Sustainability: 5 key pillars you need to respond to

Developments in the food sector are rapid. Consumers are changing, which has consequences for production and distribution. At the same time, the chain must become more sustainable and innovation is not standing still. Curious about the latest trends? Rabobank provides an update.

Food supply chain is changing

Supermarket chains have a dominant position in the entire food chain. We also see this situation developing in our main export countries. The growth of online retail and out-of-home consumption is increasing competition. Supermarkets are looking for ways to distinguish themselves, which in turn creates opportunities for the industry. The chain is changing on four fronts:

1. Retailers want to buy as close to the source as possible.
Retailers want to buy as close to the source as possible to be sure of delivery and quality. Retailers and industry move from 'just in time' stock management to 'just in case'. In other words, they will hold more stock to ensure delivery.

2. Home delivery of groceries is growing structurally.
The chain is digitising and data make these developments possible. The future lies in personalisation of the supply to the consumer: 'customised food'.

3. Sales channels are increasingly blurring into one another.
Depending on the location and the target group, the formula and the corresponding range are determined. As a result, producers need to differentiate their products and adapt them to the formula and target group.

4. Private labels and A-brands are growing strongly.
Supermarkets have invested heavily in cheaper private labels. A-brand producers are increasingly outsourcing their products to specialised (private label) producers so that they can focus on product innovation and brand development.

"Consumers are critical and this has an impact on food production and distribution."

Sustainability increasingly important in food industry

A part of the consumers is aware of the footprint of their food: of the impact on the environment, but also of the impact on their own health. Radical transparency is becoming the norm. The aim is to give consumers more insight into the impact of the production of food products on the climate and the environment. These are five pillars to which entrepreneurs must respond:

• Reducing the impact on the environment, climate and living environment: what impact has the production had on the immediate surroundings, the climate and nature?
• Improving animal welfare: how was the animal bred, fed, transported and slaughtered?
• Making packaging more sustainable: consumers are against (plastic) packaging of products. How do you keep the balance between less plastic and preventing food waste?
• Improving health: consumers are more aware of their diet and start to eat to order.
• Reducing food waste: a lot of food is thrown away and wasted in the chain by consumers, industry, retail and the hospitality sector. To reduce this, the foundation 'Samen tegen Voedselverspilling' (Together against food waste) was established.

Innovation and technology in food industry: from production to digitalisation

In food production and distribution, investments are in full swing. There is innovation in several areas:

• Allergens: More and more is known about what certain foods do to your health. This offers opportunities, but also threats such as product recalls.
• Traceability: there is increasing transparency about more sustainable production, the composition of a product, fair working conditions and animal welfare.
• Clean label: production as natural as possible with as few additives as possible.
• Robotisation, automation and artificial intelligence: digitisation of the chain, improving production processes and reducing waste.
• Circular entrepreneurship: better valuing of residual flows, reducing waste and circular purchasing of packaging.
• Responding to changing consumer needs: product innovation, new flavours, packaging and compositions. We are also seeing a shift from less animal-based to more vegetable-based products (protein transition).

Smart industry is also on the rise. Smart industry is the collection of a large number of technical innovations and digitalisation. Examples are robotisation, mobile internet, cloud computing, internet of things, 3D printing and data. This innovation is leading to the emergence of smart factories in which machines and robots communicate with each other and detect and repair errors themselves. These developments have an impact on every company in the food sector.

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