Blockchain: The Trigger for Disruption in the Food Value Chain

Companies that want to remain successful in the future food value chain should start to explore options for participating in blockchain initiatives to help them lower costs, increase efficiencies, and explore opportunities for creating new value.

Advantages of blockchain

Once implemented, the blockchain can be used to reduce costs and/or increase the value of end products or raw materials by using the information that accompanies products. There are opportunities for increasing the added value of raw materials, for example, by meeting specific wishes of consumers, related to production method (e.g. fair trade), origin, and other physical and ‘virtual’ quality attributes. 

“Another advantage is seen in the case of a food safety issue, for example,” says Harry Smit, Senior Analyst – Farming and Farm Inputs. “Product recalls can be much easier when the entire chain is transparent.” Transparency of the food chain also means that the benefits of reputation that market leaders have will decline. Trust in a product will become less dependent on the trust in the supplier, but more dependent on the information available in the blockchain. This enables smaller companies to establish premiums based on the intrinsic characteristics of the goods they supply, without necessarily having a longstanding reputation. 

The available data also creates opportunities for developing products and services based on intelligence. For example, data can be used in predictive models to predict demand and/or success of a product by making use of new insights about correlations and causalities. As a result, business models can change from responsive to risk-based and predictive.

Digitalisation and broad participation will be key

Key to reaping any of the benefits is a digitalisation of internal and external processes. “There are definitely benefits,” according to Harry Smit. “But two prerequisites have to be met in order for blockchain to become successful. First, processes within companies, and between companies, have to become digitalised and standardised. Second, a broad participation of stakeholders along the value chain is required; otherwise the value of blockchain is lost.”

Getting it right

Selecting the right blockchain initiatives will be challenging. Rabobank recommends participating in more than one initiative and/or maintaining flexibility to switch to other blockchain initiatives.

Read the report ‘Blockchain: The trigger for Disruption in the Food Value Chain’