Accelerating Agri-Food - Opportunities from the Global Agrarian Revolution - June 2019 - KPMG
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Accelerating Agri-Food Opportunities from the Global Agrarian Revolution June 2019 kpmg.com/nz
Accelerating Agri-Food 3 CONTENTS Transitioning from value chain to value web ............................................... 4 Playing an infinite game...and thriving through wellness .......................... 8 Stocktaking the global mega-forces ..........................................................12 Social platform ......................................................................................... 16 The Health and Wellness decade ............................................................ 20 Nature of a farm ...................................................................................... 24 How we farm ........................................................................................... 28 Products grown........................................................................................ 32 Processing and distribution...................................................................... 37 Consumers and consumption .................................................................. 40 Directing actions – Articulating impact .................................................... 44 Five impact opportunities for agri-food organisations .............................. 45 Sources .................................................................................................... 47
4 Accelerating Agri-Food
Transitioning from value
chain to value web
Our observation is that majority of With people holding these views it is
people that make the choice to work not surprising that only 68% of people
in the agri-food industry chose to do trust organisations in the food and
so because they are passionate about beverage sector, although this is a
creating safe, quality products for positive score in comparison to general
the people that eat, drink or use trust in business at 56%.
the food, fibre or timber products
Regulators are focused on the details of
that they grow.
the rules they administer and the extent
They love the challenges that come of their jurisdiction. This means that
hand in hand with a biological industry; they often miss change happening in
balancing climate, water availability the industry globally or focus on issues
and labour with market prices and that suggest they are missing the
customer demand. bigger picture. The reality is that most
governments develop policy to meet the
The problem that has emerged as global needs of the majority of the population,
populations have become increasingly who are increasingly urban. Policies
urbanised, is that many communities that work effectively in urban areas
Ian Proudfoot
Lead Author
have considerably less knowledge about are often ineffective or have perverse
Global Head of Agribusiness the complexities involved in running an consequences in rural areas.
agri-food businesses as they have lost
direct connections to the land. In fact, Around the world quality food, fibre
as people find out about the processes and timber is being created by millions
that have historically been used to of farmers, growers and producers
produce food, many are not liking what every single day and it is rarely, if ever,
they learning. Practices the industry celebrated. The contributions that
has used historically because the end farmers make to their local communities
justified the means are becoming go largely unnoticed or recognised.
socially and ethically unacceptable to The investments that the industry has
many consumers, who want a higher made to better manage its impact on
bar in respect of how their food our land and water are dismissed as
is grown. being insufficient, rather than being
acknowledged for the scale of what
Customers are rarely exposed to the has been achieved to date.
passion of the people that grow the
food that they eat, with the exception The agri-food sector provides
of those able to pay a high premium employment, supplies the nutrition
to source products directly from and creates wealth for countries
farmers markets. What they are regular with the wide portfolio of products
exposed to around the world are grown and sold around the world.
bad news stories about the agri-food The sector has the ability to underpin
system; about animal welfare issues, the transition to a low carbon future
environmental failings, price spikes or as the full capabilities of biologically
food safety scares. sourced materials are understood and
their ability to substitute many products
This is reflected in the results of the we use in our day to day lives that are
2019 Edelman Trust Barometer, which currently made from non-renewable
suggested that 65% of respondents resources is capitalised on.
across 27 countries agree that large-
scale food and beverage production has
harmed the environment and lowered
nutritional standards.
Accelerating Agri-Food 5
Perceptions shape consumer It has become clear that individual through the farmer to the processors,
behaviours consumers are intuitively making and ultimately to the retailer and the
It is not only the threat to the social decisions about a product based on end consumer of the product. The
license that is focusing organisation their perceptions of its origin and bricks-and-mortar controlled by the
across the global agri-food sector the provenance. Food is being categorised retailer was the only point that the
need to on take back the narrative as good or bad based on the personal consumer interacted with the product,
surrounding the food system. It is also ethics of a consumer. If a consumer and this experience was carefully
about how customers perceive their decides a product is bad, there is managed by the retailer to ensure
products in comparison to a competitor’s unlikely to be a low enough price point that they captured the largest share of
offering. The provenance story that to encourage a consumer to buy the margin available from the value chain.
underlies a product contributes to product because there is something Much of the time, the consumer had
how its value is assessed. The positive inherent to the product that would make limited knowledge about the original
stories that can be told around a it unconscionable for them to eat it. If source of the product they were buying.
product can appear to be little more the conclusion is that the food is good,
Given that, what happened on the
than spin, when the customer makes the consumer will not pay an excessive
farm, orchard or fishing boat had little
a Google check and discovers nothing price (it still has to represent value to
impact on a consumers perception of
but bad news about the industry. that consumer) but they will pay an
a product or its value. However, it has
Customers question the integrity and appropriate price for the attributes
become increasingly clear to us that
the provenance of products and if they inherent in the product.
the traditional concept of a lineal value
do buy, they pay a lower price. The The reality facing the industry is that chain is rapidly being replaced by a
predominant narrative around the sector the threat of eroded value, caused by more complex series of networks and
is costing farmers, growers, processors negative narratives, is growing every relationships, which form a consumer
and their supply chain partner’s real single day. The traditional value chain centric value web.
money every single day. has flowed lineally: from input suppliers,
Envisaging the future: a consumer-centric value web
Food Research
Government
manufacturers institutions
Processors and Retailers and
Consumers
exporters distributors
Farmers and
Input providers Community
growers
6 Accelerating Agri-Food
Technology has eroded the previously- valuable to all stakeholders if they can
held power of the retailer. Now every be verified. This puts truth at the heart
participant within the value web is of any story being told. When a local
able to develop direct connection with community can verify what is really
any other participant, including the happening within a farming system, it
consumer. The consumer sits at the gives them confidence that the natural
centre of the web, and every participant environment, water and animals are
organisation needs to be focused being used in an ethical and sustainable
on understanding the factors that way. It will also assure a consumer
consumers will consider in making a that the provenance of a product is
buy or no buy decision about a product. intact, and it has the attributes they
would expect given its price point.
Obtaining this understanding enables
Technologies such as blockchain and
an organisation to maximise its
traceability services are underpinning
contribution to delivering a product
these characteristics as a way to collate
that consumers see as good and are
and present datasets to validate a
prepared to pay a premium for. The web
product is what it says it is.
also enables organisations to be better
rewarded for the attributes that they Ultimately, specific businesses
bring to the table, rather than simply for will identify and develop a suite of
their position on the lineal value chain. attributes that best suit the needs
of their product, based upon a deep
Meanwhile the consumer is also
understanding of their customers’
seeking information about the product
needs. As more companies embrace
they are being offered, and is seeking
the principles of integrated reporting
out a wide range of information
(IR) – and consider their performance
before they make a buying decision.
in a wider sense than just profitability
Uncertainty around the sustainability,
– we expect the attributes that
efficacy, safety or quality of one product
companies choose to focus on
in comparison to another will make
will increasingly align with a more
the buying decision easier for the
comprehensive approach to business
consumer. In response, organisations
reporting. The inclusion of attributes
need to raise their game and ensure
within an IR framework enables
that their stories are told in a way that
companies to better articulate the
satisfies the customer’s requirements.
total contribution they are making
This is more critical today than it has
to their community, as well as being
ever been in the past.
transparent about their opportunities
to do better.
Verifying attributes delivers
fact based narratives Given that the agri-food sector has
Articulating a series of verifiable faced a regular barrage of criticism in
attributes that can come from how a recent years, much of it unjustified, this
product is grown, processed, exported represents a real opportunity. The great
and ultimately distributed to the end thing is that many in the industry are
consumer assists an organisation already doing what is needed to provide
in capturing more value from the their products with a compelling
products they grow and handle. Every attribute-based story. The industry now
step in a production process has the needs to front-foot this, obtain the
potential to add attributes to a product necessary verification and take the lead
that consumers may find valuable. in telling its stories in a factual way,
For instance, the cultivar or genetics but with the true passion that exists
of a particular plant or animal could across the sector for growing safe, high
be an attribute. The soil it is grown in, quality food, fibre and timber products.
the way water is utilised, or how the Organisations need to take back the
environment is managed can all be initiative and regain control of the
considered attributes. The employment narrative surrounding their products.
conditions of people involved in the Articulating the attributes inherent
process can be attributes, as can the within products will provide accurate
channels through which a product is stories to counter those based on
exported, or the technology deployed half-truths and perceptions that have
to verify its provenance. The specific dominated social media conversations
attributes that are important to a local for far too long.
community, an individual consumer or a
specific market will vary; depending on
their particular interests and values.
The reality is that many consumers
are sceptical about claims producers
make about their products and how
they are produced. Claims that are able
to be independently verified are more
Accelerating Agri-Food 7
emerging gene editing technologies).
Understanding As a consequence they are more open
to the technologies being used in
consumer
novel foods if the rest of the product
attributes meet their needs.
behaviour
Inconsistent farming practices: there
are good and bad farmers all over the
world. Ingredients used in food are
grown by farmers that invest in their
land and those that exploit it but as
With increasing consumer interest
consumer can’t tell whether they are
in and acceptance of new and novel
buying good or bad food attracts them
foods, we explored with agri-food
to novel foods that are clear about how
companies the factors they have
they are grown.
detected underlying the consumer
willingness to engage with these Organic content: premium consumers
products despite many of them are increasingly seeking out products
being highly processed and far that are grown in organic farming
from clean label. systems as they believe that these
products are healthier and have greater
Animal welfare: while enjoying animal nutritional density.
sourced foods, many consumers are
inherently uncomfortable with the Affordability: the price of food is a
processes that deliver these foods. bottom line for most customers around
Products delivering a similar experience the world. If a novel alternative to an
that eliminate animal welfare risks animal produced protein is cheaper than
appeal to many consumers. the traditional product yet delivers a
similar experience this will attract many
Incomplete understanding: consumers to try the novel product.
consumers are often not given a
full picture of the impacts that a Ability to feed the world: recognition
products supply chain has on health that there are hundreds of millions
and environment. Stories told about of people that do not have access
novel foods focus on attributes where to the food and nutrition that they
they out perform traditional foods need attracts consumers to novel
but it is difficult to obtain a complete food products that have the potential
understanding of all the impacts a to make a significant contribution to
product has. addressing malnutrition globally.
Focus on health and wellness: as Demographics: groups within
consumers become more aware of a community are more likely to
Chris Allan © Shutterstock
the impacts that food can have on their explore novel products based on
health they are seeking out foods that their willingness to explore new
have proven health benefits. Many technologies. In respect of novel
novel foods are being designed to foods, millennial consumers are
deliver specific health benefits which seeking to understand more about
are appealing to consumers. their food and are leading
experimentation in this part of
Search for precise nutrition: some the economy.
consumers are looking to utilise
technology solutions to secure better Food safety: in some markets,
health outcomes. As a consequence consumers are inherently uncertain
products which have proven health about the safety of the food that they
benefits are easily incorporated into eat for a wide range of reasons. Novel
personalised nutrition systems and into foods that come with assurances
consumer diets. around their provenance and
manufacturing process appeal to
Sustainable clean foods: many novel consumers that lack trust in the
foods are able to make claims about food system.
how they are produced in comparison
to traditional foods which appeal to Novel tastes and textures: it should
consumers; these include a smaller never be ignored that food must taste
environmental footprint, use of less good and be pleasurable to eat to be
water, elimination of animal welfare attractive to consumers. Products that
issues and reducing unskilled jobs. introduce appealing new tastes and
textures are likely to attract consumers
Genetic manipulation: consumers to try them. A great experience will
are becoming more attuned to the full encourage repeat purchases.
range of issues associated with the
use of genetic technologies (including
8 Accelerating Agri-Food
Mitch Gunn © Shutterstock
Playing an infinite
game.. and thriving
through wellness
Change is constant and it flowing into technologies that have the producers ultimately sell their products
always will be. We instinctively potential to reshape every aspect of the into around the world. We often hear
agri-food value chain, from what a farm people talk about the market as if it is
search for new knowledge and
is and how things are grown, through a single, uniform construction. Maybe
use this information to look for to new products, and to the way in the past this was a reasonable
better, more efficient ways to products are processed, distributed approximation of reality, when channels
do things. The agri-food industry and ultimately consumed. to the consumer and the range of
has constantly evolved; in what product options available were limited.
In our view, the world has not only
it produces, how it interacts entered the fourth industrial revolution, However, the technologies of the fourth
with consumers and how it it has also entered the first global industrial revolution are fragmenting
uses natural resources. agrarian revolution. The basic premise markets into an infinite number of
of both revolutions is the same; the niches, aligned to the specific wants
Industry leaders recognise that the fusion of biological, digital and physical and needs of consumers around the
pressure for change is unrelenting and technologies to create exponential world. As we note later in this report,
likely to accelerate for the foreseeable solutions that have the potential to the one size fits all solution has gone,
future. As a consequence, the need transform industries and the way that to be replaced by a model that is
to continue the transformation of we live our lives. trending towards mass personalisation
organisations to become more and, eventually, solutions that deliver
We see the agri-food sector as being
collaborative, agile and resilient is one size fits one products.
at the centre of the fourth industrial
an ongoing and significant focus for
revolution as combining the biological The global market in the next decade
many organisations in the global
(a plant or animal), with the physical will be comprised of millions of niches.
agri-food sector.
(a tractor or a spade) and digital We expect that each of these niches
(knowledge and insight) has been will align with one of a number of key
Recognising the extent of disruption
what the industry has always done food system streams that reflect the
It is hard to comprehend the extent to grow food and fibre products. ability of an individual consumer to
of disruption the agri-food system We do, however, distinguish the make choices in respect of the food
is facing globally. The reality is that revolution in the agri-food sector they eat and the way it is integrated
much of what is considered usual from the wider revolution because into their daily lives. Given that markets
agricultural practice today would not the sector effectively missed the first are evolving rapidly it is hard to predict
be that alien to the Vikings or the three industrial revolutions, and is with accuracy what these food system
Romans. While we have introduced consequently facing more significant streams will ultimately end up being,
new equipment in some parts of the disruption over the next decade or but we foresee seven primary streams
world, increased scale, and improved so than any other sector of the which are likely to encompass the
the genetic qualities of which has global economy. bulk of consumers around the world;
improved yield and raised production of subsistence, sustenance, first choice,
the plants grown or animals raised, the The agri-food market of the future flexible, integrated, ethical and
fundamentals remain largely the same premium. More details are provided
While food and fibre producers are
– tend the land, feed the animals, add on the following.
facing dramatic change within their
sun and water and wait for a product
own farming operations, the wider Recognising that the expectations on
to grow. As a consequence, the
transformation of society will have producers are different for consumers
industry has been ripe for disruption
a material impact on the markets in each of these streams is critical to
for decades. Significant money is now
Accelerating Agri-Food 9
determining where the products an accelerates it can’t be overlooked that organisational objective is to build the
organisation grows are targeted. It is each doubling adds 100% more users. capacity and resilience to stay in the
important for producers to recognise It is difficult to move beyond models game, and thrive in an ever-changing
that they are very unlikely to be able to that are built on historic data and trends, world while competitors fail or exit
feed the world, by developing markets but it is critical that organisations do the market. The problem for many
across each of these seven streams, but take this step to stand a better chance traditional businesses, is that if you
in most cases maximising the value of of capturing the opportunities in front try to play an infinite game with a
their product will require them to target of their organisation. finite mind set you will struggle to
consumers in niches in more than one match your competitors for innovation,
Recognising that you are playing
stream, recognising that each requires effort, morale and performance.
an infinite game
a tailored strategy and approach.
Surviving in an infinite game requires
In an environment of dramatic and
The challenge for organisations is organisations to enhance existing, and
continuous disruption, the biggest risk
that they are being required to make develop new, capabilities to enable
facing organisations is maintaining
decisions on the niches they should them to retain a sustainable and
relevance. In the past, organisations
target based on their expectations impactful position in the markets
developed strategies which used
about how the system may evolve, that they choose to play in.
language like winning, beating the
and the assumptions they have
competition or leaving nothing on the Internationally, we observe many
formed about which of the 45 trends
table. The focus today is on long term companies using the UN Sustainable
shaping the food system, discussed
sustainability and earning the right to Development Goals to define the
on the following pages, will have the
serve customers and partners. This impact they seek to have and reporting
most dominant impact on consumer
change in language is reflective of a their progress.
behaviour and demand.
change in the ground rules surrounding
Our conversations during the year
While we make predictions about markets that the pace of innovation and
have assisted us in identifying a range
the future of the food system, the disruption is imposing.
of organisational capabilities that
speed and extent of disruption the
Well known business commentator, have not always been a priority in
sector is facing mean that the past
Simon Sinek, suggests that what we agri-food companies, but which need
does not provide a reliable predictor
are observing is a fundamental shift to be developed in response to the
of what will happen in the future. The
in how business works, from a finite substantive changes that are occurring
adoption of technology over the last
game (with rules, a start, a finish and in how markets are functioning. We
decade has illustrated that the world
result) to an infinite game; a game with have summarised the attributes we
is not linear, with many technologies
changeable rules, where players come believe will help organisations to thrive
following exponential adoption curves
and go and there is no endpoint. The in their infinite game on page 9.
that start slowly. However, as adoption
The seven primary food system streams
SUBSISTENCE: INTEGRATED:
Food availability is not assured and consequently these Food is fully integrated into lifestyle, the consumer can
consumers will eat whatever food is available when afford foods that provide functional and nutraceutical
it becomes available, often as a result of their own properties when necessary and regularly invest in premium
farming activities, with little concern about the nutritional food products and eating at ‘experience’ restaurants when
composition or safety of the product. they are spending time with family and friends.
SUSTENANCE: ETHICAL:
This consumer has sufficient economic capability to buy Consumers which put the provenance of the product
the food they need for them and their family. Their focus is central to their buying decisions. They generally do not have
on sourcing enough nutrients to enable them to function in financial constraints on their purchasing decisions, likely to
daily life and continue to generate income to buy more food be open to purchasing organic products, novel foods and
in future. experimenting with vegan and flexitarian diets.
FIRST CHOICE: PREMIUM:
Greater economic capacity provides some ability to make Consumers where the cost of food presents no
choices about the food eaten which sees consumers start financial constraint and their focus is entirely on the
to seek out animal proteins (or equivalents) as an alternative experience that a product delivers. They wish to
to plant based foods. Priority is given to providing safe, engage in novel food trends quickly. They focus on
nutritious food to children. the attributes of a product and how expensive it is
in making purchasing decisions.
FLEXIBLE:
Consumer has the financial capability to choose from a wider
range of food options and the attributes of the product start
to inform the choices that are made. There is the capability
to eat out on occasion and to invest in more expensive foods
for special events.
10 Accelerating Agri-Food
The bottom lines in a fragmented, Food is central to future Volume to…value, values or wellness?
2
disrupted agri-food sector of the health system: The mantra over the last five years for
Having explained why we believe The connection between what people many agri-food organisations as markets
the agri-food sector is now experiencing eat and health outcomes is irrefutable. have become more complex and
the first global agrarian revolution, our As the social impact and costs of disrupted, has been that we need to
view that markets are fragmenting curative healthcare systems place an accelerate the shift of our products from
into millions of niches, highlighted increasing burden on government and ‘volume to value’. While this is easy to
that there are 45 identifiable global society, there is no doubt that policy say it is not nearly as easy to deliver on,
disruption trends, and explained that settings will shift towards preventative as many organisations have found. As a
the fundamental rules underpinning care models. This places food at the consequence, some organisations have
markets have shifted. We only see centre of the health system of the started to talk about making a shift from
opportunity in the agri-food sector future and increases focus on a food’s ‘volume to values’ which makes a lot of
if you are prepared to approach nutritional density, functionality and sense. While activities adding value to a
your future with the right mind-set. impacts on health outcomes (both product can be replicated or superseded
positive and negative). Recognising by a competitor, underpinning a product
The speed and extent of change
this shift presents a myriad new with a set of values that reflect an
can be viewed as a challenge or an
opportunities for food producers able to organistatons ethics and morals is
opportunity. The only person that is
verify the therapeutic outcomes their significantly harder for a competitor
able to determine the lens you choose
products contribute to, but also flags to replicate or displace.
to use is you. We believe that the only
practical choice is to view disruption as risk for products that contain ingredients We think that there is an opportunity
an opportunity, to understand the key that are perceived to be bad for health. to take this position one further step.
bottom-lines shaping the industry and It also suggests the space that has We suggest that organisations
then to buckle in for what will be an traditionally existed between the food should aspire to transition from
exhilarating ride. and pharmaceutical sectors will become ‘volume to wellness’.
increasingly blurred, as businesses from
We believe there are three bottom-lines both sectors explore opportunities in We believe ‘volume to wellness’
shaping the future of the agri-food sector: functional and nutraceutical foods. encapsulates growing products that
have attributes consumers aspire to
1 Sustainability is Diets will transition as
3 inherent within them, and that are
a non-negotiable: consumers personalise unpinned by a clearly articulated set
experiences: of ethics and morals. However it
To maintain social license the reality is
that it is no longer appropriate to just The last decade has seen the protein goes further, and says our focus is
do enough; there is a need to listen wave wash through the food system, on producing products that promote
to all relevant voices, including those with consumers placing significant focus wellness; wellness for the consumer
from minority communities, and do on the protein they eat. However, we that eats the product and also wellness
the right things for the organisation, believe this central focus will evolve in for our community and wellness for
stakeholders and the wider community. the coming decade. We expect a second our environment.
While conversations often focus on wave to come through the sector, shifting Thriving in the infinite games
climate, land and water, achieving true the focus of consumers from purely requires organisations to make bold
sustainability requires an organisation protein towards the complete nutritional commitments to secure a sustainable
to think far more holistically about the density of their food as recognition grows place in the game and derive fair value
systems they interact with. This requires that there are many other nutrients, oils, from what they create. We believe as
thinking beyond financial metrics and fats and minerals that are important to we move into the 2020s, a decade
environmental consequences to include health. Secondly, consumers are thinking that will be dominated by health and
analysis of human, social, intellectual far more about the foods they eat and wellness themes, now is the time to
and technological dimensions in where they come from; we have heard place wellness front and centre in our
decision frameworks. It is becoming many times in recent months that there agri-food story if we really want to
apparent, that as more organisations is place for ‘good food’, whether it is secure our share of the value we grow.
think about the wider impact they have produced from plants or animals, but no
on a value chain, circular thinking is place for ‘bad food’, any food produced
being designed into business models, without awareness of the impact it
with greater effort being made to has on health and the environment.
find partners to extend the life of We also believe consumers are taking
non-renewable resources. more control of their diet. In seeking
personalised experiences, they are
transitioning from conventional food to
nutrition arrangements that align with
their lifestyle, world view and ethics.Accelerating Agri-Food 11
Organisational capabilities
to thrive in the infinite game
Long term focus Address points of friction first
A goal for any organisation playing an Too often organisations seek to build
infinite game is to earn the right to consensus around the points of
continue to play. Looking to extract agreement and in doing so overlook the
the last dollar at the expense of a (often critical) matter over which there is
relationship does not make sense if no agreement. While it is uncomfortable
you are wanting to continue playing. to focus on the points of friction,
Balancing an immediate return with the ultimately addressing these issues will
need to leave something on the table drive better outcomes and enhance
to build trust requires continuous and the likelihood of building long term,
careful focus. sustainable relationships.
Own your own problems Report on the right metrics
When faced with challenges, too many Historically the only metrics that
organisations look to a third party, often mattered were those calculated from
the government, to provide solutions the profit and loss account. If you
to their problems. The reality is nobody are looking to make a sustainable
else has an incentive to solve a problem contribution to an industry this will
as quickly the organisation itself. require an organisation to report on a
Owning your own problems and actively wider range of metrics which reflect
seeking to find solutions is critical if the impact that the organisation has
you want to secure your position in an on its customers, business partners,
infinite game. community and environment. Using the
UN SDG’s as a framework to achieve
Hire ahead of the curve this is an option for every organisation.
The quality of people that an
organisation employs shapes its culture. Keep an eye on the extremities
People are critical to creating successful A business looking to survive in the
businesses that can thrive and grow in infinite game should not ignore what
disruptive environments. Organisations is happening on the extremities of
should make every effort to over-hire their organisation. If a small fraction
in advance of growth to provide the of customers are unhappy and the
capacity to innovate faster and respond organisation is not listening, there are
to unexpected disruption. now channels for the marginalised to be
heard and this can quickly undermine an
Seek good advice organisation. There can be no tolerance
In a sector that is experiencing for non-performance.
significant change, such as agri-food,
there will be a wide spectrum of Innovation comes from anywhere
opinions about how any market is We have learnt over recent decades
likely to evolve. Being open to a range that innovation does not come from
of opinions by encouraging internal boardrooms or brainstorming sessions.
discourse and seeking external advice It comes from somebody saying “what
will build a better understanding of the if we did this?” Organisations need
opportunities in front of an organisation mechanisms that encourage their teams
and provide it with the courage to do to bring forward innovative ideas. They
the right thing. also need to sense global business
model innovation to identify seeds of
Ensure financial resilience ideas that could deliver a step forward if
Playing an infinite game requires applied to the agri-food sector.
ongoing investment in innovation
to respond to threats as they arise.
Organisations need to have the
capability to make investments when
required. This means they have to
balance a desire for growth with prudent
financial management to guarantee
their balance sheet has the resilience
to withstand an unexpected shock or
support an opportunity to be grasped.12 Accelerating Agri-Food
Stocktaking The ‘mega’ mega-forces
the global
Transitioning to a low carbon
future is unstoppable
Higher incidences of extreme
weather events together with
increasing scientific consensus that human
mega-forces
activity is contributing to an increase in global
temperatures has resulted in governments,
companies and civil socity all making
commitments to take actions to transition
to a lower carbon future in an attempt to
restrict the increase in temperatures to as
close to 1.5 degrees celsusius as possible.
The mega-forces shaping the
world’s future are evolving usion technologies accelerate
F
exponential change in daily lives
as scientific discovery and
The increasing ability to fuse
knowledge become available. biological, digital and physical
technologies reshapes all aspects of day to day
life, creates opportunities for new business
models that redefine how businesses work
across many sectors of the economy and
delivers the ability to transform agriculture
The Agenda in 2014 highlighted 14 trends
given that fusing a biological product
across economics, politics, demographics,
social infrastructure, technology and the with knowledge and physical tools is the
environment that our research suggested were fundamental core of the sector’s activities.
shaping the multipolar world in which we live;
a world where a disruptive externality can
come from anywhere at anytime. The report
highlighted the rapid impact that the Ebola
outbreak in West Africa had on people all over
the world during 2014.
We reviewed the mega-forces in 2016 and
unsurprisingly concluded there was little
change. We did highlight that given the
breadth of applications being developed using
fusion technologies, that it had become clear
these products are going to have a more
fundamental and transformational impact on
society than we had previously envisaged.
Rolling forward to 2019, we have identified the
fusion revolution as one of two mega mega-
forces, the other being the transition to a net
zero carbon position given the consequences
of doing nothing.
In addition to identifying these two overarching
themes, we concluded three new mega-
forces need to be incorporated into the
analysis based on our research. Awareness of
the fundamental impacts these new forces
(Generation Voice will fight for its future,
inequality can no longer be overlooked and we
must be able to do that with plants) are having
has become apparent recently in response to
concerns over climate change and the political
consequences of large groups in communities
feeling excluded or left behind by economic
growth. Some of the other forces have been
renamed to sharpen their focus but the overall
conclusion is that our world has only become
more complex, or more multipolaral, in the last
five years.Accelerating Agri-Food 13
17 GLOBAL
MEGATRENDS
Challenging the global
status quo
LOW CARBON
Geopolitical instability
is a fact of life
The increased ability to consume and
FUSION TECH
share information using digital channels
creates an environment that can rapidly accelerate
groundswell political movements. This is seeing
unexpected political leaders coming into power, often GEOPOLITICS
based on the positions that they take on a single critical
issue for disenfranchised groups with the community.
ECONOMIC BALANCE
Economic influence will continue to shift
as wealth grows in emerging economies
For most of recorded time, the world’s
largest economies were Asian. The shift of NEW GOVERNMENT
the balance of wealth to Europe and, ultimately, North
America is a relatively recent phenomenon driven by
the rapid industrialisation of these countries from the
INEQUALITY
late 1700s. The first three industrial revolutions largely
bypassed other economies and their influence declined.
The growth emerging economies delivered as the
west struggled to recover from the GFC demonstrated MILLENNIALS
the wealth pendulum is swinging towards emerging
economies and returning east towards Asia, disrupting
the perspectives we have held for centuries on economic
influence.
AGEING POPULATION
Leading in a integrated and instantly
informed world requires new capabilities URBAN DWELLERS
While physical distances remain the same
and national borders rarely move, technology
has eliminated the time delays that were inherent in VOICE FIGHTS
most cross border transactions 25 years ago. A faster,
technology enabled world is highlighting the constraints of
government, legacy international institutions and treaties
and the challenges of regulating in a connected world. A FUTURE HEALTH
new approach to government is required based on greater
responsiveness and more collaborative approaches
to regulation.
EDUCATION
Inequality can no longer be overlooked
The gap between the haves and have nots
DATA PLATFORMS
has grown around the world, largely out of
sight of those with influence and power in
our communities. The benefits of economic growth have
not been shared evenly, with many in the community ENERGY SECURITY
believing they have received no benefits. Technology
gives marginalised communities a voice. There is a need
to listen to concerns being expressed and take action to
ensure the benefits of growth are shared more evenly, to MORE WITH LESS
ensure the long term stability of society.
IMPACT WHY
BIOECONOMY14 Accelerating Agri-Food
Future world citizens Empowering infrastructure
Millennials facilitate the connected, Preventative medical systems
instant access economy enhance human health outcomes
Millennial consumers are leading Innovation drives the discovery of
the adoption of digital solutions new solutions to a growing range of
that provide instant access to the products and healthcare challenges facing society, however the
services that they require without the constraints cost of these solutions make it challenging to provide
of long term asset ownership. New solutions that access to all but the most affluent members of our
increase lifestyle flexibility are rapidly replicated and society. As a consequence, governments around the
adopted, globally accelerating the development world focus attention on developing new primary
and growth of increasingly innovative business care models that reshape lifestyle fundamentals,
models. The use of digital solutions means that with the objective of preventing the illness and
millennial consumers are no longer confined to creating a fundamentally more healthy soceity.
the choices available in their physical location.
Education delivered beyond
Anything but ‘generation done’ the classroom multiplys impact
exerts their economic muscle A high performing education system
People aged over 65 represent the underpins aspirations for growth and
fastest growing segment of the global development in any society. The impact of an education
population, driven by increased life expectancy and system depends heavily on the quality of its teachers
falling birth rates around the world. As the population and the effectiveness of the channels used to deliver
ages, the proportion of the population available to knowledge and enhance learning. As technology evolves
support the associated health and welfare costs of the constraints of traditional educational relationships
declines putting presure on core social services. built in a classroom disolve, enabling the best educators
However, the ageing population are also consumers to have an amplified impact on global society than has
and in many parts of the world they have spent a not been possible in the past.
lifetime generating wealth which they will use to secure
products and experiences that enhance their lives. Democratising data unleashes its
potential for all of society
Urban survivors are empowered A world with billions of connected
to become urban thrivers devices will see data lakes continuing
The growth of cities and urban areas to grow expotentially. Data is only valuable if insights
around the world continues to accelerate, can be extracted from the lake that create benefits
driven by migration from rural areas and natural growth for organisations or for soceity in general. The more
in the population. The evolution of smart technologies relevant data that can be targeted towards answering
to integrate work, mobility, nutrition and lifestyle a question, the better the quality of the answer. This is
elements into day to day life, changing the nature best achieved if organisations recognising the value of
of urban living from one of battling the system to data is maximised, by sharing it with others to help find
survive to one where life is enhanced by cities that are the solutions to the biggest questions facing society.
designed to work with and for their residents.
Generation Voice fights
for its future
Generation Voice, those members of the
community born after 2000, complete
their schooling and enter into full productive economic
and political life. This generation, and their children,
will live with the consequences of climate change and
they are not about to sit back and let their future be
sacrificed without a fight. Generation Voice will be the
most activist generation the world has seen, using the
power of digital technology, to protect what is left of
planetary resources for future generations.Accelerating Agri-Food 15
Seeking indefinite
sustainable living
Energy security is now
everybody’s responsibility
Concern society is consuming finite energy
Alexandros Michailidis © Shutterstock
resources too quickly, at the expense of
the environment, has driven investment into renewable
energy technologies but has also made it economic to
recover fossil fuel reserves that were uneconomical “I don’t want you
to utilise. The need to transition to a lower carbon
future while meeting increased energy needs, driven
to be hopeful.
by economic growth, will require individuals to take I want you to
ownership for their energy security in respect of both
generation and usage, through solutions scaled to be panic. I want
embedded into day to day lifestyles. you to feel
Infinite search for ways to the fear I feel
do substantially more with
a declining resource base
every day. And
A larger population and the emerging wealth then I want
of communities globaly is fuelling a growth in demand
for consumers products. These goods utilise natural
you to act.”
resources in their production. The wave of demand is Greta Thunberg
increasing stress on already limited resources, increasing
prices and putting more focus on how products are
used. Sustainable resource management becomes an
increasing focus for governments and societies who will
seek to influence how resources are utilised to generate
more output from less input.
Impact rather than profit becomes
By Liv Oeian © Shutterstock
the core of many organisations’ why
Historically, the profit motive has been the
primary driver undelying business. While
some businesses, particularly co-operatives and mutual
societies, have operated for the benefit of their members,
the majority have measured their success based solely
on the profit they create. Driven by the challenges facing
society, a new breed of businesses are emerging that
have a primary focus on addressing a social failing that
too many in society overlook rather than reporting a profit.
Having a positive impact increasingly dominates the why
in society.
We must be able to do that with plants
Modern lifestyles rely on access to a
vast array of consumer products many
of which are made from non-renewable
resources. As their availability becomes tighter and
costs increase the search for alternative, more
sustainable alternatives accelerates. Utilising the
properties inherent within plants through the
application of modern bio-technologies will
unlock sustainable solutions that will superseed
products made from plastics, metals and other
non-renewable sources.
Liv Oeian © Shutterstock16 Accelerating Agri-Food
Social platform
Global population growth is predominately occurring in some of the poorest, most
environmentally-challenged, water-stressed regions of the world; areas where sufficient
nutritious food is often difficult to find. With over 800 million of the world’s population
regularly malnourished, the food system is clearly not delivering effectively for everybody.
The UN has sought to highlight the scale of the challenge through the Sustainable
Development Goals (SDG’s).
Yet the food system is expected to tough, unskilled physical work, often in preventative healthcare strategies
deliver more every day. Food issues harsh weather conditions, with anti-social which have a strong focus on educating
however are not confined to emerging hours and low pay; hardly a great story communities on dietary matters. The role
economies, many developed countries to tell the world. The reality has generally that ‘food as medicine’ will play in the
have significant levels of nutritional not been so bleak and employment future of the healthcare system as well
deficiency across their populations across the sector is increasingly as the agri-food system should not be
which is creating significant social and demanding more skills to respond to new underestimated. The impact that health
economic costs that governments are technology and consumer expectations. and wellness will have on the global
having to deal with. These are big issues If producers fail to meet employment agri-food system in the coming decade
that impact every member of society standards that are acceptable to is explored in more detail from page 18.
and as a consequence they should consumers, they may find themselves Several countries are implementing
not be left entirely to governments being considered modern slave masters legislation to combat food-related
to resolve; as they require broad and having the market access of their illnesses; with the UK, Ireland and
community responses. Sustainability, products restricted, as more countries Spain introducing sugar taxes. In
in its widest sense, lies at the core of introduce Modern Slavery legislation. the US, the 2018 Farm Bill proposes
the food system. Communities need The ability for stories to go viral through a Produce Prescription Program, to
to produce sufficient food within the digital platforms shows the power of encourage the prescription of food
confines of the productivity capacity of society setting standards, and amplifies as medicine.
the environment. Technologies such as the impact for those that chose to ignore
genetic modification need to be explored, the rules. There is a threat to the image Food production costs
even though the long-term effects are of an organisation and its ability to recruit will increasingly reflect
not fully understood. Governments need and retain top employees, as well as to the true costs of consuming
to develop food systems that extend the sustainability of their supply chain, if natural capital
beyond their borders to achieve food employees are reported to be mistreated Food spend as a percentage of income
security, and ensure their communities in any form. Corporate responsibility has consistently fallen in recent decades
are responsibly educated on what groups are calling on organisations to (the analysis on page 15 comparing
constitutes healthy food. It is unlikely imbed transparent reporting into their the increase in median income in the
we will ever have a truly sustainable strategy. In 2017 Nestle and Unilever US to movements in the prices of a
food system unless we collectively take implemented best practice on slavery range of products and services over
responsibility to implement substantive reporting, with Nestle reporting on the last 30 years, demonstrates this
solutions. Leaving food issues 11 key human rights risks relating to clearly). At the same time production
unaddressed increases the risk of its businesses as a way to increase costs have reduced, due to productivity
social imbalances destabilising society. transparency. improvements and an increase in the
In history, food inequality has resulted scale of many producers, however the
in social unrest, economic migration, Governments pivot towards reduction in cost has not been sufficient
war and terrorism. preventative healthcare to enable producers to hold their margins.
to address fundamental Some argue that the costs of producing
Modern slavery becomes health issues food are currently materially understated
a growing issue in the The World Health Organization has as farmers, growers and fisherman
agri-food sector reported that non-communicable have historically not paid for the natural
Society expects all employers to treat diseases (NCDs) cause more than 70% capital they have consumed in growing
their employees fairly. This includes of deaths worldwide every year - with products; most producers do not pay for
factors such as paying a fair wage, food being strongly connected to these the soil nutrients or ecosystem benefits
providing safe and sanitary conditions illnesses as one of the top four behaviour that the plants they grow utilise, some
for workers and families to live and work risks. NCDs include lifestyle illnesses are charged for water but for many this
and providing them with opportunities to such as diabetes, metabolic syndromes remains an asset that they can access
develop useful skills and experience. The and heart disease. The cost of treating freely. An analysis performed by KPMG
agri-food sector globally has often been these diseases is unsustainable for many in 2010 suggested that charging the
viewed as a poor employer, providing governments, resulting in them adopting food production sector for the naturalAccelerating Agri-Food 17
GROWTH IN PRIC ES C OM PA RE D W IT H E AR N I N G S ( U SA)
199 0 -20 18
+181% +182% +189%
+117% +118% +130%
+108%
+66% +78% +82%
+19%
NEW AIRLINE F O O D AT E L E C T R I C I T Y F O O D AWAY MEDIAN PETROL RENT OF CHILDCARE, PRESCRIPTION MEDICAL
VEHICLE FA R E S HOME FROM HOME EARNINGS PRIMARY N U R S E R Y, DRUGS CARE
RESIDENCE SCHOOL
Prices grew slower than earnings Prices grew faster than earnings18 Accelerating Agri-Food
assets it consumes directly and indirectly
would result in a charge that amount to
224% of the industry’s EBITDA. Given
the focus from retailers to keep prices
down, it is clear that food prices around
the world currently do not reflect the
true costs of production, in particular the
costs of natural capital consumed. We
expect there will be moves made by
governments around the world, as part
of the response of individual countries
to climate change, to charge farmers
for the natural capital they consume.
This would overtime result in food
prices increasing to better reflect the
true costs of the inputs into the food
production process.
Philanthropy and social
impact-centred business
models to proliferate
With over 800 million people being
failed by the global agri-food system,
the industry offers huge scope for
entrepreneurs and philanthropists to
have life-changing impacts on the global
community. Many start-up businesses
are being formed with either a dual
purpose (profit and impact) or a purpose
beyond profit, particularly to reduce
the number of people suffering from
under-nutrition. We have observed that
many of these start-up enterprises are
receiving funding from a range of high
net wealth individuals as they direct their
philanthropic activities towards some of
the biggest challenges facing the global
community. For example the Bill and
Melinda Gates Foundation is collaborating
with private sector enterprises, NGOs
and governments with the goal of
preventing 1.8 million malnourishment
related deaths by 2020. Corporate social
responsibility (CSR) is also evolving. It
is no longer sufficient to sponsor the
local football team, organisations are
investing in impact projects that align
with an articulated purpose that they have
adopted (be that empowering women in
rural communities, investing in skills for
young people or promoting nutritional
improvement). Consumers are expecting
companies to be taking an active role in
supporting the vulnerable in the global
community. Demonstrating a strong
commitment to purpose is a also key
platform for attracting the best talent to
an organisation. The social enterprise
One Acre Fund supports over 135,000
farmers in East Africa through a
market bundle approach; providing
local farmer groups with agricultural
education, loans for planting materials,
market training and crop insurance.
Environmental regulation
crystallises a step change in agri-
food technology and investment
Governments have committed to address
levels of greenhouse gas emissions fromAccelerating Agri-Food 19
economic activities in their respective focus in an attempt to ensure that more to the cost of the capital to they are
countries. The Paris Agreement saw most of the national food supply is eaten. The able to secure. To secure green funding
countries commit to keeping the increase World Economic Forum initiated a arrangements there are expectations
in global temperatures well below 2°C five action initiative bringing together being placed on organisations to report
with an ambition to keep it close to 1.5°C. farmers, government, civil society on their ESG performance using a
Delivering on the commitments that and the private sector, facilitating recognised framework, such as Integrated
have been made is likely to result in most partnerships at regional and country Reporting, and provide an assessment of
governments introducing regulations that levels, and encouraging the exchange the impact they are having on society. As
target activities that generate emissions. of knowledge around food security. a consequence, there are opportunities
Given that the farming of livestock is for organisations that have adopted clear
a significant creator of methane gas, The challenge of feeding the strategies to manage and reduce their
one of the key greenhouse gas, we world attracts talented young impact on the environment and to actively
expect these regulations will ultimately people into the agri-food sector support their community, to translate their
have impact across the agri-food value The young people that are now coming actions into cost reductions. Lenders are
web. Responding to new regulatory into the workforce have grown up in a finding creative ways to reward those
requirements will likely attract ethical technology-enabled world; they expect that are proactive in addressing critical
investors to the industry, will spark instance access to knowledge and insight, issues. In addition, the growing power
innovation that will benefit all farming they have a strong value system and a of the consumer voice on social and
systems, and increases the amount of voice that they are willing to use when ethical issues is benefiting the financial
technology being deployed across the they see activity that is not aligned to performance of organisations that have
industry. Companies are already taking their values. It is predicted that Millennials taken steps to enhance the sustainability
matters into their own hands in line with will comprise 75% of the workforce by of their business practices. The Financial
consumer expectations, proactively 2025, and they will likely have the greatest Times reported an analysis of more than
implementing systems to ensure carbon spending power of any generation in 300 of the world’s largest companies
use is captured and actionable steps are history. Evidence indicates that the across a range of sectors found that
taken to reduce emissions. We expect millennial generation reacts positively to those with more ethical operations make
to see companies and regions pushing companies and organisations that can bigger profits.
hard to achieve zero carbon status for clearly articulate their purpose and values
their products as this is an attribute that and is prepared to take steps to bring Bringing activist campaigners
ethical consumers are prepared to pay a these commitments to life. This means to the table to become part of
premium for. Arla Foods, a Danish dairy that they are attracted to a workplace or the solution
co-operative announced in March 2019 industry that is contributing to society, The agri-food sector has always been
that it will target a 30% reduction of rather than operating solely for financial subject to challenge by activists; perhaps
greenhouse gas emissions by 2030 and benefits. Roles that enable them to use more so than any other sector of the
will work towards zero carbon by 2050, skills to improve society are of particular global economy (with the possible
noting that setting the target focuses interest – and opportunities in the agri- exception of the energy sector at certain
each of the co-op’s dairy farmers food sector to mitigate malnutrition points in history). However there is a
on what they can do to improve and environmental degradation will be unique paradox involved in the nature of
their businesses. appealing to many. We consequently the challenge that is placed on the sector.
expect to see companies across the Organisations are coming under scrutiny
Food security and affordability agri-food sector recruiting employees as one of the largest users of natural and
remain a key priority for almost into a wide range of roles with a human resources (be that land, water,
every government in the world commitment to let them use the skills the oceans or soil or as a major employer
For many governments the availability and experience that they develop globally of people) which has a range of
and affordability of food is a top priority, during a sabbatical period to make a positive and negative benefits on the
as failures to deliver sufficient food to contribution to helping the world to community and society. It cannot be
their population can lead to social unrest feed itself. overlooked that the collective purpose
and ultimately could result in leaders in using these resources, to provide
being changed (via the ballot box or other Finance arrangements people with sufficient food, is undeniably
means). Governments are taking different increasingly take account positive. The very reason the sector exists
approaches to setting up resilient and of how a borrower manages is to feed the world. This provides a solid
secure national food systems. Some ESG in their organisation framework for working with those who
countries lack the ability to produce all the may oppose various activities within
food they need to feed their populations To date, the investment that organisations the sector. When setting policies and
and as a consequence governments, have made into addressing environmental operating practices, more organisations
either directly or through sovereign and social risks they face have are inviting a diverse range of perspectives
wealth funds, are making international predominately been seen as a cost. to the table. This helps them to design
investments designed to secure access However, this is changing rapidly as robust frameworks that enhance rather
to sufficient supplies of product to meet investors and lenders around the world than detract from their social license to
domestic demand. Other countries are start to place more focus on the activities operate. Companies need to ensure they
making significant investments to develop of the companies they are providing listen to every voice so communities are
domestic production, including securing capital to and the impact that these assured the sector is working with them,
access to novel growing practices and activities have on the environment and not against them, to maintain their social
new technologies. There are also initiatives the wider community. The consequence licence to operate.
to diversify diets to reduce reliance on of this is a growing amount of green
products that are more susceptible to financing arrangements being entered into
supply issues. Enhancing food handling around the world, which is forcing those
practices and encouraging agri-food raising capital to link their Environmental,
companies to minimise waste are also a Social and Governance (ESG) performanceYou can also read
