Changing tastes are driving sustainable innovation in food and drink manufacturing. By Colin Elkins
Today’s consumers are increasingly mindful about sustainability. When it comes to their food and drink, consumers increasingly want to know about how ethically ingredients are sourced, and how sustainably they are grown. And it’s not just the food itself, they also care about how it appears on the shelf, what happens to the packaging it comes in; what ends up in landfill? What can be recycled?
According to market research from Neilson, nearly three-quarters of global consumers say they would ‘definitely’ or ‘probably’ change their consumption habits to reduce their impact on the environment. But, 88 per cent of UK and US consumers want brands to help them live sustainably. So, how are brands responding to this new appetite for sustainability?
The consumer demand for sustainable, ethical products is forcing manufacturers to adapt. Some are rolling out comprehensive initiatives in areas such as responsible packaging, clean labelling and supply chain visibility. Some are creating limited production runs of more sustainable versions of their flagship brands that allow them to be seen to be taking action, but without having to commit to wholesale change overnight. Industry has recognised the challenge. Currently, many of the initiatives in the market seem designed to ensure the companies that dominate the industry today continue to do so. But, if large companies continue to only pay lip service to the issues consumers care about, it may be more likely that new challengers will steal market share, unencumbered by legacy structures.
A growing opportunity
There’s a big opportunity for these challenger brands that are taking action and using new and emerging technology to cater to today’s conscious consumer.
Grocery shelves today are dominated by an oligopoly of global Consumer Packaged Goods (CPG) companies – such as Danone, Unilever and Johnson & Johnson – but their products often perform poorly when it comes to sustainability. These long-familiar products which benefit from decades and billions of ad spending must now 7be re-engineered to appeal to today’s mindful shoppers. This presents a huge opportunity for challenger businesses.
Legacy and lethargy
Antiquated technology presents a major barrier to incumbent companies’ ability to meet the demands of the conscious consumer. The software many CPG giants use simply isn’t fit for purpose. The systems that underpin their finances is disconnected from the systems used to source raw materials, formulate recipes and manufacture products. Information on where raw materials came from, what batch of product they went into, and the history of the product, are kept in different systems, from Excel spreadsheets to Manufacturing Execution Systems (MES).
This disconnect means executives cannot easily see how reformulating a product will impact revenue, hindering their ability to respond to the issues their customers are passionate about.
Legacy technology is making this CPG oligarchy more vulnerable than ever to more agile and aggressive challenger companies.
Technology for transparency
To be best placed to challenge the CPG giants, businesses need nimbler and more modern enterprise software systems. Integrated from the outset, these companies can easily give consumers the transparency they require.
The onus to deploy and better use this kind of technology is accelerating. Not only to keep customers buying the product, but to comply with increasing regulation on specific ingredients, such as palm oil. Global standards created by the Roundtable on Sustainable Palm Oil (RPSO) are now being used widely by retailers, requiring certain percentages of RPSO-certified palm oil in products they place on shelves, failure to comply means being removed from range reviews and possible delisting. Organisations can respond by leveraging powerful supply chain and batch traceability tools to provide thorough, authoritative documentation of the origins of each ingredient in each batch shipped allowing the mass balance of the ingredients used.
Dietary supplement company, Gaia Herbs has taken this further still and provides customers with a ‘MeetYourHerbs®’ web portal. This provides visibility into the supply chain and product origins for the company’s line of nutraceuticals and nutritional supplements. From grower to manufacturing batch to machine operator, consumers can see where their specific batch of product is from and who touched it along the way.
This technology is hugely powerful and will have a marked effect on what are perceived as the leading brands of tomorrow. Companies are going to have to use technology to pull their customers closer, not the opposite.
Feeding the consumer
Much like the banking industry, where traditional incumbents are grappling with how to compete with new fintech challengers, major CPG firms are going to have to wake up to the fact that their current systems are unable to cope with what the modern market requires.
Ambitious new challengers with more flexible and agile processes are better-positioned to deliver to socially-aware and health-conscious consumers. In a world moving towards a more sustainable future, those who don’t embrace the necessary technologies now risk getting left behind.
Colin Elkins is Global Industry Director, Food and Beverage, at IFS. IFS develops and delivers enterprise software for customers around the world who manufacture and distribute goods, build and maintain assets, and manage service-focused operations. The industry expertise of its people and solutions, together with a commitment to delivering value to every one of its customers, has made IFS a recognised leader and the most recommended supplier in the sector.