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Vegan, organic and sustainable: The impact of new consumer trends on meat and dairy procurement

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Insight
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WORDS: Barbara Guignard

There has been a huge shift in attitude towards food over the past 40 years. Its share of our total budget is diminishing but concerns over its impact on our health and on the welfare of the planet have increased. Today’s more discerning consumer wants to know where their food comes from, how it was made, and the subsequent impact on the environment. But what does this mean for meat and dairy procurement? 

According to The Vegan Society, demand for plant-based food increased a substantial 987% in 2017, with veganism predicted to be the most significant food trend in 2018. Not everyone wants to give up meat altogether, but alternative diets have seen a boost in popularity. The Annual Food Survey, conducted by the International Food Information Council Foundation, indicates that in 2018, one in three Americans were following some sort of diet, with most of them having an impact on the quantities and quality of meat and dairy consumed. 
 
These new consumer trends do not appear by chance. The abundance of information on both social and conventional media means consumers are often bombarded with the results of – sometimes contradictory – scientific studies and eating recommendations. With so many publications on what we should eat and how we should care about where our food comes from, it would be natural to assume that the sale and consumption of meat and dairy might be on the decline – impacting the entire supply chain, including procurement. And there is evidence to support this.
 

An alternative approach

 
Plant-based alternatives are experiencing a rise in investment, Nestlé being a good example of this with its latest ‘meatless’ burger. In-vitro meat has also seen significant improvement in its development. MosaMeat claims to be producing the “first slaughter-free meat” and has seen its costs of producing meat in a laboratory rise from €250k six years ago, to about €9 today. There are many steps yet to be taken to ensure this meat is actually vegan, as the process for extracting the stem cell still involves a biopsy procedure on the cow.
 
The growing concern of consumers when it comes to sustainability and, therefore, traceability is also likely to be a strain for the food industry. Cargill has already taken steps towards this, investing $300 million in AI tracking devices in one of its poultry farms. In Europe, Spain has just launched a new welfare scheme for pork production, endorsing good practices in the industry. But this has a cost which is eventually felt by the producer and the total cost of production. 
 
So, what about the dairy industry? Research from Mintel reveals that the sales of milk alternatives (soya, almond, coconut milk) in the US increased by 61% between 2012 and 2018, reaching over $2 billion sales. Health concerns seem to be the top reason for seeking alternatives to cow’s milk. The dairy industry also faces criticism from vegan organizations, as the treatment of cows involved in the production of milk and its derivatives is considered even more cruel than in the meat industry.
 
Signs clearly indicate a shift in the future production and consumption of meat and dairy. Is this a long-term revolution that meat and dairy producers should be afraid of? Should they keep going as they have done in the past or should they start diversifying their production and supply base or even start investing in plant-based products? In my opinion the answer is yes and no, and here’s why.
 

Time for change?

 
A key characteristic of trends is that they tend to disappear as quickly as they appear. Have you heard of the Keto diet? According to the Annual Food Survey by the International Food Information Council Foundation, referenced earlier, this is one of the top six diets followed by dieters in the US. Some experts predict it will disappear as quickly as it arrived, similar to the Grapefruit diet of the 1970s, which saw the sale of citrus fruit explode in the US, only to become one of many forgotten consumer trends.
 
The OECD-FAO Agricultural Outlook 2018-2027 provided a market forecast indicating that the meat industry still has good days ahead. Its latest report on meat revealed a projected 1.1kg increase in global meat consumption per capita. When looking at the specifics, the poultry market is predicted to gain the most significant growth, while beef, sheep meat and pig meat are expected to change marginally. The reason for this is because of poultry’s “low production costs, high feed conversion ratios, and low product prices”. The report goes on to say that: “Its short production cycle allows producers to respond quickly to market signals, while also allowing for rapid improvements in genetics, animal health, and feeding practices.”
 
As far as the dairy industry is concerned, the same upward trend seems to occur despite the rise in milk alternatives. According to a Beroe report, the growing GDP in the developing countries and Consumer Price Index in OPEC countries are expected to boost the demand for milk and its derivatives by a total of 1.19%.
 
So, what can procurement professionals do to respond effectively to this change?
 
  • Traceability and sustainability: These are two topics that seem unlikely to fade as quickly as diets. As previously mentioned, large companies like Cargill are already investing even more in traceability, setting up a $300 million AI tracking system. For procurement professionals, it is probably time to discuss future investments with meat and dairy suppliers. Key questions to consider include what systems are in place to track the supply chain? How do you ensure the production is sustainable? What steps are in place to ensure you stay ahead of ever-more stringent future legislative requirements? 
 
  • Collaboration with suppliers and innovation: We know that animal husbandry causes considerable CO2 emissions, but according to HSBC Global research, innovations in the field mean that in the future, different animal nutrition, including seaweed, can reduce the polluting emissions. Instead of considering meat alternatives, it might be worthwhile ensuring your suppliers are keeping abreast of these innovations and taking steps to invest in smart solutions. Alternatives to meat and dairy are of course a trend to follow closely. Some companies have already decided to invest in this field, such as Maple Leaf in the US, which recently announced that its to build a £310 million protein-based food plan. As we’ve seen, poultry seems to be the safe meat to bet on for the future – could this present an opportunity for diversification? Innovation and investment from suppliers doesn’t happen without a strong strategic partnership – you need to involve yourself in the game. 
 
Several changes can take place within your organization:
 
  • Strategic approach to procurement: The initiatives explained above cannot be executed without a strategic procurement plan in place. Strategic procurement is not about a one-off discussion with suppliers when prices are starting to creep up or when the contract needs renewing, it’s about putting together a comprehensive program of procurement practices within your organization. This involves training your teams and introducing a culture of change, which could take years but it’s worth the investment.
 
  • Cross-functional co-operation: Similarly, a strategic procurement organization cannot operate in an optimal way without collaborating with different functions within the company. The most successful organizations enjoy a strong collaboration between the various functions across the supply chain. In other words, for example, procurement talks to sales and they work together to understand the challenges faced by both parties, agreeing solutions that offer the best quality at the lowest cost possible.
 
  • Education: Finally, education is the key driver for change within an organization. Even if the results are less tangible, investing in educating your teams will reap benefits in the long term. A culture of change and learning is paramount to delivering quality procurement. The best way to do this is to stay on top of the latest industry news by signing up to newsletters, attending conferences and taking part in discussions. Train your teams on the latest innovations in the market, on tools and techniques, and about key challenges. Suppliers are also a great source of specific knowledge, especially when what you buy from them is their core business. You could simply get a meeting with a potential new supplier who will be happy to give you a lot of first-hand information about the current trends on the market, the challenges they face and their strengths.
 
Today’s economy means the world is changing fast. Trends do not last decades – rather weeks and, in some industries, just days. Not only does this impact the strategy, sales and marketing teams, but also procurement. The meat and dairy industry is likely to see a global increase in its production and consumption, especially in developing economies. Yet consumer requirements and legislation are still encouraging a push towards alternatives to milk and dairy, as well as innovation.
 
As a procurement professional, it is crucial to keep abreast of a fast-changing environment, while striving to maintain a long-term vision for the organization. A strong collaborative relationship with your strategic suppliers is all-the-more important in this context. Thinking outside the box to see where other options for a more performant procurement plan lies – internally as well as on the market, is also key.
 

An abridged version of this article was published in Supply Management. Click here to view.