In 2012 the global population reached 7 billion. The planet faced severe droughts, soaring commodity prices, and lagging food production. Are we staring down the Malthusian food and population disaster predicted in 1798? Or can innovation and technology come to the rescue? While the answer is too complex to know fully, it seems certain that the next decade will bring more volatility and disruption to the food industry and consumers. Changes in weather patterns, consumption, and global trade will force most companies in the food production business to change the way their businesses operate.
Rapid demographic changes are also creating new demand. In the decade from 2000 to 2010, developing countries have grown economically at the staggering average rate of 6.3 percent per year. This shift has lifted millions out of poverty and created a new global middle class. In 2000, China had just 3 million households with disposable income over $10,000; now it has nearly 60 million households in this category, and will have 230 million by 2020.
As the planet grows from 7 billion to a projected 9 billion inhabitants by 2050, and more and more of this population joins the global middle class, how will the global food market of the future look? How will companies and policymakers be able to ensure that supplies and resources are sufficient, and accessible? A few food production innovations, such as precision farming, genetically modified crops, and vertical (urban) farming might help us meet the demand -- but right now it feels like we're still a long way from where we need to be.
For global food companies, there's a chance to make a positive commercial and social impact over the next ten years while adjusting to the "new normal" in the food industry. What innovations might we see from the food industry?
- Faster innovation cycles. Consumer demand is changing rapidly in the developed and developing worlds, and faster innovation cycles will be needed to meet them. The ubiquity of social media and the runaway train of globalization will account for quick changes in tastes across national and geographical boundaries. Especially in the West, celebrity chefs and food blogs have created a culture where food is fashion. R&D organizations and strategic planning, in their current states, aren't set up to respond fast enough or affordably enough to be successful. Here is where one new model is needed.
- Competition. Rather than individual companies competing against one another, supply networks will become the new competitors. Along with food safety and transparency concerns, rapid shifts in consumer tastes and a constrained supply base will make teamwork and partnership in the supply chain even more necessary. As they balance price fluctuations with faster turnaround times and steady supply bases, food companies will need to figure out how to juggle all these new alliances. Only the strongest networks will win.
- Industry consolidation. It will become increasingly important for companies to widen their lens to the entire globe in order to meet the demands of these emerging markets, and to secure access to shrinking resources. In addition to having a global-scale outlook, the food industry will probably have to rely on political influence to respond to issues raised by non-governmental organizations and restrictive regulations.
By taking such actions, the global food industry will have a fighting chance of meeting the new demand. Newly affluent shoppers in the developing world are gaining a pocketbook and a taste for meat and poultry, moving away from a subsistence-level diet of grains and vegetables. The United Nations Food and Agricultural Organization (FAO) estimates that from 1999 to 2030, annual meat consumption will rise from 38 million tons to 59 million tons in Asia and from 21 million to 35 million tons in the Middle East and North Africa. This will necessitate doubling grain production throughout the world by 2030, as the production of one pound of meat requires seven pounds of grain.
Granted, it would be a mistake to assume that these new consumers in the developing world will suddenly start to shop or eat like Western consumers -- rising middle-class consumers still keep many traditional tastes and preferences. At the same time, the so-called Western diet is likely to undergo a big change of its own in the coming years, driven by our heavy emphasis on snacking, fragmented food preferences (vegan, gluten free, allergies, etc.) and obesity control. These factors have led to frequent smaller portions, lower meat consumption, and more diverse cuisines. The Western palette will most likely shift further, in unanticipated ways, as companies introduce new products, from artificial meat to edible biocultures.
While population growth and shifting diets will continue to grow the global demand for food, the restricted availability of agricultural commodities and ingredients will limit the options available to companies in the global food industry. Companies that figure out how to use their scale and influence in the global market will be better positioned to adapt and take advantage of the emerging opportunities.
About the Author
Based in Chicago, IL, Dave Donnan is a partner with A.T. Kearney, and leads the firm's Food & Beverage Practice. He can be reached at firstname.lastname@example.org