Commodification of unique claims it’s a vicious cycle… how do we stay ahead?
The EU has introduced the Farm to Fork Strategy which will take effect in the coming year. It will require that food both produced and imported have an environmental footprint analysis.
Environmental claims were considered quite “niche” not even 18 months ago (a pre covid time if you can remember back that far).
We now have pretty good certainty that something that was “premium” before has now become commodity, due to it being a requirement for the mass market in the EU. So, we as primary processors and producers need to be thinking about the next premium product.
We also know most certainly that this increase in requirements, new certification schemes and programs will only continue to increase. These can be costly endeavors to integrate into high volume production processes and can rapidly cause unbearable/costly complexity in workflow.
The question is how do we prepare for this inevitability of increasing compliance and premium market product requirements… without eroding our margins or investing significant capital each time it’s necessary to do so?
We need something that will allow us to add programs and requirements at marginal cost and not cause complexity, be able to be flexible enough to grow as these requirements grow. We need to build flexibility into your processes and workflows.
Please inquire about our Virtual Product PlatformTM that is our solution to this increasing complexity for large volume producers, which enables the addition of new products, new evidence, and new audit programs to ensure the message gets to the end consumer more effectively.
I had the privilege of living through a full “product life cycle” of the organic label in my lifetime. I’ve seen it go from very niche to basically standard operating procedure. I’ve seen the effects on the rural communities that grew it, that took a punt on it, and the ones that didn’t initially but adopted later. I’ve also seen the effect of regulating the label claims, I’ve seen the effect of the copycats, I’ve see new claims without verification emerge to reach the same market niche, and largely achieved the same margins without the cost of auditing.
These claims were things like “naturally raised”, “free from”, GMO free etc. I’ve seen the benefit of a certified, 3rd party audited claim for access to overseas markets, and I’ve seen the uselessness of that in a more domestic, shorter supply chain market.
So for a long time I’ve said that this cycle will repeat itself, and due to the pace of innovation and the information age we live in, this cycle will get faster and faster. Unfortunately, agriculture (when referencing natural production systems) is a reasonably slow photosynthesis-based process and doesn’t have the ability to adapt this fast. This doesn’t even take into account the practical aspects of investment and change management in the rural sector, which has other social factors at play, such as intergenerational business leaders/mindsets, the actual land use change, the change of expertise (eg/ from animals to plants or vice versa), and the infrastructure investment, which then leads to financing and lending.
So, I’m sure the question on all our minds is,
Is it REALLY changing that fast?
How do we tell our story better?
Where will this end?
How do we keep up?
Is it really changing that fast?
Well, as mentioned in the opening line of this article, a few things happened over the last few months that evidence the faster pace of the cycle, and the rate of what was once unique becoming the ticket to the game, or “commodified”.
Where unique carbon neutral claims would have been firmly in the “novel” food product category just 1 year ago. The Farm to Fork Policy of the EU, which will require all food (including imported food) to have an environmental footprint analysis done, through regulation has effectively made what was once a niche claim into a commodity market.
This is happening at faster and faster intervals. It took 20 years for the Organic to slide down into a commodities market (some would argue it still isn’t, but it is no longer getting the premiums it once was). It won’t take 20 years for environmental claims verification to become commodity – it has already in the short period of less than 18 months.
*For those interested here is a bit of a critique of the EU Farm to Fork and Biodiversity policy .
**At the end of this article are a few quotes and other links that show the prevalence of this thinking through the fashion industry, the EU, the UK etc.
What’s making this claims space more challenging?
If we were just dealing with other natural production systems, it might be a different story, but we’re also dealing with increasing options for protein that have entirely different cost structures, business models and production drivers and value propositions.
Alternatives– Where will these food alternatives sit in the market? How will the consumer purchase them? Will they feed the affluent or will they feed the lower socio-economic purchasers of food and replace the commodities market completely? Their cost of production is rapidly decreasing, and it looks like they will soon be able to produce a “clean” gram of protein cheaper and with less impact on the environment than the natural production systems can.
What is the impact on the consumer/marketplace which will have increasing claims to attend to? Is it lab grown meat, is it plant protein, is it just meat, is it from a paddock, is it GE meat or is it GMO fed meat or is it plant based meat alternative, is it genetically meat but grown in a lab? The landscape of the market is drastically changing and new claims, new products are coming faster and faster.
My question to natural production system companies, is do you have a strong strategy for navigating this and have you built flexibility and adaptability into your processes?
We saw this first happen with Genetically modified products, the debate about whether genetically modified products should be required to state that they are from genetically modified seed, or whether it is up to the naturally produced products to then make claims that they are NOT genetically modified.
Where will it end up?
Nobody can know for sure, and ultimately, we need to learn to adapt faster to the environment that is rapidly changing and we need to understand our end consumer better. We will need to be coming up with new value propositions
Either way a few things are for sure
- Evidence of production methods will be important
- Differentiation between claims as the marketplace gets more complex will become increasingly important
- Evidence and ability to accurately record calculate and report about environmental footprint both as we understand science now, but also as science discovers more, the ability to include those new calculations in as the emerge.
- Channels to market will be important – direct access to the space in an end consumers mind will be priceless real estate. (Compounded by the fact that the competition of artisan and direct to consumer is becoming less and less of a cost barrier for smaller production companies, this is becoming a real threat to our large exporters for the real estate in the end consumers mind).
How do we keep up?
Singularity U and well… history, informs us about the trend of the number of SKU’s in the marketplace. It has been on a steadily upward trend since the dawn of time of clay pots in marketplaces in town squares. This comes from the book History of Money (worth a read).
This fact is also reflected in the fact that in the last 7 years we’ve seen 50% of all the sku’s of all time enter the marketplace (check out the link for our research on how consumers play a role in sustainable value chains)
Just like in agriculture if it’s not growing its dying. If we don’t take this opportunity to lead, to lead in product creation, new value creation and own some segment of the market in our end consumers’ minds, we will fail to keep up. We are asking the wrong question if we’re asking how do we keep up, a better question would be how do we lead. It takes the same amount of effort, just changes the direction.
We need to be bold, to be brave and to lead.
If you’ve ever had to kick a conversion in rugby, you’ll know that to be successful, they say you must aim beyond the posts, to kick through the posts. It’s the same as tackling, tackle through the person and that’s where your power comes from.
This is the time for us to be kicking goals, but we need to aim through the posts, we need to aim to the furthest part of the stadium (and maybe just for kicks, let’s make it a North American or European sized football stadium)
Links and Other Signals
- "Requirements for greater transparency and more standardised reporting are on the horizon. The EU, UK and US are all planning to implement mandatory requirements in this area, with companies listed on the London Stock Exchange expected to disclose climate risks as part of financial reports by 2022."
- "In March this year, members of the European Parliament voted by a landslide to press ahead with proposed legislation that would make companies more accountable for ensuring environmental and social standards are upheld across their supply chains."
- "The UK is drafting new guidance on how businesses can comply with consumer protection laws when marketing products as environmentally friendly. And in the US, a group of fashion brands and sustainable fashion advocates has written to the Federal Trade Commission asking it to review its guidance on green marketing.”
- Economic Commission for Europe: Call to Action for Traceability, Transparency, Sustainability and Circularity of Value Chains in the Garment and Footwear Sector
- "Development and application of policies, norms and standards that support traceability and transparency along the entire value chain (b) Implementation of business management systems or instruments for traceability and transparency.”
- "The Policy Hub has identified two key ingredients for a legislative framework that will provide better information for consumers:
- 1. A common method - the PEFCR for Apparel & Footwear - and a shared database are needed to calculate the sustainability performance of a product. To ensure that a product’s sustainability information is accurate, trustworthy, comparable, and reliable.
- 2. Clear legislation with a minimum set of common standards on consumer-facing communications are needed to empower consumers to make better purchasing decisions and to play their role in a circular economy.”
- "Brands now have a so-called bedding-in period until 2022, upon which time the CMA will carry out a full review of misleading claims made both on and offline. While any products and services carrying green claims will be affected, the CMA is to prioritise the industries which consumers are most concerned about, and the fashion and textiles industry sits at the top of the list.”
- UK – Greenwashing policing