Finding your niche

April 23, 2013

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.

Niche &MaslowClick 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.

Copyright 2013 – The Happy Future Group Consulting Ltd.

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What more demand for meat means for the future

October 21, 2012

Here is an excerpt from We Will Reap What We Sow, the book I published in May 2012. The recent difficult climatic conditions for agriculture and their impact of agricultural markets have made the issue quite relevant. Here it is then:

As the economy in emerging countries is improving, their population becomes wealthier. Just as it happened in Western countries during the 20th century, the increase in wealth translates into dietary changes. The consumption of animal protein, especially the consumption of meat, increases.

To realize what the consequences of a higher consumption of meat might be, it is interesting to make calculations for China. When 1.5 billion people eat on average one more kg of chicken meat per person, world production needs to increase by about 750 million chickens. That represents about 2% of the world’s production. Similarly, when each Chinese consumes on average one more kg of pork, the world must produce 15 million more pigs. That number represents 1.5% of the world pig production. For beef, an increase of consumption of one kg per capita per year means the need for a production of 2.4% higher than today.

Meat consumption in China has already passed the milestone of 50 kg per capita per year, and projections indicate that it should reach 80 kg per capita per year in 2030. Clearly, consumption will increase by much more than just one kg.

An increase of 10 kg of chicken meat per capita per year in China means that the world’s chicken production would have to increase by 20% to meet the new demand! This represents almost the entire US chicken production volume, and more than Brazilian production. In the case of pork, an increase of consumption of 10 kg per capita means that the world’s pig production would have to increase by 15%. That is five times the current pig production of Iowa, USA. That is 60% of the EU production. For beef, the world’s production would have to increase by 24% to meet an increase of 10 kg per capita per year! This number also represents about 125% of the current total US beef production.

Different animal productions have different feed conversion ratios (FCR). The FCR is the quantity of feed needed to produce 1 kg of meat. For chicken meat, the FCR is of 1.8. For pig meat, the FCR is about 3. For beef, depending on the proportion of grass in the cattle’s diet, the amount of grain used to produce 1 kg of beef varies. With an average FCR of 3 for the various types of meat productions, an increase of meat consumption of 30 kg in China would result in the need to produce three times 30 kg times 1.5 billion. Depending on the consumption of which type of meat will grow the fastest, the need for feed, excluding grass, would vary between 100 and 150 million tons.

The world’s second largest population, the Indian population, is still largely vegetarian. Although India is among the countries with the lowest meat consumption, with less than 4 kg per capita per year, Indians are gradually changing their eating habits. Meat consumption is increasing in India, too, but not in proportions as dramatic as in China. Nonetheless, with a growing population, any incremental meat consumption will have physical consequences. Some simple math can show the magnitude of the higher demand for meat.

Between 2010 and 2050, the world’s population will increase by 2.2 billion, from 6.8 billion to nine billion. If everything stays equal, the consumption would increase by about a third (2.2/6.8). According to the FAO, the average consumption of meat per capita in the world in 2010 was of about 47 kg. The population growth alone would represent a meat consumption increase of 2.2 billion times 47, or 103 million tons. This number represents about a third of the 2010 meat consumption.

In the example of China mentioned earlier, the predicted increase of 30 kg per person represented an increase in meat consumption of 45 million tons.

Even if the world average meat consumption per capita remained stable between 2010 and 2050, the need for additional meat production would be of 2.3 (103/45) times the numbers in the China example. This represents an additional need for animal feed, excluding grass, of between 230 and 345 million tons compared with 2010.

The situation becomes even more interesting when the average consumption per capita increases. For every 10 kg increase of individual consumption, the need for additional meat production increases by nine billion times 10 kg, or 90 million tons of meat. For each 10 kg increase of average meat consumption, an additional volume of 600 to 900 million tons of animal feed is necessary. The following table presents the effect of the population increase to nine billion people and its meat consumption on production volumes.

Average individual meat consumption increase from 2010 (kg/capita/year)

0

10

20

30

40

50

Average individual meat consumption(kg/capita/year)

47

57

67

77

87

97

Total meat consumption(million tons)

423

513

603

693

783

873

Total meat consumption increase from 2010 (million tons)

103

193

283

373

463

553

Percentage of increase from 2010

32%

61%

89%

117%

145%

173%

An average meat consumption of 97 kg per capita per year would be about the current average of developed countries. If the average meat consumption per capita per year in the world were to meet such a number, meat production would have to almost triple from 2010 volumes.

Most of the gloomy scenarios about the challenge of feeding the world are based on the assumption that the diet model would have to be the Western diet, and in particular the American diet. This is far from certain. Actually, it probably will not be the case. As the world’s population increases, one of the sensitive issues, especially in the overfed world, will be what to eat and how much of it. Higher food prices will also force people to indulge less. It is important to understand the difference between nutritional needs and consumer desires. Today, the world produces enough calories and protein to meet the actual nutritional needs of nine billion people. If the nine billion people expected for 2050 all want to have a Western diet, the amount of calories needed would be equivalent to the nutritional calorie needs of 17.5 billion people.

It would be normal to expect feed conversion efficiency to improve in the future. Nonetheless, the production for animal feed would then increase with 3,000 to 4,500 million tons above the volumes necessary in 2010. Since a third of grain production goes to animal feed, a tripling of meat production means that grain production would have to double, just because of the desire for more meat.

Clearly, the challenge of feeding the world will depend increasingly on meeting the demand for meat. The challenge for producers of agricultural commodities will be to keep up with the demand for animal feed. As demand for meat increases, there is no doubt that more and more questions will arise about how much meat the world can afford to eat. The world food situation will depend on how much meat people want to eat, not on calorie count.

How much meat should we eat?…

The rest of the text for this topic and much more is in the book.

Copyright 2012 – The Happy Future Group Consulting Ltd.


Why we will change our eating habits, one way or the other

February 8, 2011

In the discussion about producing enough food for the 9 billion people the world will have by 2050, one of the sensitive issues, especially in the overfed world, is about what to eat and how much of it. There always is resistance to change, and changing eating habits may be even among the most difficult challenges we have. Eating habits are developed unconsciously since early childhood, and switching to conscious choices is not easy to achieve. It requires will power and self-discipline.

Most of the gloomy scenarios about the challenge of feeding the world are based on the assumption that the diet model would have to be the Western diet, and in particular the American diet. This is far from certain. Actually, do not expect this to be the case.

Changing eating habits will happen in two ways. One will be voluntary and the other will be a consequence of food prices.

There is a growing awareness of the health consequences due to overconsumption of food. All the stakeholders seem to blame each over for obesity, diabetes and other heart conditions, and try to convince the public that they are not the cause of the problem. Whose fault is it? Is it meat? Is it corn syrup? Is it fast food? Is it salt? Is it lifestyle? Is it the parents’ fault? Is it the schools with their vending machines offering snacks and soft drinks? We all have read such statements. Here is a scoop: overweight is caused by consuming more calories than are burnt through physical activity. Ailments are the results of rich and unbalanced diets. Eating (and drinking) too much, and too much of the wrong things is bad for you. There is a reason why gluttony is one of the seven deadly sins! Actually, our societies should have a close look at that list, because we might be in trouble.

In Western countries, we eat too much, and that should not be a surprise to anyone. Obesity and diabetes are becoming society problems in the USA, but other countries are following the same path. Europe and China have a rising percentage of obese people, especially young people. Even in Africa, there seems to be an increase of the number of overweight people. A recent study confirmed this (click here for the interactive chart). Awareness about health problems has already generated action. There are government campaigns. Food producers are reviewing their formulas and are working toward healthier products, in particular by lowering the content of salt and sugar of their foods. More and more consumers are also adjusting their eating habits, mostly by changing what they buy and where they buy it. The trend towards healthier and more natural food is growing and it will not stop. Only biotech companies seem to ignore this fact. This food trend is not just in Western countries but in China, too, the demand for natural and organic foods is increasing. After all, nobody really feels happy with being fat or unhealthy. If some people are taking action to improve their diets and its impact on the environment, this voluntary choice is still about a minority of the population, today. One of the reasons for this is that healthy diets seem more expensive than the junk fattening eating habits. I say seem, because those who can cook know that it is quite simple to make delicious balanced meal for less than the supersize combo deep fried so-called menu.

Money matters. That is a fact. This is why money is probably the best incentive for change. And the future will bring us plenty of incentive to change our diets. The current concerns about food prices, and the food riots of 2008, have created awareness about food supply. Although the price hike is more the result of investors, not necessarily speculators, looking for a safe haven for their US dollars through transactions in futures contract, the reality is that the commodity markets, even on paper, becomes the “official” market price. This enters the real economy and affects the price of food for households all over the world. The poorer countries are more sensitive to food price inflation, and this has the potential to cause very serious unrest.

Regardless of the current causes of food price increase, simple economics show that when demand increase, while supply has difficulties to keep up, prices increase. And this is exactly what will happen. In a previous article, I showed that the potential for meeting food demand, or I should say the demand for nutritional needs, of 9 billion was there. Quite easily. However, in this calculation, I indicated the road to success includes reducing food waste and a reduction of the quantity of meat in the diet. This means that we need to change our behaviour towards food.

If there is a sensitive topic about diet, this has to be meat. Opinions vary from one extreme to another. Some advocate a total rejection of meat and meat production, which would be the cause for most of hunger and environmental damage, even climate change. Others shout something that sounds like “don’t touch my meat!”, calling on some right that they might have to do as they please, or so they like to think. The truth, like most things in life, is in the middle. Meat is fine when consumed with moderation. Eating more than 100 kg per year will not make you healthier than if you eat only 30 kg. It might provide more pleasure for some, though. I should know. My father was a butcher and I grew up with lots of meat available. During the growth years as a teenager, I could gulp a pound of ground meat just like that. I eat a lot less nowadays. I choose quality before quantity.

The future evolution of the price of food is going to have several effects. The first one is the most direct. As food becomes more expensive, consumers look for the more affordable alternative first. If their budget is tight, they buy slightly smaller portions. People will slightly reduce their food intake. Those who were over consuming might actually benefit from a positive impact on their health. For those who already were struggling, this will be more difficult to deal with. From all the food sorts, animal protein will be the most affected by an increase of the price of food commodities. Already today, there are clear signs from the meat and poultry companies that the price of feed is seriously squeezing their margins. As usual, passing the price increase to consumers will take time, as retailers will resist. If the price of agricultural commodities is to stay high, consumers will inevitably have to accept price increases for food in general, and for meat and other animal products in particular. The price of meat is going to be affected by other factors than just feed prices. The need for more control on food safety issues, the stricter environmental regulations that will come for animal husbandry, on the land and in the sea, a change in animal husbandry practices, especially a lower use of antibiotics and farms with lower densities of animal will all contribute to an increase in costs. Energy will become more expensive, too. A whole system based on cheap commodities is about to change, simply because there will not be any cheap commodity anymore. These are all adjustments to rebalance our consumption behaviour from the unbridled overconsumption of the past decades, when consumers were not thinking about the consequences of their actions. The industry will figure out how to increase efficiency to contain some of the cost increases, but the change of farming practices will make meat significantly more expensive than it is today. The price of ad-lib cheap meat is ending. The future dynamics of food prices as presented here will be ongoing. A long as we will not have adjusted our diets to a new equilibrium, meat will keep increasing faster than other basic food staples, until meat consumption, and therefore meat production, will reset to different levels. Do not expect this to happen overnight. It will be a gradual process. There will not be any meat or fish riots. If food riots happen, they will be about the basic food staples, simply because the first ones to riot will be the poorer among us, and their diet is composed mostly from rice, wheat, corn, cassava or potatoes. Should the situation become dire, governments will intervene to ensure food for the poorest. Such price systems are already in place in many developing countries, and they are likely to be maintained, and even strengthened.

The same critical factors to keep food prices in check are very much the same as the ones that I presented in the previous article that I mentioned earlier: food waste reduction, moderate meat consumption per capita; and economic development, especially in Africa.

Copyright 2011 – The Happy Future Group Consulting Ltd.


Food, Inc. or just the description of America?

January 22, 2011

A couple of days ago, I watched the documentary Food, Inc. Although the underlying theme is that the four large US corporations that dominate food would try to keep the American consumers ignorant of their activities, I saw this documentary much more as a review of the US society over the past 60-70 years.

As usual with this kind of documentaries, there is a mix of commentaries with pictures without presenting anything specific about the relation between the text and the images. The chicken farmer from Pennsylvania is angry, but it is not clear exactly at what. She removes dead chickens, but we do not hear what the cause of death is. To me, with my experience in chicken production, it seems that her chicken house is in very poor shape, and I am not sure about her level of commitment and overall technical performance. The Tyson grower seems quite a bit happier than the lady chicken farmer who ends up being terminated by Perdue. Unfortunately, the crew cannot film inside his chicken house and we never hear to know exactly why, but the commentary tends to imply that Tyson wants to hide something. Unfortunately as well, no representative from the large food companies mentioned wished to be interviewed, and that creates the impression that they want to conceal something. The chapter about the staff policies of meat companies is quite interesting. If this seems a surprise for the journalists, it was not for me. In Europe, we knew 20 years ago how harsh contracts were for farmers and plant staff. This is the product of free job market mechanism with a slight reminder of a certain thinking about labour force in the old south. Certain things simply die hard. John Steibeck’s Grapes of Wrath had shown several decades ago how agricultural labor force could be exploited. The reminder that meat packing plant workers used to have decent wages is an indicator of two things. One is a reflection of the disappearance of the American middle class in the manufacturing sector, and the other is that meat plants would purely and simply suffer tremendous financial losses if they had to reset wages the way they used to be. There might be some concerns about their financial long-term sustainability. They are not ready to cope with production cost increases, and they can hardly reduce personnel costs much anymore.

The family of four that lives on a diet of fast food is also a typical example. They do not have time to cook, and that justifies eating only burgers with fries and pop. The fast food meal for four comes down to almost US$ 3.00 per person. You can make a healthy meal for that money. The luxury meal that I prepared for my spouse on Christmas Eve was hardly more expensive than this. For that family, like for many American households, money is tight and they need to do the best out of a limited budget. The filmed visit to the supermarket tends to focus too much on the broccoli at US$1.29/lb. That price would be too high. That is possible, but there is more than broccoli to choose from. Potatoes, rice, carrots, beans, cabbage or onions are much cheaper than broccoli, and by combining them, it is possible to prepare quickly a healthy nutritious diet, including some meat. The mom works long hours and has no time to prepare diner. I accept that, but the teenage girl could do that to help her mother. My parents also worked long hours, and dinner was not before 9 pm. This is why I learned how to cook. When there is a will, there is a way. Then, we learn that the parents suffer of diabetes. This is not really a surprise considering such a crazy diet, and this problem is spreading to more and more American families. When you add the medication costs to the price of the fast food meals, preparing a healthy meal as I described above is really the best deal in all respects. In the land of individualism, where people are expected to take charge of their destinies, it is a bit strong to reduce the discussion to the agribusiness having “altered” foods, thus presenting this family as victims. I disagree with this. They made a choice, which may be the most convenient, but not the wisest. The alternative certainly requires some effort, and that may be difficult to handle. The blaming game, which is even more popular than baseball in the US is not leading anywhere. Most of all, why do they have to order pop with their burgers? They can cut their calorie count by filling bottles with tap water. Making sandwiches is easy and quick, too. This is a lot cheaper and a lot healthier, and it does not require much work at all. Last year, I had written an article in which I was showing the similarities of human behaviour and how we produce food. Food, Inc. makes this comparison quite vivid.

Then, the documentary shifts to food safety and presents some footage of meat processing plants. That is certainly a very important item in the US, where the number of recalls for bacterial contamination is simply astronomical. I found this part very interesting because in my many years in the meat, poultry and fish businesses, I have spent several years in close contact and even supervised plant operations as well. What this movie from 2009 showed gave me the same impression that I got the first time I came to the US in 1998, and toured what was by then one of the largest chicken processing plants in the country, in Alabama. Americans certainly love everything big, just like the calorie count of their meals. They love huge complicated plants where the molecules (chlorine by then in that particular chicken plant that smelled more like a swimming pool than anything else, and ammonia in the case of the plant featured in the movie) are supposed to do the work. Unfortunately, with such layouts, visual control is rather difficult as it appears in the documentary. When a plant is such a thick forest of pipes, chains and rotating parts, not only is it very difficult to see what is happening, but it is the best amusement park you can imagine for bacteria. They have so many niches where they can settle and grow in peace. The more complex the layout gets, the more difficult it is to sanitize the plant. The hamburger factory has installed cameras and management claims that this helps them to control what is going on in the several plants they own over the country. My view on meat processing plant supervision is that it has to be done in an ongoing manner, online, with the supervisor being on the plant floor, not sitting in his office. I doubt that cameras will eliminate food contamination issues. Moreover, online quality control requires motivated staff, which also requires proper wages and benefits. Food safety is less a technology matter than it is a matter of management and motivation of staff. Another important element that I noticed is that the boss of the hamburger plant describes himself as a mechanic. I had expected him to see himself as a food producer who wants most of all to offer safe food to consumers. I did not hear that statement. I also would have liked to see him eat some of his ammonia-marinated burgers. I am a meat lover, but I really do not need that on my plate. When I think that, in The Netherlands, we were not even allowed to use chlorine in the slaughterhouse water… We had to work on eliminating the causes of the problem instead of applying never-ending layers of technology band-aid. And we did significantly reduce the causes!

Then, the documentary presents the “natural farmer”, Joel Salatin of Polyface Farms. He certainly is very successful, but by his own admission, he has no plans is growing much more than he currently is. If there is more demand than he can supply, that will be the customers’ problem. By looking at his chicken slaughter installation and system, I doubt that he can supply much volume, but we never got to hear how big his business is. He is a niche producer, and his customers appreciate him, since one of them claims it to be worth driving 5 hours to get to his shop. That is 10 hours drive including the way back. One can wonder if the footprint of that food is all that great when it comes into the consumer’s home. How many of such farmers are necessary to meet consumer demand? And what is the price of the food they sell? Could this feed the family of four on a very tight budget that eats from the fast food drive-through? The movie never answers these questions.

The story of Stonyfield Farm yogurt was cause for more optimism. They offer the organic alternative. According to the CEO of the company, they are the third yogurt brand in the US and the most profitable one. This is a success story. They sell to Wal-Mart and fit in the retailer strategy towards more sustainable food. It also shows that organic has long passed the stage of hippie small-scale and that is a rational modern business, which the industrial agribusiness tends to refuse to see. The one thing that was missing about this story, though, was how the farmers who supply the milk perform financially.

Probably, the scariest part of Food, Inc. was the one about the lobbying and the politics. In the material country, this is no surprise. This does not make it any less scary, though. Since winning elections is about how much money candidates have in their “war chests”, the actual vote ballot is a banknote. The ones with the most bank notes have the most power. Reality is less idealistic than the idea of a “government of the people, by the people and for the people”. The system seems to have evolved to somehow reminiscent of an aristocracy structure. The US is a republic, but maybe a little less of a democracy after all. The money power is not only political, but in society where suing is a lifestyle, justice tends to favour the richer ones, simply because the poor cannot offer the fight very long. This power of money through lobby and lawmaking might not be as strong as one think, though, Last year, an oil lobby backed-Republican Senator of Arizona wanted to pass a bill to kill solar energy in the state. A Chinese company, Suntech Power, had plans to open a solar panel factory in Arizona (a Chinese company opening a manufacturing facility in the US. That is interesting is it not?) If this bill had passed, they would have lost the business. What did they do? They threatened to stop the project and kill the jobs. Do you know what happened? The Republican Senator did not proceed with his plans. Maybe China will help eliminate the negative effects of lobbies. Nonetheless, for now, lobbies are still active and powerful.

Then the conclusion of the documentary comes in a rush. Buy local, from the farmer’s markets. This is nice, but millions of households cannot afford that food. Moreover, production is not even remotely close to meeting the national food demand. You can vote three times a day to choose the food system. Americans voted a long time ago to have instant gratification, and they chose for the consumption society. Never things would have evolved to what they are if consumers had rejected it from the start. Nobody forced Americans to drive to a fast food restaurant and stay seated inside their cars to eat. Nobody forces them to drink pop, eat potato chips or candy bars, to think that the right size for a steak is 9 oz., to pour ketchup on everything, just as they did not have to spend more then they earned and dig themselves in huge debt.  I do not consume any of those items, yet my self-esteem is good, though.Freedom requires a bit of will power. Freedom of choice does not imply that one should not resist temptation. The American consumer’s behaviour has been a boon for the industry. Nothing is better than consumers who just consume without asking questions. Fortunately, this is now changing gradually. Americans realize that consumer goods producers have looked at them in a similar way as the livestock in feedlots, passive and submissive. Unlike what the makers of Food Inc. may say, all Americans are responsible of the society they have. The industry is, of course. But consumers are just as much. In order to change, consumers are going to realize what role they have played in the consumption society. They can vote, but the US is one of the countries with the lowest turnout at elections. The ones who choose not to express themselves just miss an opportunity to change things. Most Americans have lost faith in their politicians. Yet, there is a democratic force that can, and in my opinion, will restore true democracy. This force is the food retail, with Wal-Mart as the leader. They do not wait for politicians to make laws when it comes about food should be produced. They do not care much about the games played in Washington, DC. They just listen to the people and they offer the workable solutions to meet these wishes. Unlike politicians, they do not set their objectives for the next four years. Wal-Mart has already done more about sustainability of food supply than lawmakers have. Earlier, they had decided not to sell milk from cows injected with growth hormone. Yesterday, they announced their decision to make healthier food affordable to their customers. They represent such a purchasing power that they can force their suppliers to change their practices and their purchasing strategies, enforcing the change all the way back in the supply chain to the seed producers. Be assured that the food industry will do what the retail tells it to do, because without the retail, they are out of business. Their purchasing power is so much larger than the one of the people buying on farmers markets. People should cast their vote and give power of attorney to the retailers. Really, the food retail is just one step away of enforcing change on antibiotics, hormones, animal welfare and GMOs; even if the politicians have not made up their minds. Just compare the size, financially and in jobs, of Wal-Mart and Monsanto. Who is the true giant?

Altogether, I found that the movie was raising good questions, but it was not giving much hope for a quick change, either. This is a weakness, just as the lack of specifics of the pictures. They need to make a sequel in which they will show how things can change for the best, make food affordable and farming sustainable, and how they see the US making the transition. I missed that. The documentary is not as specific to the food industry as it seems. A similar movie with a similar commentary could be made on about every industrial sector of the US, from energy to electronics, telecommunications, the car industry, the banks or the pharmaceutical industry.

Copyright 2011 – The Happy Future Group Consulting Ltd.


The locavore’s dilemma

December 1, 2010

There is a growing trend, or at least a growing noise in favour of eating locally produced food. The “locavores” as they are called, claim that 100-mile food is the way to a more sustainable agriculture and consumption. Is this approach realistic and could it be the model for the future?

This movement is rather popular here in Vancouver, British Columbia. The laid-back residents who support the local food paradigm certainly love their cup of coffee and their beer. Wait a minute! There is no coffee plantation anywhere around here. There is not much barley produced around Vancouver, either. Life should be possible without these two beverages, should not it? The disappearance of coffee –and tea- from our households will make the lack of sugar beets less painful. This is good because sugar beets are not produced in the region. At least, there is no shortage of water.

But this is not all. There is no cocoa plantation around here, and believe me, there are many people who are addicted to chocolate. British Columbia does not produce citrus or other warm climate fruit. If we are to become locavores, we must say goodbye to orange juice, to lemons, to bananas. Even the so popular sushi must disappear because of the lack of rice. There are no rice fields in this area, and neither are there wheat fields. The Asian population certainly would have a hard time eliminating rice from their diet. The lack of wheat means no flour; and no flour means no bread, no pastries, and no cookies. The carbohydrate supply is going to be tough. If we must consume local, our lifestyle is going to change dramatically. Potatoes and cabbage is the way of the future. But before going all local food, the local locavores must realize that British Columbia produces only 48% of all the food its inhabitants consume. One out of two locavores would have to starve. Going exclusively local would also affect deeply the source of animal protein. Most of the animal feed is made of ingredients that come for much farther than 100 miles. The chickens and eggs would become less available. Farmed salmon, BC’s largest agricultural export could not use the type of feed they currently use, as fishmeal and fish oil come from Peru and vegetal oil comes from farms located far away. There would go many jobs with very little alternatives. If we look beyond food, other agricultural products such as cotton and wool would not be an option anymore. Cars would disappear, because the main component of tires, rubber, is not produced under this climate. The 100-mile rule will solve traffic problems. If local consumption is the rule for food, should not it be the rule for everything as well? China would probably have different views about this. Not only would their manufacturing collapse, but also if they have to produce food within 100 miles of the consumer, they would have to give up importing agricultural commodities. For them, a true locavore system would mean famine. The same would be true here in British Columbia. When people are hungry, they are not so picky about the distance from the producing farm.

The problem with concepts such as local consumption is that the basic idea has some value, but the idea quickly evolves into an ideology, and ideologies tend to make their followers stop thinking pragmatically. Today, the idea of eating locally in a place like Vancouver is possible because supply easily meets demand, thanks to the 3,000-mile foods. This is ironical. If the distance to market has to be within 100 miles, farmers in low population density areas, such as many regions of North America, South America and Central Europe, would have a different type of problem. They would produce an abundance of food, but because there are not enough people to consume it locally, the law of supply and demand tells us that the price of agricultural commodities would plummet, food would stay in storage and farmers would go out of business, while people in China, and in British Columbia, would suffer hunger. Clearly, the 100-mile diet needs some amendments.

Intuitively, it sounds logical that locally produced food has a lower carbon footprint than food that comes from 2,000 to 10,000 miles away. However, this is only partly true. The mean of transportation affects the carbon footprint. The environmental impact of transport is much higher for road transport than it is for rail transport, which is also higher than water transport. The type of transport also depends on the type of commodity brought to market. Perishables need to reach consumers as quickly as possible for shelf life reasons, while dry goods, such as for instance grains and oilseeds do not face the same kind of deadline. The quality of the logistics is also crucial to reduce the carbon footprint. A fully loaded truck is much more efficient than a local truck dropping small quantities in many places, thus driving around most of the time with empty space in the trailer.

The emphasis should not be so much on local as it should be about the search for efficient and low environmental impact. More than the distance from the farm to the consumer, it would be more useful to provide consumers with information about the actual carbon footprint of the products they buy. They would have the possibility to make the right choices. Retailers, too, would be able to make decisions about their sourcing strategies. Clean products and clean producers need to be rewarded for doing a good job. Here in Vancouver, local food products are more expensive than similar offerings from California, Mexico, Ecuador or Chile. How do you convince families with a tight budget to spend more for local products that look pretty much the same? This problem needs to be addressed. Currently, farmers markets are much about marketing. They sell the experience as much as their production methods. Only a wealthy minority can afford to buy on these markets. The prices are not based on production costs plus farmers income. They are as high as possible, because the farmers can ask these prices. The wealthy city dwellers are willing to pay a substantial premium above what they can buy from the local supermarket. In this relation farmer-consumer, the price bargaining does not take place. If these farmers were to try to sell to a grocery retail chain, they would never get the prices they get from the consumers who will not haggle about the price. This is why more farmers try to sell directly to consumers: they make more money that way. However, this might change in the future. A number of retailers are working towards offering “farmers market” products into their store. This already makes market farmers nervous.

Is local production for local markets the way of the future? My answer is that it partly will be and it partly will not. I do expect a shift of the location of production for perishables. Consumer habits will change, too. In the West, consumers have been spoiled. They can eat anything from anywhere at any time of the year. This luxury probably will not be affordable for long anymore. The superfluous will naturally be eliminated.

As the economics of energy, and therefore of food, will change, producers will increasingly locate their operations closer to cities; and even inside cities. Urban farming is a growing activity. Although it started mostly in poor neighbourhoods as a way of having a small patch of land for personal consumption, more sophisticated and efficient systems are being developed. My expectation is that production, and consumption, of vegetables and fragile fruit (for instance strawberries) will gradually become more integrated in the urban landscape than they are now. I also think that we will see animal productions, such as fresh dairy, poultry meat and eggs relocate closer to consumer markets. An interesting development is aquaponics, the combination of greenhouse produce with fish production in tanks. The production of non-perishables will not relocate. It does not have to. What will probably change is the transportation infrastructure in many areas where these commodities are produced.  This is good news for coffee drinkers and chocolate addicts. After all, transport of commodities over long distance is not just the result of cheap oil. The Silk Road and the spice trade by the Dutch took place before mankind even knew about oil. Trade has always been a force of progress for humanity. It helps an increasing number of people to have access to goods that make their lives better. The rules of trade may not always be fair, but like all human activities, it is a work in progress. Limiting our food supply to 100 miles would be a regression. Subsistence agriculture has not demonstrated that it could feed the world. Most of the people suffering of hunger live in subsistence agriculture areas.

(This topic is one of the many that are presented and discussed in my second book, We Will reap What We Sow)

Copyright 2010 – The Happy Future Group Consulting Ltd.


Follow the water!

November 15, 2010

Without water, there is no agriculture, there is no food, and there is no life. It is obvious, and yet the water question is too often neglected. The quantity and the quality of water available are absolutely crucial for the future production of food. It will influence where and what type of food we can produce. It will define food security and world politics. Since 70% of fresh water use is for agricultural purposes, it is clear that water will soon be power.

The need to preserve water and use it efficiently is going to be one of the main challenges to overcome for the decades to come. This will stimulate innovation and the development of new technologies and new techniques.

Field sensors that measure the level of humidity in the air and in the soil connected with “crop per drop” irrigation systems can allow the distribution of the right amount of water at the right time, thus saving waste through evaporation and drainage. The selection of plant varieties will focus more and more on water efficiency. Drought-resistant plants that can thrive in arid conditions are in the works. For instance, a trial on wheat in Australia has delivered promising results, as the yield was 25% higher than non drought-resistant varieties. Researchers, through hybridization and genetic engineering, are working to develop varieties that can use less water and produce similar yields as per today. Although high tech may bring solutions, other methods deliver good results, too. Agro forestry, the production of crops under a cover of trees seems to help farmers achieve satisfying results in the Sahel region. The foliage of the trees helps reduce evaporation from the soil. Combined with proper techniques to apply organic matter and fertilizing elements, farmers can create better conditions for plants to grow.

Another field of research is the development of alternatives to traditional desalination, which is very demanding in energy. Transforming seawater into fresh water for the production of food is not simple, and it is expensive. The technology is here.  Israel has used it for decades. Currently in the United Arab Emirates, a project of floating islands covered with solar panels to provide the energy to desalinate seawater is being developed. This system has the advantage to produce both fresh water, which is precious in desert countries and clean energy at the same time. A project, called The Sahara Forest Project aiming at producing food in the desert is currently in the works. It combines solar energy, modern biomass production and a type of greenhouse, built by the Seawater Greenhouse company, that helps the humidity produce by the plants to condensate.

In many countries, the problem is not so much physical scarcity of water as it is a lack of proper infrastructure to collect, pump and irrigate efficiently. The population density contributes to the problem, because the more people, the less for each of them. In many countries, for instance in India, the equipment is old, inadequate and poorly maintained, because of a lack of finance of governments and farmers. The result is a waste of water resources, and a suboptimal production. Another area that has potential for improvement is the collection and the storage of rainwater. A large quantity of water runs off and is not available for food production because there are not enough containers, if any. Developing and improving storage infrastructure will definitely help farmers to produce more food.

If the availability of water is important, so is its quality. In China, the situation is a lack of both, because of the heavy pollution of many streams and rivers. In many areas, the water is there, but it cannot be used, as it is fit neither for human consumption nor for agricultural production.

The respective situation of countries about water availability will determine their ability to feed their own people or not. In Arab countries, irrigation has led to a high level of salinity and it has depleted drinking water reserves. Saudi Arabia, for instance, has now abandoned its policy of increasing food production to become be self-sufficient. Saudis are actively purchasing land in African and Asian countries to meet their food needs. China and India, that represent about 40% of the world population, are following a similar approach and invest heavily to help develop land in Africa. In countries where drinking water is scarce, there are discussions about the need of not exporting, as export of food is actually water export as well.

If a number of countries face a water shortage, others have a different situation. This is the case for large areas of North America and South America. Especially Brazil disposes of large water reserves. Together with a favourable climate, Brazil has many advantages to produce food, especially animal protein. According to Osler Desouzart of OD Consulting, the production of 1 kg of beef requires 16,000 litres of water, while it takes 6,000 litres for 1 kg of pork and only 2,800 litres for a kg of chicken. This shows why Brazil has been gaining market share in beef and poultry. It indicates that intensive animal production will be more challenging in countries where water is not as abundant. This also tends to show that poultry will be the most successful type of land animal production. The US and Canada have large water reserves, although there are also clear regional differences. The South West of the US becoming increasingly arid, and one can wonder if California, that currently produces most of the fruit and vegetables for the North American continent, will be able to keep its production levels. It is likely that fresh produce will be gradually produced closer, even inside, the large urban centers in the northeast as well. Considering the emphasis on water preservation, it is also interesting to note that before the housing crisis in the US, the most irrigated type of plant production were lawns, using three times as much water as US corn. Food recalls are another source of water waste, especially meat and eggs recalls. From the numbers presented above, it is easy to see how much water is lost when dozens of tons of animal products must be destroyed, not to mention the huge food waste that this represents.

When it comes to food and water, aquaculture offers interesting possibilities for the efficient production of protein. Fish produced in the ocean do not consume freshwater. This saves large amounts that can be used for other purposes. However, one of the challenges for the fast-growing aquaculture industry will be to be able to source feed ingredients that do not directly compete with other farm animals and direct human consumption. Land-based aquaculture is developing the very interesting concept of aquaponics, which is a combination of fish production in tanks combined with the production of vegetables indoors. The system recycles the water used for the fish tank, and helps fertilize the plants with fish waste. This is a very water–efficient system that can help produce large amounts of food on a small area, making it fit for urban farming units.

Copyright 2010 – The Happy Future Group Consulting Ltd.


The quiet revolution of food retailers

October 28, 2010

While many debates continue in the political and “parapolitical” world about many aspects of food production systems and the impact of human activity on the environment, retailers lead a quiet revolution. Without making the headlines, they gradually change the way their suppliers will do business in the years to come.

Such an evolution is certainly welcome, especially in a time where important decisions need to be made. Political leaders seem unable to reach any agreement on environmental issues, as the world could see at the late Climate Summit of Copenhagen. In the food sector, there are many discussions going on about sustainability and genetic engineering, to name the two hottest items, but the political class does not seem to generate clear and concrete action plans.

Just like what happened in the 1990s about food safety in Europe, retailers are taking the initiative to create momentum on the current issues. The problems that plagued the food industry in Europe, such as salmonella in poultry, the mad cow disease, or the dioxin in Belgian fat for chicken feed showed a number of weaknesses that needed to be addressed. In the case of BSE, UK retailers did not wait for British or European legislation to demand meat and bone meal-free feed for farm animals. As I was working for a company supplying the UK market with chicken meat, I can testify that these were dramatic times. Tough decisions had to be made on a very short notice that had serious financial consequences. By then, a couple of reasons made the retailers took the lead. First, the inability of the government to prevent and tackle the issues was creating a bit of a vacuum on leadership. Consumer confidence in their institutions was fading, and retailers were the only ones, true or not, perceived to take the proper actions to protect the public. The second reason was the fact that many retailers had their own private labels. In this case, the problem was not the supplier’s problem anymore because the supermarket chain could have risked serious PR damage if a food safety issues would have been associated with their brand.

This time, retailers are again in the position where they can present themselves as the consumers’ champions. Legislation is slow to move and make significant decisions. The involvement of interest groups adds to the infighting and delays decision-making.

To prepare for the future, they already have come out with plans and communication on how and where they want the food they sell to be produced, and they try to offer a choice to consumers. By doing so, the most active among them are setting new standards, and forcing the whole production and supply chain to think about the things to come.

In previous blog posts, I have mentioned some of such initiatives, and in Future Harvests, I described the increasing leadership role of food retail in agricultural practices.

In particular, I mentioned the carbon footprint labelling on dairy products by Tesco, Wal-Mart’s Sustainability Index questionnaire to suppliers, and the seafood sustainability programs of many retailers. Marks & Spencer started their Plan A in 2007 with the objective of making their business more sustainable. To achieve this, they are involving their suppliers and the farmers producing for them to carry out the changes that M&S finds necessary for a better future.

More recently, new initiatives indicate that retailers are pursuing further on such initiatives. Wal-Mart came last week with their plan for sustainable agriculture. In the UK, Sainsbury let know last week that they were committing GBP40 million to invest in farming. Earlier this week, Carrefour unveiled their “Reared without GMO” program. In their stores in France, they will sell 300 food items labelled as being GMO-free, to offer consumer a choice based on transparent information. If Carrefour ventures into this, one can be sure that they do so because they already know that this will be good for their business. By gaining market share, it is very likely that their competitors will soon react by issuing similar programs. The EU Commission may be struggling to figure out how to deal with GMOs, but Carrefour says “Let the consumers tell us!” Vox populi, vox dei!

Of course, such initiatives do not please everyone. Today, I could read in a blog for a US magazine backed by the meat industry some interesting reactions about Carrefour’s new plan. Some readers were bringing up the typical arguments. Meat would be so expensive in Europe. Well, meat is quite affordable in France, even without GMOs, so think again! The other argument was about freedom of choice: people should be able to eat what they want. By labelling its food item, Carrefour does just that. French consumers are free to buy at Carrefour or somewhere else, and they have the right to choose what label they prefer. The freedom of choice is ironic coming from the US meat lobby, since American consumers do not have that freedom. Reared with GMOs is pretty much the only choice in the US. For now, that is. However, it is interesting to see on Carrefour’s press release that the pictures of fish, chicken and pork chops are exactly the same, regardless of whether they would be grown with or without GMOs.

In the 1990s, British and European consumers, and retailers, were challenging food industry practices because they were worried about their health and about the lack of transparency about food. Nowadays, in the USA, consumers are increasingly suspicious of their agribusiness, because they are worried about their health and the lack of transparency of the industry. Beef recalls because of E. coli, egg recalls because  of salmonella, spinach contaminated with manure are in the news on a (too) regular basis. They are also increasingly aware, and suspicious, of the relations between interest groups and their government agencies, and how this influences decisions on what they eat.

Retailers are now saying that they are not waiting for politicians to make decisions. They have defined their vision, they know what they want, and they are passing the message on to the suppliers. What would happen in agribusiness USA if Wal-Mart took a similar approach as Carrefour?

Copyright 2010 – The Happy Future Group Consulting Ltd.