Who’s afraid of Brexit?

Posted on November 21, 2016 by Christophe Pelletier

Brexit is a hot item. I am asked regularly what I think about it and I have to admit it is rather difficult to answer with any kind of certainty today. I hear and read all sorts of points of views and their opposites. The financial markets sent their messages and legions of experts have given their opinions but I see two main forces in what they tell us. The first thing is a lot of subjectivity. Most predictions I read seem to be more the result of spite, particular agendas or wishful thinking. It sometimes sounds more like what the pundits would like to happen to the UK and to the EU than the result of a solid analysis. The fluctuations of the Pound Sterling are also more the result of a lack of clarity than of a long-term view, but that is how financial markets work. Uncertainty opens the door to all sorts of rumours and speculations. When the crystal glass is too blurry, everyone develops his/her own scenario, which of course adds to the confusion, the uncertainty and the nervousness.

The only way to dissipate uncertainty is for political and business leaders to come out and say clearly what they are going to do and how. They also must explain what will change and that includes the good, the bad and the ugly. Brexit is about change and change always brings fear, which is really the fear of loss, as gains are usually never perceived as threats. The missing bit in the Brexit issue is the lack of clarity and communication about what the political leaders will do. Even the date of initiating the process seems rather fluid, not to mention those who say that it will not happen after all. As long as clarity and determination seem to still be missing, confusion will prevail. I believe that the situation remains vague simply because the leaders do not have a clear idea themselves of what to do with that referendum outcome they did not expect and therefore never really thought about what the next step should be. Just imagine what the reactions would be if the UK had the Euro as a currency and were part of the Schengen area…

road-for-the-uk Will the UK face an economic crisis or a recession? Maybe but maybe not. That would not be the first time and eventually the UK has always recovered. I do not see why this would be any different. I remember when Black Wednesday took place in 1992. By then, I was in charge of the UK market for a Dutch poultry processing plant. The UK was the main destination of breast fillets, our most expensive product and overnight the company turn-over was headed to a major nosedive. The Brexit excitement of today feels nothing like the panic of then. Regardless of how stressful it was, the Black Wednesday situation delivered some good lessons in term of business strategy that I am sure would be beneficial in today’s situation.

The first lesson for us by then was that having many of our eggs in the same basket was quite risky. The exchange rate and the law of supply and demand showed us that less attractive national markets became more attractive and we developed breast fillets sales outside of the UK, while the UK was more competitive outside of its borders. Markets dynamics changed but life went on. One of the most important functions of a sales department is to generate alternatives all the time. No alternative means there is no choice but to accept what the other party offers. The second lesson may be the most important. We had a good marketing strategy. We served the most demanding segment in terms of quality and we offered top-notch service. This made us the last suppliers our customers would want to eliminate and it gave us a solid leverage to renegotiate deals and compensate the loss due to the exchange rate. They wanted our product because it was supporting their business and they would not want to throw that value away. The third lesson is a correlation of the second one. We had chosen a specialized and growing market. By being market-oriented we were able to stay in demand and weather short-term market volatility much better than many of our undifferentiated competitors, both from the UK and the EU.

Because I have seen the benefit of a market-oriented value marketing approach, I can only recommend it as a choice in regards with Brexit. Even in a changing environment, if you have what the market wants, the market will want you. Crises are useful. They help eliminate businesses that are not adapted and not adaptable. The key is to find the customers with a future and help them to be so by delivering them superior value.

Food fights will go on and it is a good thing

Posted on March 28, 2016 by Christophe Pelletier

A funny thing happened to me when I moved from Europe to North America in 1999. In Europe, I was used to having demanding customers. Issues about how food is produced have been rather common during pretty much my whole life (I will turn 55 later this year so that you have an idea of how long it has been).

When I came to North America, I dealt with a completely different situation. I did not get some of those 30-page product specification documents from retailers, foodservice and manufacturers with all the do’s and don’ts of how to produce food. I just got some 30-page disclaimers and liability documents, for the customer to dodge any heat should there be a law suit some time down the road instead. Before, I left Europe, I remember my Managing Director from the poultry company I worked for telling me how lucky I was because “over there (North America), customers hardly ask anything, you just sell them what you produce”. I remember looking at him and thinking that it could not be possible. I was wrong and he was right. For as much as European consumers were picky on all things such as hormones, antibiotics, GMOs, animal welfare, feed composition and origin, North American consumers, and retailers as well, seemed totally uninterested about production methods. It was almost eerie and to be quite frank, it was boring, because I could not see any challenge. One of my American colleagues enjoyed telling that it was the way it was and that it would never change because that is how Americans are. I disagreed but it certainly appeared he was right for a few years. Things have changed now. The American consumer has become more demanding and the dynamics of the discussions have become quite similar to what I had known in Europe for decades. It is actually rather easy for me to “predict” the future as I am living in an ongoing déjà vu nowadays.

The debate about food has indeed evolved into food fights. If there is one thing that I always found remarkable in my professional life in the food and agriculture sector is the issue of the producer-consumer relationship. Maybe it comes from my family background, but I have never understood why the food industry is so defensive when challenged by consumers or any organizations. My father used to be a butcher and I spent quite a bit of time around the shop and with him on the markets. I discovered very early that customers would ask the weirdest things but that what matters is not the factual truth but whether they trust the supplier. If you cannot deal with that fact, I suggest you do something else than producing food. Food is loaded with emotions and that is that. If consumers were rational, there would not be any diversity in foods and other consumer goods. They always would do the right thing and would not pay attention to all the marketing efforts that support the world economy. If consumers were rational, I bet you that they would deconstruct any PR by spotting all biases. If consumers were rational, they would focus on nutrition only and they also would reject anything that is unsustainable. I have a feeling that a lot of people who resent consumers’ emotions would actually be out of business because they would deal with a much tougher audience than the current consumers. Be careful what you wish for. Further, it is also clear that those who criticize consumers for not being rational, are not rational themselves in their consumption patterns, either. Nobody is.

Last year, a book titled No more food fights hit the shelf. Considering the author is actually supporting the conventional agriculture and has a problem with consumers and activists who challenge the food system, it is actually ironic. It reminded me of the words of my Managing Director about the North American market. What could be better than the good old days when the agribusiness could push their products to lethargic consumers? It sure must have been a good time, but it is gone. The book’s author, just like the agriculture sector, does not want anybody questioning the food system. They don’t want anyone looking over their shoulders and find out the bad and the ugly, at the risk of not showing the good either. I do not understand the food producers’ reluctance. If you are proud of what you do and what you produce, as they claim, you are proud to show the world and to share that goodness. You are also willing to always improve and make your customers satisfied. In my opinion, the attitude is really more about being production-driven –or should I say production-centred- than market-driven. The difference is that the former is about oneself and the latter about others. That difference actually reflects quite well in term of whom consumers trust. They trust the latter group, but are very distrustful of the former. I can understand both attitudes because I have filled functions that were more oriented towards technical operation as well as commercial functions.

I started my professional life in a position in a technical and scientific field, which suited me well by then because I was a hard-nosed rational fellow with a tendency of not accepting unfounded non-sense. Then, by accident, I got myself involved in a commercial role, which opened me new doors, and my eyes, too. The successful experience led me to other commercial positions and the lessons that I had learned in my father’s shop, I rediscovered on a daily basis in the multinational company. There is a huge gap of perception of the customers between the different departments of a company. Very often this discrepancy is reflected in the dynamics of the sales and operations departments of a business. One wants to say yes and the other wants to say no.

Personally, I find being challenged a very good thing that can happen to a producing company. I would agree that negative feedback is never pleasant, but even though the message can be rough, it is feedback after all. In this regard, it should be handled in the same way as customer complaints, the good kind of handling that is, not the denial kind. The latter is usually more of a reason for a customer to drop a supplier than the problem that occurred in the first place. Business, like it or not, is first of all about human interaction. Money is only a means to secure it. In the course of my career, I had to deal with “consumer resistance” in quite a few occasions, but what it put into motion brought me most interesting and rewarding experiences. They helped me to learn about business and to understand the complex dynamics of entire value chains faster than ever. They helped me grow and that experience has made me one of those who understand the ins and outs of marketing, production and management in a variety of discipline the best. I am thankful to my “difficult” customers forever.

The reason is simple. By being very demanding, customers forced us to be better than ever and be resourceful to find ways of both meeting their expectations and allow us to remain profitable. Quality only improves through pressure from customers and a competitive environment. It very rarely happens as the result of a voluntary decision, simply because there is a cost at first. In the case of my past professional experience, needless to say that adjusting to consumer demands was never an easy process internally. On the one hand, there was the source of the company’s revenue – in other words salaries – at stake, and on the other hand, the natural drive to keep production costs under control. The key was to not lose our focus on the one essential parameter: the margin. Margin management with market vision really delivered amazing results in such situations. Another essential point was to negotiate everything and always get something in return for any effort made on our part. I remember some very tense conversations with Marks & Spencer in the time the talks were about the removal of meat and bone meal from animal feed. We showed them the impact of their demand on our bottom line and made clear that if they helped out on the bottom line we would go along. Because we were offering top quality chicken, we were able to find an agreement. For as much as we could not afford to lose their business, they did not want to lose us as a supplier, either. The willingness to accept challenges from the market and the drive to always improve our products and service served us. We would not have been in a position to ask anything in return if we had produced a basic commodity. By aiming at being the best, we had a sustainable competitive advantage. Finally we were able to have them accept to buy more from us so that we could dilute the extra cost over a larger volume and have more efficient logistics. The result for us was actually more volume of above average margin products. The customer had to say goodbye to some suppliers who were not ready to go the extra mile for them, and we also said goodbye to customers who would not support us in the cost effort. In the end, a very tough challenge ended up in a strong long-term profitable win-win situation. We came out of a crisis that could potentially have destroyed us stronger and more respected than ever. This is only an example of a tough market challenge. I went through similar situations in the various sectors –feed, pig, poultry and aquaculture- in which I have worked. The added value got in the millions per year each time.

Food fights are good, but they work only by picking the right partners in the market. As a producer, you need to have customers and make the right choice to achieve this goal. As a consumer, you need to find a producer that listens to you and meet your expectation. They will be disagreements along the way, but in the end both parties can benefit, but it will not just fall on your lap. Fights are a part of life. On the first day of my last year in the Agricultural University, the head teacher had a short presentation. He said that life is about:

Learning
Creating

Those two points were very well received by the students. Of course, it fits quite nicely with a crowd of intellectuals. The third point was received by the chilliest silence I can remember. The third point was…

Fighting!

Yes fighting is an integral part of life. We all fight all the time. We fight with competitors, with other drivers, with customer service representatives, with sales people, with the tax man, with retailers, waiters. You name it and it you will find an example of fighting. So no more food fights? Forget it, it won’t happen. In my experience, the only reason why anyone asks for a fight to stop is when they are losing. In this case, if they are losing, it is more because of their refusal to listen to where the market is going than because of those bad irrational consumers. The smart food producers, big or small, have all made moves in the direction of consumers’s demands because they know that is where the growth and the future are.

Transparency is a market-driven exercise

Posted on March 2, 2016 by Christophe Pelletier

Among all the trends in food markets, transparency is a tough demand to meet. As such, it is only natural that consumers have questions about what they buy and want to be sure that they buy something they feel comfortable with. In times when the food economy was local with everyone knowing each other in small communities, the food supply chain seemed transparent. With the separation of rural areas and urban centres and the increasing distance, both geographical and relational, between consumers and the different links of the chain, the distance in trust increased, too. Add to this a few scandals through the years and the result is a feeling that something is broken in the world of food.

The renewed desire for transparency is nothing than a cry for trust. Since the personal relationship with suppliers in many cases no longer exists, trust cannot be just a matter of knowing the farmer, the baker or the miller. Today’s transparency is about verifiable facts. Today’s consumers, unlike their parents or grandparents, do not want to be told a story anymore. If they don’t trust you, they won’t believe you anyway. They are used to search online for everything, with more or less success when it comes to the truth, but they nonetheless want to find out for themselves and figure out on their own what to think. Today’s concept of transparency is replacing PR, which is a one-way push communication technique. Today’s consumers want a one-way pull information platform. That is all the difference. PR is obsolete, but most food producers still have not come to this realization.

The prospect of having to collect, update and disclose all information through the chain from DNA to retail store or restaurant seems a daunting task and for many food producers, it feels like an overwhelming request. It seems and feels that way because it is. It is rather close to some Herculean task. One of the questions I often get is how much do consumers want to know and should everything be available? My answer is that in theory, consumers want to know everything and so it all should be available indeed but in practice, it is somewhat different. Consumers do not really want to know everything about how their food is produced. Well, maybe some do but they are very few. Most consumers do not even read nutritional labels, so they won’t bother spending hours or more to learn everything about the bread or the chicken they just bought unless something serious triggers it. So, what do the large majority of consumers really want? They don’t want to know everything but they want you to be able to answer them any question they have. They want the certainty that, should they have a question about their food, they will get an answer, the truth and that nothing will be hidden from them. Transparency is much more about trust and truth than it is about hard data. Yet, the way to get there is through data and open access.

The amount of data that can be collected is huge and so is the task to set up your transparency system. However, regardless of how much data you collect and share, your transparency performance will always depend first on making transparency one of the pillars of your organization. By that, I mean have the genuine willingness to engage in a candid and honest interaction with your customers and consumers. Genuine, candid and honest are key words when it comes to transparency. People will sense if you are so indeed. If they sense the opposite, you will not gain trust and the perception of your company will further deteriorate. Consumers will forgive honest mistakes when you admit you made one and are willing to do what is needed to correct it, both inside your organization as towards your customers. Consumers will accept that you do not necessarily have all the answers ready but that you are willing to do the research and come back diligently to them with the information. Although immediate response has become an expectation in the digital world, people understand that sometimes a bit of time is needed. Although data is important for transparency, attitude is at least just as much. By being responsive and handling difficult conversations in a mature manner will get you a long way. In a transparency approach, there is no need for defensiveness. You open the doors and you get out of the way! Of course, the mix of transparency and data brings the issue of boundaries. There is a fine line between what is useful information for customers and what is critical information about the company and information that affect competitiveness. Consumers will understand that some information is sensitive enough to not be disclosed. In this process, too, it is essential to be genuine, candid and transparent as long as it is not an attempt to hide something. Remember, transparency is a tool to increase the consumer’s trust and loyalty!

Why now may be the best time to work on the future of food and farming

Posted on October 21, 2013 by Christophe Pelletier

Although agricultural commodities markets have recently calmed down, the past few years have been turbulent. The result has been an increased attention for the world’s food supply and demand. Even in food secure regions, it is quite important to not take food security for granted, as it is always a work in progress. In this regard, the stress on agricultural markets and the recent price hikes have been a good thing. They have forced many to take a closer look at the situation and to start reflecting about the things to come. I have been among the ones who started earlier than most others, for two reasons. Firstly, it was obvious that meeting the demand of a strongly growing population would bring some challenges. There was no need for a crisis to figure that out. Secondly, I did not find analyses that connected the dots beyond the particular interests, the particular regions or the particular business areas of those who produced research and documents about the subject. This is why I have developed my foresight activities for food and agriculture and published the two books. The first, Future Harvests, answers the question of whether we can feed the future population and the second, We Will Reap What We Sow, reflects on how our future behavior towards consumption, together with the quality of our leadership, will decide whether the future will be prosper or gloomy. Those of you who read them know what the answers are and why.

Although the period of tensed markets helped bring valuable attention to the food issue, it has produced more quantity than quality about what should be next. Between those who announced the end of days and those who see it only as an opportunity to use fear to stop others from thinking, there has been little structural long-term thinking. Both groups play on short-term fear to push agendas that serve mostly only themselves. The future cannot be selfish; it will be about helping others succeed. Profit is only a by-product of sound decisions. Those who will foresee the actual needs of the future will make lots of it in the long term. The others, although they might score in the short term, will not win the race. In food and agriculture, foreseeing the future and defining winning strategies are complex activities. I say complex, but I do not say complicated. Ironically, the more thorough the analysis, the less complicated it comes out. When done well and communicated properly, there is no reason why others would not be willing to build a successful future. The complexity comes from the many levels involved in food security. The interactions between natural conditions with the political, economic and cultural environments, together with the many – and often divergent – interests of the players of food value chains are difficult to reconcile. But this is not all. The fact that food production systems and consumption behavior are also influenced by many other sectors competing with agriculture for resources adds to the complexity. The issue is not just about production techniques, new technologies or functioning of markets. Other societal issues play a role, too. The quality of a society and as a result of the people of which it consists will play a role. Health, education and on-going training are very important components of how we will manage the future. Each of the “blocks” I just presented are complex in themselves, simply because they deal with life and keeping the dynamics of life running harmoniously is no easy task. On top of that, the fact that these different blocks, depending on how they individually function, interact with each other and affect the performance of the others, it is clear that we need to look at the issue of feeding the world in a comprehensive manner. We need to identify and integrate all these elements in the analysis to determine the proper action to take. It would be quite convenient if future actions depended only of what directly affect a particular sector. Unfortunately, limiting the thinking to one degree of separation is not enough, by far.

In my years of the Food Futurist, I have had the opportunity to notice that the multidimensional nature of the issue is the one that seems the most difficult for most organizations to fathom. There is no shortage of reports or publications about the future of this or that. However, although they clearly are of excellent quality and the result of hard work, many of them miss the dot connecting part. They focus on the area of interest but tend to neglect the bigger picture. It is only natural that organizations look at the future from the angle of how it will affect them. Yet, nobody should investigate the future from a self-centered kind of production-driven manner. This tends to produce a self-serving strategy that will not prepare those organizations to deal with what will come from the higher degrees of separation. The here and now is nice, but to thrive, they must focus at least as much on the elsewhere and later. I must say that I also have dealt with organizations that do have this comprehensive approach. I found that they had several qualities in common with each other (and with me to some extent): serenity, a rather positive and optimistic outlook on the future, and the quiet confidence that we can overcome the challenges.

Yet, even these “better” organizations still need to go further than they have in preparing the future. Their comprehensive understanding on all the factors that will influence the future needs to go to the next level. All organizations, those with the comprehensive outlook on the future as well as those who carried out the exercise in a less deep manner must translate their understanding of the future in specific strategies and effective execution. In many cases, this is still missing. Organizations must let go of the past by not assuming that past, present and future are linked in a linear manner. That way of thinking is still dominant and, considering the magnitude and the nature of the changes to come, it will not be the best approach to be successful in the future. Another important aspect to take in consideration is to clearly identify in advance what the effect of their actions will be on the rest of us. The latter will be a prerequisite for a prosperous future. It is amazing to see that most plans have no plan B. Without a plan B, a plan is pretty much not a plan. There cannot be only one strategy. There has to be an arsenal of options. What must stand fast, though, is the final outcome. Building a strong future is also about being prepared for the unexpected and to adapt accordingly to succeed. Such an approach would also show that their future actions are taken in with responsibility in mind.

The current times of agricultural markets calming down and readjusting to more reasonable and realistic prices are, more than any other, ideal to focus on how to proceed to build the future of food and farming. As grain prices have slowed down and the animal protein sector is improving financial results, everybody is in a more serene mode. The white noise from the media and the fear mongers has faded for now. Everyone can hear him/herself think again. That is quite a good thing. However, this is no time to lay back or become complacent. Such a serene environment will not last. The population keeps on increasing. Meat and poultry producers will resume production increase as demand for their products is among the fastest growing of all foods. With grain and oilseeds prices less attractive, the incentive to push for more production will also slow down. It will not take a genius to figure out that demand for animal feed will grow faster than production of feed ingredients once again. Lately, Asians have also hoarded agricultural commodities to have stocks at hand, but as availability of commodities increases, they will get more relaxed about it. For all these reasons, agricultural prices are going to go up again, hurting animal protein producers again and sending agricultural markets up as investors and speculators will see their chance for quick money. Let’s also be sure that there will be some climatic event somewhere sometime that will also join the party to add on the stress. When the different parts of the food value chain do not plan ahead globally to ensure a balance between supply and demand, such cycles persist and crises come back. It probably will be a couple of years (my guess is three to five) before we face a similar crisis again. This is why the time to act is now by developing solid plans, engaging in the right partnerships and collaborate closely and intensely to work on the future of food and farming. I mentioned earlier that analyzing what will happen in the future and to prepare for it is complex, the exercise is actually easier than it sounds. It is only a Herculean task for those who want to solve all the world’s problems on their own. One simple trick is to see the big picture but to define what the realistic contribution of the organization to the whole problem actually can be. Another one is to ask for help and support, and thus engage others on the right path. The contribution can be products, services or collaboration. Nobody will fix the situation alone, and nobody should think in such terms. The essence is to act and make others act in the right direction. Communication towards others is quite important as it helps other organizations to determine their respective objectives. In this regard, conferences and events about the theme of the future of food and farming are quite useful. I have participated to quite a few already. Sometimes, I wish they were more focused on what it means for the partners and the audience than what it means for those organizing such events, though. It is clear that many of such events have a marketing and/or image purpose, but that too can only be a by-product. The most important is the added value to the attendants and what they can use practically in their own operations from what they heard at the events. At least, that is my philosophy and how I approach such speaking engagements. Too often, participants present their offering, such as new products for instance, but so far I have not heard anyone ask what I think is the most important question and the key to success: What do you need from me or from other partners to succeed? There are too many conferences about the future of agriculture that do not even include a farmer among the speakers! The customers are the ones who know best what they need from others to do a better job in the future. Let them speak out!

As far as I am concerned, I have now started to work on my third book, the topic of which will be about strategic foresight for food and farming. It will be about anticipating the changes that will come as well as the changes that must take place with the main purpose of presenting adequate strategies to adapt and to prosper. It will review the future evolution of the different productions, the different links of the entire food value chain from DNA to consumer. It will present strategies for and between stakeholders in the different regions of the world, as they face different challenges and conditions, with the objective of showing how it can work for all. I believe it will be a welcome follow-up to the previous two ones, which had already paved the way to show options a building a prosperous and viable future for all, here and now as well as elsewhere and later.

Finding your niche

Posted on April 23, 2013 by Christophe Pelletier

One of the most common questions I get from my clients and audiences is how to find better markets. Regardless of whether I am addressing crop farmers in the Canadian prairies, food companies in the US, seafood producers in Ireland or local farmers here in British Columbia, the need to escape the undifferentiated commodity market is close to universal.

In my opinion, there is a simple reason for this. I usually explain it by joking about commodity markets being 95% price and 5% psychology, while niche markets are 95% psychology and 5% price. Of course, the percentages must not be taken literally. My point is that for commodities, since all the physical qualities of the offerings are similar, the (almost) only decision factor to choose between suppliers is price. All other arguments do not weigh much. For producers, this is often frustrating because it is a cold-hearted process in which the market decides. They feel that they have no control about the price setting, which is true for the most part. Although futures markets are there to help farmers limit the price risk, the lack of control in the actual price setting contributes to uncertainty, especially for producers in region with a relatively high production costs. In many developing countries, the disconnection between farmers and the markets presents similarities with the above. The lack of access together with the lack of control is a major impediment for the development of strong and successful farming operations.

Then, is niche marketing the way to go? Before answering this, it is useful to take a closer look at what a successful niche is about. Probably the best way to visualize it is to look at it from Maslow’s pyramid of needs, and look at which gradients we can define as we climb up the pyramid.

Click on the picture to view enlarged chart

The first one that comes to mind is that the bottom of the pyramid represent the need for generic cheap commodities and the top the exclusive luxury niches. The second one is directly derived from the previous one and from the content of the pyramid. It is the amount of emotion and psychology involved in the customer’s choice. This means that the level of quality also must increase as we go up the pyramid. Similarly, the level, and the quality, of service are also more important, as the target group lies higher in the pyramid. These differences clearly mean different way to conduct business. A solid niche is difficult to enter. If it is not, then many followers will rush into it, commoditize it and destroy it in no time. The difficulty can have very different reasons. It can be technical. It can be organizational. It can be commercial. It can be a matter of logistics or of planning. Whichever the reason may be, the message is clear for the producers: they must have the specific know-how to serve the niche well. They need to have the right set and the right combination of skills in-house. If done well, the development of a niche will also result in higher and more predictable margins, as well in the short term as in the long term. This has a lot of value to food producers, because they can plan ahead much better. Another important aspect of a solid niche is its growth potential. A good niche will grow. Of course, it will not become a commodity market, but that is what the producers want to avoid. If the niche has no growth potential, then as a producer you will be stuck and will need to find other solutions somewhere else for your business. This is why a niche has to be market-driven. There is no way that a production-driven approach will develop a niche successfully in the long term. It might work for a while, but putting production first will weaken the concept eventually. Good niche management requires a deep connection between the producer and the customers. Developing a niche is not a marketing gimmick. It is not wrapping the old product or service in a new packaging. It is easy to make claims about sustainability, social responsibility or other concerns of consumers, but a good niche is not about the superficial stuff. It is about mutual dependence and shared value. To succeed in niche business, producers must be passionate about what they offer. They must believe in their vision, in their product and in their customers. They must commit to them and engage in a true partnership. If this is not the case or if it is not mutual, the honeymoon will be short-lived. Beyond the common vision and goals, what really counts is to speak the same language. Speaking the language of the customer is not enough. A good niche is one where customers want to buy from you, not having you hounding them for more sales. Good niche marketing rests on collaborative planning with the customers.

Although the comparison with Maslow’s pyramid of needs is useful, it is also important to realize that it does not necessarily means that a niche be tiny. Niche marketing is not the same as local and/or micro business. Especially in a world where purchasing power is evolving and where a huge middle-class with increasing disposable income, as well as a growing upper-class, are rising in populated emerging countries, niches may actually be quite large in comparison with the traditional Western markets.

Because there is such a need for niche developement, I am offering a specific program here at my company to help producers who want to walk the niche path. In my professional life, I have had many jobs and projects that were about getting away from the undifferentiated market and develop specialty markets that generate higher margins. The reason is that the production units where in countries with so-called uncompetitive production costs. Despite that, I successfully turned around difficult situations by setting up adequate strategies that capitalized on the strengths of the businesses and took them away from their areas of weakness.

Developing successful niches takes time and perseverance. For instance, it took me three years to get the poultry company I was working for to be approved as a supplier to Marks & Spencer. It also took some painful human resources decisions to turn around the sales activities I inherited in Germany. It took a lot of energy to lead for change here in British Columbia in an organization that was all about production and with no marketing skills, just as it took a lot of energy to convince the market that our new strategy would work (focusing on Chinook salmon instead of Atlantic Salmon) because many tried before and finally gave up. Yet, we did it and in half the time from what was stated in our supposedly very ambitious plan, and both the company and the customers benefited greatly from this move. I must also state clearly that to achieve such outcomes, I had set up teams with the mix of the right skills and talents to execute my vision. Nobody can do everything alone. That is valid for yours truly just as well. I am quite thankful for the great people who joined me in these endeavours and made it happen.

The difficulty to enter the niche protects you from the competition, but you also must pass the hurdle yourself. This means that you need to have the capacity to be stronger than your competitors. If you are not, realize that you will have difficulties to stay in business anyway.

Thinking of a better agriculture in a better world

Posted on August 11, 2012 by Christophe Pelletier

Recently, I joined a group on LinkedIn called “Future of Agriculture”. One of the discussion topics, which caught my attention, was “What’s your dream for the world with agriculture as a theme?” Of course, this is quite a broad topic. I decided I would write here my thoughts about the discussion as concisely as possible. Therefore, here is what I believe is important for the agriculture of the future.

Agriculture must provide food today and tomorrow. Keeping the potential to feed the world for future generations is not an option; it is a necessity. Agriculture must produce in a sustainable manner. It must meet both the demand for food, but also be able to continue meeting future demand. It must take all necessary actions to ensure there will be enough water, enough soil, enough organic matter and enough nutrients to keep producing. It must also make sure that it does not contaminate the water and the soil. Agriculture must be sustainable from an environmental point of view, but it also must prove sustainable financially and socially. Without agriculture, there cannot be prosperous societies. To have agriculture, the world needs farmers. Farming must be an attractive occupation that allows those who practice it to make a decent living. This is more important today and in the future than it has ever been before.

Future food production must be innovative. Innovation is essential to solve current and future problems. It is the main trait of the human genius. Finding new ways of doing a better job and meeting all the future needs is a must if humanity wants to succeed in feeding its growing population. However, innovation is not the same as high-tech. Innovations do not need to be complicated and expensive. Innovation must integrate science, experience, common sense and practicality. Innovation does not oppose the past and the present or the future. It comes for the search of the best of all worlds. Innovation is useful only when it solves actual problems. It is not a doctrine of its own. The purpose of innovation is not about R&D for the sake of new products that help boost sales of those who market them. Its primary purpose is really about helping others succeed. Innovation must start from the market. What does the customer need to do a better job? The answer will be much more successful and better accepted if it starts from the market end, instead of being pushed onto the customers. This leads me to the next point: the necessity of being market-oriented.

Market orientation is the best approach for any type of business activity. It is true for R&D, but it is true for farming, too. Developing and producing by investing large amounts of money are much more effective and cost-efficient when the markets and the infrastructure are there. Offering what customers need has a much higher level of success than trying to convince buyers who are not very interested. The prices and the margins are always higher in a pull strategy. Market orientation also means that the infrastructure to bring the goods to the final users exists and that it actually works. One of the main scandals in today’s agriculture supply chain is the postharvest losses. It is outrageous that food that has been produced at the high cost of money, labor, water, energy, inputs and the farmers’ time rots in the fields or in deficient storage while it is good for consumption. It is the responsibility of all partners in production, supply chain and government to co-operate by organizing operations, so that food reaches those who need it.

The agriculture of the future needs to be developed in a pragmatic manner. There is no fix-it-all agricultural system. Food production depends on climate, landscape, soil types, water availability, need for sustainability, land rights, as well as the cultural, social, economic and political environment. The types of crops and animal production will depend on these factors. If systems cannot always be transferred from one place to another, knowledge and skills can be. Human intelligence and sharing is what spread progress. If farmers and all players in food production must be pragmatic and choose among the arsenal of tools and techniques what fits best in a particular situation, there are no boundaries in helping others to succeed. The energy must be spent to level up performance, not on defending a system for ideological or mercantile reasons. If the agriculture of the future succeeds, all of humanity will succeed. If it fails, humanity will have to deal with unrest, riots, hunger and possibly wars. Pragmatism is what will help the farmers of the future optimize food production around the world by making decisions that are in the best interest of all the partners from farm to table. Pragmatism is also what will deliver the highest financial return for them. However, for pragmatism to beat partisanship, bias and short-term interests, outstanding leadership will be paramount.

The leaders of the future will identify the right actions and execute them. They will cut the rhetoric and focus on delivering result on all fronts: financial, social and environmental. They will crystallize the energies around the objectives that serve all on the short term and on the long term. This will not be an easy task as the reasons to choose the path of least resistance are many. It will take courage, vision and the ability to convince the opposition. In history, great leaders have always sacrificed their personal interests, their personal safety and comfort for the good of the group. Such leaders are rare, but they exist, at all levels of society. They need to rise and improve the way we currently do things. They will succeed only if the average person is willing to make the right changes, too. This is not an easy task, either, but the alternative is even worse. The great leaders of the future will show the rest of us how things can be. They will give others the courage to implement the change and make them believe in the future. They will have to lead by example. They will have to reconcile instead of dividing and polarizing. When it comes to food production, they will not only help develop an efficient and sustainable agriculture, but they also will make sure that consumers change their eating habits where it is needed. They will help educate consumers about proper nutrition and moderation, while keeping food a positive experience, as well for the senses as for it social purpose. They will ensure that proper nutrition protects the health of their people. They also will give agriculture its rightful place in society and ensure that producing food is a respected and attractive occupation. They will take all actions to help food producers to succeed. They will reconcile urban and rural areas. They will make sure that people understand where food comes from and what it takes to feed for prosperity. They will work against waste.

Every waste is a loss of efficiency. With a population of 9 billion coming in the next few decades, waste will not be an option anymore. As the number of people increases and their needs have to be filled, the margin for error will shrink. The consequences of 9 billion behaving badly will be much worse that when there were only 3 billion people on Earth doing that. Every waste of resources will be quite costly, financially, socially and environmentally. The only way to reduce waste will be by being more efficient. This will be true for food, as well as for water, for energy, for agricultural inputs, for soil, for organic matter and for biodiversity. Preserving and replenishing will protect humanity from a situation of depleting resources, which is where it is currently heading. The consumption and depletion society has no future. Future food production and consumption must be aimed at maintaining and preserving the potential of agriculture.

Those who are familiar with my work know that sustainability, innovation, market orientation, pragmatism, leadership and efficiency are the 6 principles that I had gathered under the acronym of SIMPLE in my first book, Future Harvests. In my second book, We Will Reap What We Sow, I developed and discussed the characteristics of proper leadership and the vision required to rethink food and farming to succeed in the future.

Even if future solutions need to be adapted to their specific local situations, these 6 principles apply everywhere and need to be implemented in a concerted manner by all regions.

Food security in Paradise

Posted on June 20, 2011 by Christophe Pelletier

Many Hawaiian residents express their concern about their dependence on food that comes from far away. Actually, there are more and more conferences and workshops about the topic of food security for Hawaii. With this in mind, I went to the Big Island of Hawaii for a vacation last April. I certainly would recommend to everyone to do the same if they ever have the chance.

Since Hawaii is part of the USA, food security will be guaranteed from the mainland. However, looking at the situation as if Hawaii was an independent country makes the debate about food dependence from other
regions quite interesting. The Islands of the State of Hawaii are isolated, as they lay in the middle of the Pacific Ocean, thousands of miles away from any significant continental mass.

During my stay, I was reminded about food security and environmental issues in several occasions. On Earth Day, I came across an event that was interesting in many regards. Apart from the more militant speeches about mostly the big bad oil, and the fact that “Lady Green” touched me with a sunflower, I spent some time engaging in conversations with a number of exhibitors, from government organizations to renewable energy systems (solar makes a lot of sense in Hawaii to me). One booth where I spent more time was
the one of the University of Hawaii’s Pacific Aquaculture& Coastal Resources Center. There, I had a good conversation with PACRC’s Director Kevin Hopkins, a very knowledgeable man with extensive experience in aquaculture, not only in the USA, but also in Asian and African countries. Thanks to him, I got a better idea of the challenge to integrate a sustainable aquaculture in the Hawaiian environment. Living in Vancouver, BC, and having worked in the salmon farming industry, this is not a new topic for me. Aquaculture faces similar concerns in both places.

Click on picture to enlarge

With this in mind, I continued my vacation. At the Kaloko-Honokohau Historic Park, I found a sign showing a comparison of food security between today and 300 years ago. By then, there were 150,000 inhabitants on the Big Island of Hawaii, 100% of the food was produced on the island, 0% was imported, and they were producing 300,000-500,000 lbs. of fish in stone fishponds. Today, for a similar population, only 18% of the food is produced locally, and the Kaloko fishponds do not produce any fish at all (see picture). Of course, these numbers do not take the number of tourists to feed into account. Moreover, the current food consumption per capita is probably substantially richer in calories than 300 years ago, too. However, this history could be a good basis for more constructive discussions about aquaculture. Clearly, aquaculture was a traditional way of improving food security for ancient Hawaiians. The old fishponds were made of walls built with the volcanic rocks, and the fish was passing though a gate made of vertical bars. The small fish could enter, but as they grew bigger, they were unable to pass the gates and leave. This system made me think of a hybrid form of closed containment. In BC, where many discussions are about producing salmon on land, the Hawaiian fishponds are actually a quasi-closed containment on the seabed. It does not require all the land-based infrastructure and equipment, as is the case for land-based closed containment systems. What I saw at this park tells me that the useful could meet the historical, cultural and the modern just to help develop a responsible and productive aquaculture to increase food self-sufficiency for Hawaii. In a region where the ocean space available is as vast as this is the case around Hawaii, I am convinced that there have to be plenty of locations where aquaculture can be conducted without harming the environment, and there have to be more than enough adequate production techniques to do it right.

In the same park, there were remnants of pits in which rocks were set up in many individual planters. In these planters, called mala’ai, the ancient Hawaiians used to grow food plants. This is an ingenious system, because in that area, the fields are covered by lava. There is no soil to be used for open field crops, such as wheat, for instance. On the other hand, there would be plenty of acreage to set up such planters. This would be labor intensive, though.

At the Kaimu-Kalapana black sand beach, I read on a sign that ancient Hawaiians used to harvest seaweed and that apparently, their methods were sustainable. It is only after commercial harvesting by European settlers started that the seaweed quantities plummeted because of excessive harvest volumes. Just like for fish production, researchers from all sides should work on restoring such a seaweed production in a sustainable manner. This example, like all other examples of unsustainable human practices, simply demonstrates that we must produce or harvest what we can, instead of trying to produce or harvest always more while ignoring the signals that we are passing a breaking point.

I spent time only on the Big Island, and I did not visit the other islands. Probably, I do not have the whole picture, especially considering that more than two-thirds of Hawaii’s population lives in the State capital, Honolulu. According to the latest US population census, Hawaii’s total population is of about 1.3 million people, out of which more than 900,000 live in Honolulu. To get a more accurate picture of how much food needs to be produced to meet demand, it is necessary to add the visitors. Per year, the number of visitors is about 7.4 million people, who stay on average 9.15 days. This number expressed in average outside visitors staying in Hawaii per year is 7.4 x 9.15 / 365 = 186,000 people. To simplify, I will estimate the number of mouths to feed at 1.5 million.

For the Hawaiians concerned by the food security or, better said, the low food self-sufficiency of their state (less than 15 %!), what are the possibilities?

Just like in most of the rest of the USA, the local food movement is growing. More and more people are trying to grow some food on their balconies. Of course, this will not be enough to reverse the situation, but it will contribute. Farmers’ markets are gaining in popularity, and I have to say rightly so. Unlike what I am used to in my neighborhood, the food sold on the farmers markets that I came across on the Big Island offer many affordable and actually cheaper foods than in the large supermarket chains. At the farmers markets, I could notice that many more generic vegetables such as onions, tomatoes or bell peppers were shipped from the West Coast of continental US, mainly Washington State. On the other hand, I found quite interesting to notice that the big retailers are also trying to source local products. I only visited a Wal-Mart and a Safeway. From what I have been told, the selling of local products at their outlets is a recent change.

This is interesting, because these retailers will try to be able to source larger volumes, and they actually maybe in a position to stimulate more local food, agriculture and aquaculture production.

The quality of the local food is quite good, although when on vacation everything tends to taste better for some reason. Although I am not much of a beef eater, I was tempted by a “Hawaiian” local grass-fed beef burger recipe, and I have to admit this was the best burger that I ever tasted. It was so good that we went back to the same pub the next evening and I had another burger, while my spouse had a steak. Her steak was simply stunning. And the price was actually cheaper than similar generic beef dishes here in Vancouver.

When it comes to justifying more local food production, I have seen very interesting numbers about the amount of money that Hawaiians spend on food, and therefore to producers outside of their state. According to the same studies, local production would also result in more local jobs. However, I would not develop a plan based on such numbers, not because I doubt them, but because the business must be financially viable as well. I find all the reports that I have read too general or too academic for my liking. Moreover, I am not convinced that the politicians are committed to take the necessary steps to increase food self-sufficiency in Hawaii. They give it quite some lip service, but I miss signs that this topic might be on top of their priority list.

Personally, my first step to see what needs to be done would be to look at how many farms are required to produce what is needed: how many eggs, how much milk, how many chickens, how many pigs, how much fish, how many fruit and vegetables, how much wheat, rice, potatoes, and so on. Once I would have identified the size of the local market for all the food items, I would calculate how many farms are needed to meet that demand. After all, there cannot be food security if there are not enough farms.

For instance, every 10 kg consumption per capita of chicken meat means a production volume of 1.5 million x 10 kg = 15 million kg of chicken. As a chicken weighs about 2 kg, this would correspond to 7.5 million chickens per year. With an average of six flocks per year in a chicken house, this would mean a production capacity of 1.250 million places. This represents about 60 chicken houses. Depending on the size of the farm, my guess would be that 10 to 20 farms are necessary to cover a consumption of 10 kg per capita per year. If consumption were 40 kg per capita per year, Hawaii would potentially need up to 80 farms. Do they have the farmers and the locations for all of them? That is what I would like to determine.

Similarly, in the case of marine fish farms, every 10 kg consumption per capita per year of fish requires 15 million kg of fish, or close to 30,000 tons of live fish. If we were to imagine the containment system from Hawaii Oceanic Technology that I mentioned in “High-tech fish farm”, it almost could be produced on one farm. Of course, it would not be wise to put all the eggs in the same basket. If production volumes were comparable to a salmon farm, the 30,000 tons could require 10 farming sites. This is just theoretic in order to give an idea of the production space needed. There would be different species produced, but the calculation method remains the same for each of them.

With such an approach, for all the relevant food products, it can appear very quickly if being self-sufficient for the various food items is realistic or desirable.

The final exercise, which is also the most important, is the business plan per farm, to assess the viability of the individual projects. Even local, food production must be competitive. The example of Hawaiian sugar cane shows that this is not necessarily the case.

Next to farmers, food producers and market outlets, the Hawaiian government can stimulate more local production if it wishes to do so by setting the appropriate policies. Developing such a thorough review of how to reduce food dependency on outside sources in a market-driven and viable manner for the long term would be quite enjoyable to carry out in paradise!

SeaAgra Seafood and The Food Futurist team up for consulting of seafood projects

Posted on March 9, 2011 by Christophe Pelletier

Vancouver, 9 March 2011

SeaAgra and The Food Futurist will cooperate to offer consulting services to their customers involved in the seafood industry. By combining their pool of expertise in the field of sales, marketing, processing, quality, supply chain, business management and strategy, the new partnership will focus on actively helping execute the development of market-driven seafood projects.

The ultimate objective will be to develop viable value chains between producers and seafood buyers by matching the best partners together and by removing all unnecessary costs in the chain. Thus, the maximum value is distributed between the links of the chain. The focus will be on market-driven strategy, efficiency and optimization, sustainable projects, business organization, setting up long-term win-win partnerships, and fostering customer service. The results for the customers will be a stronger market position, improved financial results and a clear and focused future.

”A synergy of talent is what makes this partnership special. Different expertises, different experiences, and a wealth of knowledge, combined with a common focus will allow us to offer a service that is unparalleled” says SeaAgra’s Joe Collins.

About SeaAgra Seafood

Sea Agra Seafood Brokerage Ltd. commenced operations in 1992, initially as a fresh farmed salmon brokerage company servicing small and medium sized salmon farms. Since inception, the company’s product line has expanded to include fresh wild salmon, wild B.C. caught ground fish, farmed steelhead, sablefish and salmon.
We have since expanded to include the purchase of niche wild and farmed seafood products for re-sale to our highly discerning customers. Our team offers an unrivalled combination of 95 years of experience in the seafood industry and brings a genuine passion for what they do to our business.
Honesty, integrity and a keen understanding of the inner workings of our industry converge to form the basis of our approach to business. We have earned an outstanding reputation in the seafood industry in part because we treat the products we sell as if they were our own. This approach keeps our customers coming back year after year for our fresh and irresistibly delicious seafood.
SeaAgra services fresh seafood markets across North America and other major consumption countries.

I am very enthusiastic about the cooperation with SeaAgra. I have known the owners of SeaAgra, Ralph Shaw and Joe Collins, for many years. When I was in the salmon business, Joe was part of my team, and Ralph was one of our customers. They contacted me last year for a project. We did a superb job under a very tight deadline, and we have received praise from third parties who have read the report since then. Our work has been much appreciated. This has led us to pursue this partnership further. The combination of talents with the great chemistry between us generates a positive energy. We will add tremendous value to the customers. Our concept goes beyond simply advising, it ensures the successful execution of the projects!

This partnership will also allow us to explore scenarios for the future of seafood and develop marketing strategies for new species, such as barramundi, cobia and other high-end specialties.

Christophe Pelletier

Feeding nine billion is an exercise in leadership

Posted on January 24, 2011 by Christophe Pelletier

In a previous article, “Hunger is about more than just food production”, I showed how much more potential we have to feed the world than we commonly think. However, having the potential to do so does not mean that we will do it. Human nature has the habit of fluctuating between its best and its worst. Therefore, whether we will actually feed nine billion is far from done. In this article, I am going to reflect to what it would take to be successful at making it happen.

In my book, Future Harvests, I present the six principles that are critical to meet future food demand successfully: Sustainability, Innovation, Market Orientation, Pragmatism, Leadership and Efficiency. I had regrouped these principles under the acronym SIMPLE. While I was writing the book, I always came back to the same observation: success or failure to feed nine billion simply depends on us all. Someone needs to set the course and create the conditions to take the proper actions. The world needs leaders that will make food production potential the reality by 2050.

The job description is, interestingly enough, rather reminiscent of food production and genetics. In order to express the full potential of its genes, an organism needs the proper environment. This is exactly the role of the future leaders. They must create the conditions that will allow farmers to produce efficiently, yet sustainably.

The starting point will be about making the right decisions for both the long term as for the short term. We must preserve the potential to produce for future generations, but we must not forget to provide for today as well. Proper leadership will need to take into account the interest of many different groups and manage a balanced approach between money, people and environment. For sure, future leadership will be a balancing act. This will be easier to achieve if the leaders can sell the world their plan, which means that they must have one.

Leaders come from all layers of society. They are in government, in industry, in non-profit organizations, they are independent farmers, or they come from non-food related occupations. Adequate food supply is the very fundament of societies. Where there is hunger, there is no prosperity. Without food, there is not life, and just as importantly, without water there is no food. Developing food security is not an option; it is probably the most important policy sector of any society. This is something that we must not take lightly, even in rich countries where we seem to take food for granted. Things may change.

What story do our leaders need to tell and execute? The points that I raised in the article mentioned at the very beginning are a good place to start. The scandal of food waste, because it really is a scandal, must be dealt with and fixed. In developing countries, this is caused by a lack of infrastructure. It is only a matter of money. If world leaders have the will to get that money at work, it will happen. For some reason, they do not do it. Maybe it is a sign that things are not that critical after all. Compared with the amounts of money thrown at financial bailouts and stimuli of all sorts, the cost of infrastructure development looks ridiculously insignificant. Such projects would actually create jobs and increase the wealth of the populations where it takes place. This would not be artificial GDP boosting, but actual poverty reduction and increased food availability. In rich countries, food waste happens at the consumer end. What leaders of these countries need to communicate is a sense of responsibility. Wasting food is simply immoral, just like any other waste. If we take the example of nitrogen, the waste by leaching is estimated at about half the nitrogen spread on crops. This is huge and very damaging for two reasons. One is that the nitrogen ends up in the drinking water making it harmful, especially for pregnant women and infants. The other is that the production of nitrogen fertilizers uses half the world’s agriculture natural gas consumption. Efficiency is not a luxury, but it is a necessity. When efficiency increases, the amount of waste decreases. This works towards a higher sustainability, too. Food waste is one thing, but food consumption excesses or unbalanced eating habits are another area of work for our leaders. Eating more food than one needs is not only detrimental for that person’s health, it is also food that is less available to others. This pushes food prices up, too.

The effectiveness of leaders depends on their ability to communicate and get the message over to their dependants. Changing habits and infusing a sense of solidarity and responsibility requires patience, communication and proper education programs. Defining vague objectives or using hollow populist slogans and expressions will have no effect. Only charismatic leaders with strong convictions about what ensures the future of their people, even if it means sacrifices, will be able to bring such a change. It is not easy to do when your country is not on the verge of a terrible crisis. An interesting example about unilateral leadership is the decision of the Chinese government to slow down the number of new car registrations. They consider that there are enough cars. Getting a licence plate will be difficult in the future. In 2008, they decided to ban the use of disposable plastic bags in supermarkets, thus saving an estimated 100 billion bags and the equivalent of 37 million barrels of oil per year. Similarly, China is now the world leader in renewable energies. What actions did the Western democracies take about new car sales and supermarket plastic bags? When children died because of tainted milk, the Chinese authorities arrested all the people involved, and even executed two persons. Of course, the use of melamine in the milk was intentional, making the case extreme. However, in the West, I do not recall anyone being arrested or considered personally liable after deaths by food poisoning. My point is not to demand imprisonment of CEOs as a standard operating procedure, but I am sure that if executives of food companies felt that they could be personally liable for food poisoning, the precautionary principle would apply much more systematically. Leaders need to make understand that doing something wrong comes with consequences. Although there is much to say about China’s political system, one must admit that not having to think in terms of elections every four years and not having political campaign funded by any industry of NGO of any sort can help politicians focus on the long-term, too. Maybe the fact that China is plagued with so much pollution in the air, in the water and in the soils also makes the issue more acute for the leaders to resolve.

If the stick is one option to make people do what is right, the carrot is, at the very least, as important. Nothing stimulates people more than being rewarded for doing a good job. People are at their best when they know that others appreciate what they do, and that what they do makes the world a better place. Then, they do not see their occupations as “have to” activities, but as “want to” ones. Subsidies, bonuses, tax credits are all motivating tools to make people do the better thing, but the key is to have incentives that meet the goals without having harmful side effects.

Leaders also need to be innovators. Considering how fast our world changes, and the quantity of new knowledge made available about on a daily basis, many new possibilities will be available to solve old problems. Innovation is the child of human genius and, to cope with future challenges, creativity and adaptability will be major assets. It is the leaders’ role to foster innovation, yet by keeping in mind all long-term implications.

The ideal leader would have the qualities described by Plato in “The Republic”. Although it is an ideal, having committed leaders matching his description would increase our odds of success.

Future evolution of genetic engineering

Posted on December 9, 2010 by Christophe Pelletier

Genetically modified organisms (GMOs) are one the most, if not the most, controversial aspects of modern food and agriculture. So far, the focus had been on offering farmers alternatives to pesticides and herbicides. The proponents of GMOs praise the progress made and they claim that agriculture production benefits from this. Opponents warn about all sorts of potential disasters in health and environment. The reality is that GMOs have been around for about a decade and a half, and they are here to stay. There is currently no sign that they would be banned from the Earth, especially since genetic engineered traits have been found outside of farm fields, as I had mentioned in a previous article.

At his juncture, and to think of how this technology –and business- will evolve, it is worth asking a few questions.

Has the use of GMOs been successful for agriculture and food production?

There are several levels in this question, actually. From the yield point of view, it is rather difficult to answer objectively, as there is little possibility to compare the respective performance GMOs and non-GMOs. From what I gather, it would appear that the Bt cotton may have delivered better results. For corn, the picture is much less clear. Actually, some varieties have proven to have rather disappointing performance. For instance, the genetically engineered corn from Monsanto failed to produce in South Africa, and recently their SmartStax variety (developed together with Dow) has had lower results than expected. This forced the company to drop the selling price per unit from US$24 down to US$8! The stock market did not appreciate. Clearly, GMO producers can make mistakes, and this is not particularly reassuring.

However, GMOS have delivered some benefits, too. In Argentina, the use of glyphosate-resistant soybean has allowed the production of soybeans to recover strongly from the brink of disaster. After many years of intensive monoculture of soybeans, the soil had been damaged to a nearly point of no-return, With the use of glyphosate-resistant plants, combined with no-tillage technique, farmers have been able to rebuild the level of organic matter in their soils. The result has been a huge increase of production, as farming conditions have been restored.

Opposite to this success story, a study from China concluded that the use of Bt cotton changed the ecosystem in such a way that pests that are naturally not sensitive to the Bt toxin thrived in cotton fields. This forced farmers to use other regular chemical pesticides to fight them, and the overall use of pesticides was actually higher than before the introduction of Bt cotton. The number of glyphosate-resistant weeds is a growing concern in many areas of the USA, and farmers need to use other methods to eliminate the weeds. Currently, the situation has come to a point that Monsanto is offering a rebate to its customers to buy and use herbicide from their competitors, so that at least they keep buying their genetically engineered glyphosate-resistant seeds, because they do not have the solution of the problem in-house. These two examples demonstrate a simple fact: genetic engineering is not a panacea that solves all the problems. It must be used as a part of a well-thought set of techniques. Producing one type of crop with the included traits without understanding the ecosystem that a field is, simply does not work. A field is not a dead zone. A biologically very active system resists constantly the attempts of humans to get it under control. Since the odds of developing a resistance for all available products is statistically close to zero, rotating herbicides and pesticides strongly increases the chances of eliminating the “super weeds” and the “super bugs”. Of course, companies would rather not promote their competitors products by advising farmers to rotate herbicides and pesticides.

Are GMOs necessary?

Considering the rather mixed results, it is quite difficult to answer this question with certainty. The technology of genetic engineering is useful because it offers the possibility to introduce desirable traits in plants. However, genetic engineering deals with genes, and the actions of the genes, as well as their interactions with other genes, are very complex. This is still a field where we have much to learn. Caution is required. Genetic engineering is only one of the many ways we have to increase and improve production. It certainly is not, as some would like to make believe, the only way. This is also important to keep in mind when it comes to developing countries. In these countries, the problem is not that all other techniques have reached their potential. Many farmers do not even have access to just good seeds. If they had, together with proper financing, access to input and adequate techniques, they would achieve much better yields. Since they are poor, how could they even afford to buy GMOs? In my previous article, Hunger is about more than just food production, I indicated how Africa could become a net exporter without GMOs. On the other hand, in developed countries, such as Europe, where farmers achieve outstanding technical results, for instance wheat yields 2.5 to 3 times as high as in the USA, what could be the incentive? Europe is food secure, actually several European countries are among the world’s largest exporters of food and agricultural products. Why would consumers be hungry for GMOs, while food is already affordable? People may not always be rational, but there is always a strong logic about why they do what they do.

Are GMO safe or not?

In all objectivity, there is no certain answer to this question, either. Until this day, there has not been any proven disaster linked to GMOs. Since in biology things may take a long time to come out, there cannot be any certainty that something is not already changing, either. This debate is between those who think that progress always brings some new uncertainties that should accept, and those who think that we should not take chances. Genetic engineering is still a young science, and 15 years is a very short period in ecological terms.

A related question about this is: “Is there a moral issue about GMO?” There certainly is something about morals in the debate. There is the theme of playing to be God. There is the theme of corporate profits vs. people and environment. There is the theme of the control of food by a select few, and that is about power. There is the theme of secrecy vs. transparency. This is also about a certain vision of the world, and about which values should prevail. There is the New World set of values vs. the “Old World’s”. None of these themes has much to do with science, but they are quite important to many people, and they will remain so for a long time. The controversy and the debate are far from over. The food retailers, such as the giant Carrefour, are now entering the debate. A new interesting element is the awakening of the US consumers who start to question food production; while until recently, they were rather passive in that area. Many things will happen and change. At this stage, it is rather difficult to say what will emerge.

What is at stake?

Next to the themes that I have just mentioned, the most at stake is money, and a lot of it. This industry would never have developed if they had not been granted the possibility to apply for patents and collect royalties on their intellectual property (IP). Without IP, there are no GMOs. Patenting life is in itself a controversial topic. This is especially more so when a whole plant becomes private property while only a tiny part of it has been altered. The original whole plant was the collective property of humanity. Without asking permission to mankind, and not even offering to pay a rent for this collective property, GMO producers have managed to become the owners. For many people, there is a feeling of wrong entitlement.

The key element is IP. This is understandable, because most GMO companies are spin-offs from molecule makers, from the chemical and pharmaceutical industries. Their business has always been about investing large amounts of money in R&D to put new molecules on the market. Their philosophy behind GMO production is the same. They think like molecule makers, not like farmers. The objective is to develop products for which they can collect royalties to pay back for the R&D expenditure. The driver for this is the need to develop high margin products to satisfy the expectations of the shareholders. This is why GMOs were a logical step to replace gradually the chemical herbicides and pesticides, for which margins have been eroding. Something else needed to be developed to bring out solid financial results and future prospects. With the patent period ending soon, the existing GMOs will become generic products that will no longer be IP. This forces the producers to think of new traits to include, thus generating more IP for royalties. This leads to a new generation of GMOs

What will be the next phase?

We will see two different paths for genetic engineering. One is a market-driven genetic engineering aimed at solving actual problems that farmers need to overcome. This will not be so much about IP and royalties, but it will be about practical and affordable solutions. This area will be taken over gradually by plant breeders and to some extent with government support. They will focus on issues such as drought resistance, flood resistance, ability for plants to grow in saline soils, and ability to transform solar energy more efficiently into food by enhancing photosynthesis processes. An interesting case to follow is China. Over there, the government is already leading a nationwide restructuring of the currently fragmented seed industry to make it more efficient, and deliver solutions that will help the country improve its food self-sufficiency. Since China is quite involved in farming investments in Africa, we can expect to see Chinese seed producers become more aggressive on that continent, too. China has also clearly expressed that genetic engineering is a part of their new approach.

The molecule makers, as I like to call them, will choose a different path. They will look for sophisticated products for which they can receive a high margin in the market. Their objective will be to introduce as many traits as they can in plants and help them produce… molecules. They are more interested to produce high-tech novelties. They will become the Apple of biology. Chemical synthesis will be replaced by biotechnology. Their areas of interest will be pharmaceutical production and health, more than agriculture. The industry will introduce genes in plants to produce medicines that can be used to treat all sorts of diseases, such as diabetes, cancer, possibly Aids, and many others. They will also focus on the development of healthy nutritional components, such as high Omega-3 fatty acids content in oil seeds and the elimination of allergic components in current foods.

This next phase will see a change in the landscape of GMOs. Companies will make strategic choices about which segment they want to operate. There will be divestment of activities, and there will be new Mergers & Acquisitions, too. It is very likely that GMO producers will focus on biotech and sell their herbicides and pesticides activities to the companies that will choose to specialize in chemicals only. Pharmaceutical companies will get closer to GMO producers, and we can expect to see a new generation of biotech start-ups that will aim at being taken over by larger corporations. Some companies will choose for business-to business, while others will choose for consumer products. For pharmaceuticals and nutraceuticals, companies will subcontract farmers, while remaining in charge of the marketing of the molecules.

The Food Futurist

Global Food & Agriculture Futurist & Advisor | Keynote speaker | Accurate foresight | Astute strategies | Thought leadership | Positive critical thinking | Effective practical business management | Comprehensive vision of the future of food and agriculture

Tag Archives: Market-orientation