Over the coming decade, the global food system will transform dramatically, both structurally and systemically. The change will impact food security, nutrition, revenues and profits, markets and supply chains. The COVID-19 pandemic, no doubt, is a driver of change, having increased food insecurity and showing weaknesses in current systems. But, in addition, prior to the disruptions of COVID-19, other forces of change were already at work.
To understand the dramatic changes reshaping the food sector, think of the food value chain as a series of interconnected gears, with farmers with annual crop cycles functioning as big gears at the top of the system and consumers at the other end as smaller and more numerous gears. Until recently, the food system was driven by the big gears, from the top down, from producers to consumers. But that is about to change.
Given current trends, the food value chain will potentially reverse direction, with consumers driving the conversations and change. The small gears move fast, with preferences changing daily, weekly and monthly, and these rapid consumer shifts are pushing change all the way through the system from the bottom up.
Given current trends, the food value chain will potentially reverse direction, with consumers driving the conversations and change.
From changing diets, to urbanization, population growth, consumer interest in healthier food and transparency, all of these consumer interests are driving what farmers and the other actors in the value chain have to think about. As a result, leaders inside and outside the food system, from primary actors, equipment manufacturers and suppliers, financial services, energy or other related enterprises, all have to reimagine the food system and the roles they play.
Food System Reimagined, the EY perspective on the future of the food system, takes a forward look at how the food system will evolve over the coming decade as a result of consumer-driven change. Based on two years of analysis and intensive discussions with leading companies, investors, academic sand agencies, Food System Reimagined has identified five pillars for a reimagined food system, which are summarized in this article.
There are three key assumptions at the foundation of the analysis. First, it is our perspective that consumer interest will be at the heart of the change. Consumers have spoken, and they say they want to get involved with the food system, more now than ever.
Second, the food system will shift to much more planet-friendly practices. Some would argue today that agriculture and food can become poster children for sustainability. There are many opportunities in this area.
Third, the food system will become more interconnected. The food system, of course, is already connected today, but, in the future, its connectivity will be less linear and more networked, more ecosystemic.
Through the EY Food System Reimagined perspective, the “ecosystem of tomorrow” has been visualized as a construct for a new food system. The ecosystem of tomorrow will include manyi nnovations (self-driving tractors, tractors that may be driven from somewhere else in the country or, perhaps, somewhere else in the world, etc.). The ecosystem also includes alternative energy on farms, such as windmills, turbines and solar panels powering the farm and, potentially, moving energy off the farm into the broader grid system.
A reimagined food system includes robotics and automation on farms. Farming today faces labor challenges, which is nothing new. During the pandemic, many industries faced labor challenges, but the issue is acute in the agriculture and food space. There are not enough people to harvest, and the reare not enough people to plant. So, automation and robotics will become necessary, both in animal agriculture and plant agriculture.
While rural areas experience labor shortages, urban populations are soaring, with projected urbanization rates possibly reaching60% of the world’s total population. While consumers are choosing city living, theyare also indicating a preference of wanting to be close to where their food is produced – creating challenges and opportunities for producers. As people moveout of rural communities, access to labor quickly diminishes, creating a void of human capital, driving the case for more farm-level automation. An additional solution is the rise of Controlled Environment Agriculture (CEA) in cities.
CEA (indoor, vertical, rooftop and greenhouse, etc.) is an innovation that can help address this paradox. These environments offer the opportunity to grow food in the city, next to the people who want it grown locally, and they call for a different labor pool then has historically been utilized in food and agriculture. Moving forward, we will see food growing in laces we never thought of in the past.
Aquaculture will continue to be a major protein source. The feed conversion-rate in aquaculture is more efficient than most, if not all, protein sources. Innovative ways to raise aquaculture in terrestrial farms, versus pulling fish out of the seas and the oceans, are coming online and offering ways to expand this source of nutrition.
Food innovation will be focused on the convergence of health and food. Cannabis as a hemp alternative and as medicinal marijuana – when does that show up in a pharmacy next to aspirin and other pharmaceuticals?
What does the grocery store of the future look like? What will restaurants look like in the future? Groceries and restaurants are where consumers interact most directly and personally with food outside the home. Because of the pandemic, shopping for food moved more online, with curbside pickup or home delivery. People could not go inside the grocery stores. Faced with this challenge, Baby Boomers and Gen Xers, who were seen as less tech-savvy than GenZs and Millennials, adapted quickly to “click and collect” and liked it. These changes are now seen as a viable opportunity going forward.
The shift to “click and collect” or “deliver at home” movesseveral foods into a backroom supply center or “dark store” from which thesethings are shipped. Traditionally, 99%of consumer choices happen at the shelf in the grocery store. Shopping for foodfrom these “dark stores” may affect the relationship between the big brands andthe consumer.
At the same time, consumers will continue to want to pickout fruit, vegetables, meat and dairy in person, in a “live store.” The live store of the future may have more services, such as a restaurant, pickup mealkits, or ways to cook a meal inside the store and take it home. There are many opportunities for the live store. The emergence of live store and dark store formats in the grocery arena could be a major disruptor over the next decade.
In the future, proximity will matter. Where food is grown, where it is sourced and where it is sold will matter. Consumers want local and fresh. They also want to see who and where it came from, as well as learn more about their food and its cycle.
Restaurants will follow suit. They will continue to want to source locally and provide more transparency in the food they are putting in front of their customers. “Ghost kitchens” are not a fad; they will be a major player in the future, creating more disruption, particularly in quick-serverestaurants.
Looking at a reimagined food system 10 years ago and lookingat it 10 years from now, the big axes look the same, but the moving parts arechanged dramatically, which is exciting.
There are many opportunities for leaders across the food system, both traditional and nontraditional contributors, to respond to these changes. Depending on your given role, there are different ways to consider what a reimagined food system means for you:
1. Trusted food – Built through transparency, sustainability, traceability, food safety and food accessibility
2. Connected system – Not only with technology, but connected supply chains, bringing small farmers into the conversation to bring food directly to consumers
3. Innovation-led experience – For both consumers and customers and all employees across the value chain
4. Reimagined growth – Differs from the traditional mode of incentivizing producers to produce as much as possible and then figure out what to do with it; today, there is an opportunity to rethink where growth comes from and to determine what markets to serve
5. Efficient operations – Must stay at the forefront, serving all stakeholders from a long-term value standpoint, and shareholders specifically
The food system is facing dramatic changes, and it is changing quickly. Those who move quickly and adapt can seize the opportunities that are in front of them. In the midst of this rapid change, you’re either at the table or you’re on the table.
The big question: How will you adapt your role to eliminate hunger and meet the changing demands of consumer-led food innovation?
The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.