State of the Industry talks go back to the future
The Produce Marketing Association’s (PMA) Fresh Summit conference kicked off with a provocative and creative bang today in Anaheim, California. Association president Bryan Silbermann invited four ‘thought leaders’ to paint their visions of how the industry could look a decade from now. Predictions included a shift back to personalized store formats combined with internet orders, doubling food demand, robot harvesting, LED production, and a completed San Diego convention center expansion.
At the end of today’s panel discussion, HarvestMark founder Dr Elliott Grant called on participants to “suspend disbelief” when contemplating the changes the industry could be in for over the next 10 years.
“In 2022, here we are, the 25-year-old shopper who walks in the store has an app that lets her know that this store’s salad on average is fresher than the other store’s. That’s why she chose it today,” he said.
“The other thing is this morning she got a special offer that said come and buy the pineapples in this store today because they just arrived this morning from…Cuba.
“They’re especially sweet and fresh and they match exactly what she’s looking for. That offer was specific to her location, her preference and what’s specifically at that supermarket chain.”
But Grant’s predictions went much further at the consumer level, estimating that packaging improvements would be focused on increasing usable shelf life, nutrition and flavor, along with a mass data processing traceability system that is basically invisible.
“What’s visible is the benefits that traceability is bringing – that’s freshness, taste, quality and relevance to the shopper in 2022, and that will be the basis of competition,” said Grant as his 2022 self, no longer one of Silicon Valley's top 40 entrepreneurs under 40.
“We’ll have improved shelf life so much that over the last decade produce exports from the United States have gone from 18% of farm gate to 50%, again transforming the economics.”
He said the structure of growing would also change dramatically in the next decade.
“It’s 2022, growers are using LEDs, indoors and vertical farming. LED lit produce uses 97% less water, less fertilizer, and doesn’t generate any heat, so the plants are much healthier, they don’t need to be cooled down, and they can grow almost anything year-round.
“And the reason that indoor growing makes sense is because spikes in water, land, and transportation costs, have made it cost effective now to grow on the roof of the grocery store or the parking lot of a grocery store.”
In a panel where labor scarcity was a key issue, Grant’s predictions about robots formed his most futuristic claim. When the term was put forth by Czech writer Karel Čapek in 1920 it was the object of fantasy, but today seems very likely, even for a sector so evocative of the human condition on this earth as farming.
“Robots are getting fantastic. I’ve got a robot who vacuums my house every day, and it’s 2012. In 2022, robots will be packing, labeling, shipping our produce, and I actually think they’ll be picking our produce,” Grant said.
“Today in 2012 people don’t believe that a robot can pick a strawberry, but Google’s robot car just drove 300,000 miles without an accident and without a driver.”
In summary, Grant emphasized technology would be transformational for agriculture.
“I’d like you to reflect on this. Every technology that I just talked about in 2022 is actually available today in 2012, and is already being used by folks in the audience on a small scale, so my question to you to think about today at Fresh Summit, this weekend, is what are you doing about it today because a lot of this technology is already here?
Understanding the 2022 produce consumer
Food Marketing Institute CEO Leslie Sarasin discussed another way technology would impact the produce industry, in the form of frugal digital consumers and what their behavior would imply.
As her future self, she said studies in aftermath of the great recession of 2008 around 60% of consumers identified themselves as 'value-seekers', and this percentage had risen to 80-90% by 2022.
"So these attitudes of frugality have become the new norm, and that’s the way it’s going to be for a while at least," she said.
"The second factor I’d like to mention is the tools for shopping - they use every tool at their disposal to be able to feed this value consciousness that they feel, and they want to feel able to shop smarter in every way of their lives.
"The most frequent tool they’re using is digital technology –we’re still using home computers, as hard as it is to imagine that, but our smart phones are smarter than they’ve ever been; they give us more opportunity to know information than we’ve ever had before."
She said the rise of e-commerce would be the third key issue.
"It's growing across the board, and if we take a look at some of the categories in groceries specifically where these sales are increasing, it would read like the aisle markers in a lot of the traditional stores that we’re familiar with."
"It means something perhaps unlike anything we’ve ever experienced before. Perhaps we’re going to be retailers who partner with an existing e-commerce entity, and we partner with them to do the online selling and buying, and we become the point of distribution in our stores.
"Or maybe we can also establish our own variety of online shopping and we handle the distribution ourselves."
Conversely, as e-commerce grows, Sarasin's prediction is that retailers will take on smaller store formats.
"They constantly seek to differentiate themselves, focusing on one or two different operating models, and those value propositions can be anything from price value, assortment or convenience. Most of the very successful of these small formats will major in one and minor in the other two.
"What we’ve gone through is an evolution – from the mom and pop stores of the 1920s and 30s, the grocery stores of the 40s and 50s, the supermarkets of the 60s and 70s, the ubermarkets of the 80s and 90s, and now what we have is a return back to the personalized service and values of the mom and pop stores that we started with back in the beginning of the previous century.
"These new formats are going to depend on technology, so we have to be ready to address it, we have to be ready to embrace it."
Raising consumption, working with government
Vic Smith, owner of such companies as JV Farms, Agricola El Toro and Skyview Cooling, gave a more tongue-in-cheek talk than the others, joking about difficult it would be to get a hotel reservation at PMA Fresh Summit 2022, and also poking fun at delays in implementing the Food Safety Modernization Act.
"When the produce rules finally came out in 2017, we'd already cooperated and corroborated as supply chain partners in delivering safe food to our customers.
"We used the 20 years of our experience and leveraged our technology to greatly reduce food safety risk; industry and government sponsored applied research guided us to more efficient risk-based assessments, to exponentially improve our delivery of safe food.
"We agreed this was much better policy and less expensive use of our tax money as related to agricultural policy. The FDA finally realized our successes and chose to align with us as a vested partner in validating our systems as approved; our risk assessments and mitigation procedures were working."
As a result, in combination with demand-driven policies targeting children Smith said his future self would weigh 10 pounds less.
"That’s because of a definite concerted effort by industry groups covering all the fresh categories of fruits and vegetables begin to drive public policy to advocate a majority of our diet come from fruit and vegetables, and then I begin practicing what I preach with my own industry peer group.
"The health crisis back in 2013 and 14, began our journey and the need to move quickly, and not to band-aid problems, but to come up with real solutions.
"Childhood obesity and chronic diseases were draining our national economic resources and limiting our capability to compete in the international arena."
In Smith's scenario, the conclusion from society was to change lifestyles, particularly diets, with strong education, advocacy and partnership within the industry.
Improved productivity to face scare resource challenges
While Sarasin saw the frugal attitudes of consumers was likely here to stay, Rabobank vice president and agricultural economist Vernon Crowder highlighted fundamental demand and supply issues that meant high prices were in store.
"By 2022 it’s probably going to be 7.9-8 billion people in the globe. Most of that growth, 97% of that growth, is going to be in developing countries," he said.
"Very importantly, about half the world’s population today is now living in urban areas, much more than it was 20 years ago – we expect urbanization will continue.
"In fact, by 2050, about 70% of the world’s population is going to be in urban areas."
He said the main driver of urbanization was economic, which meant a lifestyle change for these people who are moving to the cities.
"They have the ability to save food, they have the income to buy higher quality food, and much of that is going to be protein - meats - that really increase the consumption of food.
"While we expect the population to increase by some 30% over the next 40 years, we expect food to demand to actually double because of this demand for higher quality food."
In this context, Crowder pointed out food production was already unable to keep pace with demand.
"We see the rate of productivity increases in food production are not keeping pace with historical trends. They're still improving but much less than they were before.
"Many countries, through their political process, have dropped their subsidies, or sharply reduced their subsidy programs, so we have seen many surplus stocks – vast inventories during periods of shortage, were gone.
He said this built a great deal of volatility into the system.
"Over the last decade or two we have basically gone to a just in time delivery system in our food supply chains, and now that we’ve had some disruptions in some supplies, we’ve had that growth occurring, we’re seeing much higher prices.
"The squeeze is really on there, so it’s going to take a while for the production side to catch up and respond to the higher prices. We’ll probably still see a great of increased prices and volatility, even by 2022.
Part of these issues have to do with less land, water and energy available for farmers. He said only 2.5% of the world's water was fresh and about 70% of it was frozen, while pollution problems existed for some of the fresh water that existed.
"It's estimated about 1.4 billion people right now are relying upon groundwater basins that are being overgrafted nearly every year.
"We can’t make much more food, we can’t make more fresh water - obviously we can talk about desalinization, but that leads me to my next tight resource – energy."
He added land was scarce was too with a fair amount of it lost in developed countries.
"Fortunately that has been replaced with new lands being cultivated in South America. At the same time, out of concern about what’s happening to the rainforest and what’s happening to our planet’s condition, we can’t continue to expand cultivated land in South America much more."
Crowder pointed out a large portion of the world's agriculture depended on migrant workers, but in the U.S. in particular there were political and social changes that would affect its availability.
"There’s a lot of debate in terms of how many people we’re talking about, in terms immigrants in the United States, but most of them have been or still are working in agribusiness be it on the farm or in processing.
"We know these numbers are declining in recent years. They’re declining for a number of reasons. Not only for the violence on the other side of the Mexican border where most of the immigrants come from, but also our increased border enforcement as well.
He added the Mexican government was also focusing on educating its youth with kids staying in school longer and more women working.
"That has drastically reduced the birth rate in Mexico in the last 10 or 15 years. It used to be a little less than seven per family, now it’s not even three.
"In 2005 we might have had about 1.4 million people estimated to be crossing. Last year we probably only had around 350,000 people estimated to cross the border. So this is a really tight resource issue in terms of labor for the agribusiness system."
Despite this seemingly pessimistic outlook, Crowder said he remained an optimist and that was strengthened by the fact his company was the largest lender in agriculture. To overcome these challenges, he said there were still improvements that could be made from both the private and public sectors.
"lot of efficiencies that can be gained out of both improved government policies, trade policies, farm programs that encourage more productivity, obviously higher prices are going to encourage more productivity.
"There’s even the issue of waste. It's estimated right now that about 1.5 billion pounds of food are wasted a year. About 75% of that is between the farm and before the consumer, 25% is with the consumer.
"We are going to improve technology – that includes GMOs, and that’s going to require a lot of education for people."