process, as well as competitors. Supply chains are very complicated, says Stasz. “Unless we are collaborating, we cannot move forward at the pace necessary to reduce our environmental footprint and make real progress on sustainability.”
That includes consumers.
According to a study by Sealed Air Corp., shoppers are very concerned about food waste, but it is not always a priority at the store shelf. Officials for the Elmwood Park, N.J.-based company also note that consumers have misconceptions about the role of packaging.
In the study, the company showed consumers two cucumbers, one unwrapped and one wrapped in plastic. Seventy-three percent of grocery shoppers said they would buy the unwrapped product. However, when a different group of consumers were shown the same options, but with an added claim that the plastic extended the shelf life, 60% said they would choose the wrapped product.
Consumers mistakenly view packaging as a contributor to food waste rather than food preserver, says Ron Cotterman, vice president of sustainability for Sealed Air Corp; adding that as consumers learn more about the purpose of the packaging, their perception will change.
A few things need to happen in the industry with regards to packaging, adds Cotterman. “We need to do a bit more messaging, even if it is as simple as ‘fresher for longer.’ Messaging is important to give consumers the information they need relative to the product.
“The second thing to understand is why consumers have such an issue with packaging; it has to do with their desire to recycle it. We have to make strides to broaden our recovery facilities for consumers that want to recycle packaging,” he adds.
Clear Lam Packaging’s chief marketing officer, Roman Forowycz agrees that consumers are confused. Terminology like recyclable, recycled content, biodegradable and compostable is lost on a lot of shoppers. What they do understand, he says, is the idea that less is more.
The Elk Grove Village, Ill.-based company has focused its efforts on sustainability initiatives for 10 years. Forowycz says the company is currently focused on three areas of development: packaging derived from renewable raw materials; packaging made from recycled content; and lightweight packaging. These practices will decrease the carbon footprint for transportation, he adds.
“The successful projects are the ones where the technology company, the retailer and the CPG manufacturer work hand-in-hand toward a common goal, and then communicate that as best as possible to the consumer,” he adds.
Many companies in particular are investing in such concepts in an effort to uphold their commitment to sustainable practices.
Hollandia Produce/Live Gourmet, for instance, sells its hydroponically grown lettuces in a recyclable mini-greenhouse clamshell that is made with post-consumer recyclables. Vincent E. Choate, director of marketing for the Carpinteria, Calif.-based grower says the packaging provides low-to-no shrink, a longer shelf life and minimal merchandiser inputs. The company also uses a freight-optimized pallet configuration to achieve the maximum units per pallet.
“Our policy is to embrace environmentally-friendly best practices at every stage of our production. We expand on our Good Agricultural Practices by using Integrated Pest Management regimes that mitigate pesticide use and a water reclamation program to conserve precious water resources. We also collect rainwater run-off in retention basins to reduce erosion and protect our nearby estuaries,” says Choate.
While many players are concerned over consumers’ lack of understanding, some observers say it does not matter. As it turns out, consumers are still more interested in the convenience factor than they are in shopping sustainable, notes Sealed Air’s Cotterman.
“We don’t think consumers are likely to buy packaging that promotes itself as a way to reduce food waste; instead retailers and companies should promote the other benefits it offers—convenience or portion-control, for example. That’s where we are headed with this: providing features and benefits that are important to consumers but also help them reduce the food waste,” he says.
Keeping the cost down
As FMI’s von Zastrow stated, sustainability is a bottom line issue—and that, of course, includes the financial bottom line.
It is often easy for retailers to recognize the cost-savings associated with in-store sustainability efforts, such as energy-efficient equipment and water consumption, but many observers note that the savings extend beyond the obvious line items. Sourcing sustainable products leads to bottom line savings across the entire food chain.
Efficiencies often equate to cost savings, says Forum for the Future’s Driscoll. “In conversations with retailers I often argue that they should not be offering any unsustainable choices. Dealing with these issues can maximize business return; it is not just building resilience and brand loyalty.”
Driscoll says the school of thought that eating a healthy and sustainable diet is more expensive is a fallacy. According to Driscoll’s work in the U.K. surrounding the link between health and sustainability, a sustainable diet is often linked to a healthy diet, and eating more fresh fruits and vegetables in a developed world is actually cost neutral or slightly cheaper than highly processed foods, he says.
Even if it is cheaper in the long run, some consumer research shows that shoppers are willing to shell out more money to “feel good” about their purchases—a conclusion that observers disagree on. A Nielsen survey, Doing Well by Doing Good, asked 30,000 online consumers across 60 countries if they are willing to pay more for products from companies that have a positive social and environment impact. Forty-two percent of U.S. shoppers said yes (up 7% from 2011); that is less than 64% in Asia-Pacific and 63% in both Latin America and Middle East/Africa.
“Consumers around the world are saying loud and clear that a brand’s social purpose is among the factors that influence purchase decisions,” says Amy Fenton, global leader of public development and sustainability for New York-based Nielsen. “This behavior is on the rise and it provides opportunities for meaningful impact in our communities, in addition to helping to grow share for brands.”
Potentially more insightful, Nielsen’s results from a March 2014 year-over-year analysis show an average annual sales increase of 2% for products with sustainability claims on the packaging; a lift of 5% for products that promoted sustainability actions through marketing programs; and only a 1% rise in sales for brands without sustainability claims or marketing.
That goes to show that the educational information and labels that producers plaster on their packaging, as well as that displayed in-store, is doing its job. Companies like Bumble Bee Seafoods and Organic Unlimited, both based in San Diego, are reaching consumers by promoting various alliances and organizations they founded and associate with in their respective industries.
Bumble Bee Seafoods, for example, is a founding member of the International Seafood Sustainability Foundation (ISSF), a global partnership among scientists and tuna processors who represent 75% of the world’s shelf-stable tuna production. Bumble Bee’s director of sustainability, Mike Kraft, says the company’s partnerships with organizations like the ISSF and the World Wildlife Fund are crucial pieces to its overall sustainability platform.
“As a brand, we strive to be a leader in the industry with an approach to fisheries that is firmly grounded in science. Retailers and consumers see our efforts with partners come to fruition through product offerings like Wild Selections, a high-quality branded line of products launched in 2013 and certified by the Marine Stewardship Council (MSC),” he says.
Such alliances are still somewhat of a mystery to consumers: “We see a lot of confusion when it comes to labels. Fair Trade doesn’t mean organic, but people often think so. There are so many things going on—Global GAAP, Fair Trade, Rainforest Alliance—we need to educate consumers,” says Mayra Velazquez de Leon, president of Organics Unlimited, the company behind the GROW program (Giving Resources and Opportunities to Workers), which provides ongoing financial support to services for farm workers, their families and surrounding communities.
Still, despite the confusion, Velazquez says it makes a difference for sales at retail. “Consumers might not know what they are getting or the specific reason that they are buying it, but consumers are being pushed down the road of sustainability,” she says. “Rainforest Alliance is sustainable; Fair Trade is sustainable; GROW is sustainable. Consumers are being pushed that way and that is good for the industry as a whole.” GHQ
Facing the future
A combination of factors, such as population growth, climate change and eating habits, has put a tremendous amount of pressure on the food supply. In order to successfully feed the population a healthy, sustainable diet, industry players must put some strict initiatives in place, say observers; but they face a lot of challenges. Here is what the experts say lies ahead.
“Human capital. The ability to access and find people to work in the fields continues to top the list of long-term viability of a consistent food supply. Since virtually all fresh fruit is hand harvested, maintaining a strong, well-trained, vibrant and well-taken care of workforce is vital.” —Alex Teague, senior vice president for Limoneira, based in Santa Paulo, Calif.
“Feeding 9 billion people healthily and sustainably within environmental limits, particularly in the context of climate change. The increase in population, increase in demand for food, increase in demand for energy and increase in scarcity of water—we are going to see a resource crunch.” —Mark Driscoll, head of food for Forum for the Future, based in London
“The biggest challenge is to get people to think more broadly about the overall supply chain and more holistically than you will about how sustainability has to be looked at across the supply chain, not just an individual piece of environment.” —Ron Cotterman, vice president of sustainability for Sealed Air Corp., based in Elmwood Park, N.J.
“Since corn, soy beans and wheat are commodities, there is no traceability system in place. One of the real challenges was designing a sustainability platform that doesn’t require traceability. This is different from what you might have in fruits and vegetables.” —Rod Snyder, president of Field to Market, based in Washington, D.C.
“Some of the challenges relate to capital and cost structures. As we move toward more sustainable technologies, there also has to be a cost savings over time. This has been the challenge with some of these more exotic bio-plastics, or materials that require additional equipment. The understanding of the overall impact of the supply chain and the cost structure is a challenge.” —Roman Forowycz, chief marketing officer for Clear Lam Packaging, based in Elk Grove, Ill.