There’s no hiding from the social and environmental challenges facing the food sector but scratch beneath the surface and you’ll find reasons for optimism. By Nick Hughes.
1. Food price inflation has peaked
Sky-high levels of food price inflation have been a millstone around the necks of businesses for the past year. Foodservice price inflation peaked in December 2022 at just under 23%, as measured by the CGA Prestige foodservice price index (FPI), however the signs clearly suggest that the worst of the inflationary pressure is behind us.
October’s FPI inflation rate of 16.7% was the lowest since August 2022 and marked the fifth consecutive month in which the rate of inflation decreased thanks to a continued softening of prices for key commodities like wheat, rapeseed oil and butter.
The compound effects of these huge inflation figures still need to be carefully monitored and managed, according to Prestige Purchasing CEO Shaun Allen, but businesses can at least start to plan now the peak appears to have passed. “The downward movement in foodservice price inflation is starting to build momentum, and we can [be] optimistic that pressures will ease further for businesses and consumers alike in 2024,” says James Ashurst, client director at CGA by NIQ.
2. Business collaboration is growing
Unilateral action on some environmental issues, like investing in on-site renewable energy or reducing food waste, can be a source of competitive advantage for companies. However sector-wide sustainability progress often rests on a willingness to collaborate with peers and supply chain partners.
The good news is that appetite for collaboration appears to be growing. FareShare’s new Alliance Manufacturing programme, a key part of the Coronation Food Project championed by King Charles, is designed to make redistribution of surplus food that can’t be avoided a shared business endeavour. Rather than ask companies simply to scale up their business-specific redistribution networks, signatories are required to combine their disparate resources to help build new, shared networks – donating not just surplus food and packaging but also their underutilised labour, factory and distribution capacity.
Moves by Compass and CH&Co to co-fund collective action projects on water stewardship, which will benefit competitors who source from the same catchments, are another example of how certain businesses are prepared to set aside commercial rivalries for the greater good.
Unilever, meanwhile, has announced it will grant free access for its fellow ice-cream makers to 12 reformulation patents that enable ice cream products to remain stable at the warmer freezer temperature of -12°C, rather than the current industry standard of -18°C, thereby saving energy.
3. Incentives are being linked to ESG performance
A key insight from The Food Foundation’s recent ‘State of the food industry’ report is that health and sustainability targets are more likely to be achieved if commitment to them comes from the very top of the business.
It’s positive therefore that companies are starting to link executive pay and benefits to the successful delivery of ESG targets in areas such as carbon emissions and diversity, in order to achieve and sustain leadership buy-in.
Co-op and Tesco now link board member remuneration packages to the achievement of environmental outcomes, such as hitting scope 3 emissions targets.
Sodexo’s long-term incentive plan for senior leaders includes achievement of sustainable development targets on responsible procurement, reduction of food waste, energy management, healthy and sustainable food offerings, and diversity and inclusion.
A note of caution however: an analysis by PwC from March 2023 found that most carbon targets linked to executive pay are not meeting investor expectations for them to be meaningful, objective and transparent.
4. Local leaders are filling the policy void on health
While the UK government dithers over the introduction of policies designed to tackle diet-related ill health, local authorities are embracing interventions that create healthier food environments. In June last year, Tower Hamlets became the seventh local authority to bring in a healthier food advertising policy which restricts the advertising of products high in fat, sugar or salt (HFSS) within its jurisdiction. It follows evidence showing that advertising restrictions across the Transport for London (TfL) network have already been successful in reducing energy, sugar, and fat purchased from HFSS products (despite the policy ruffling a few feathers along the way).
The Soil Association meanwhile reports that one in four UK local authorities, representing half the population, is now a member of the Sustainable Food Places programme which aims to improve access to healthy, sustainable food by connecting key local stakeholders like public agencies, community organisations and businesses, including caterers.
5. Scrutiny of green claims has never been greater
As a rule of thumb, for every business doing genuinely good work to improve society there is (at least) another trying to pull the wool over our eyes. In recent years, growing public awareness of environmental issues has spawned a rush of marketing-led claims that product A or brand B is better for the planet because of X, Y or Z.
Yet 2023 proved a good year for those of us who like our green claims to be substantive and ambitious as regulators stepped up efforts to separate the bona fide from the baloney.
One example is how companies have started rowing back on pledges to achieve carbon neutrality for their operations or individual brands; this follows a backlash against a practice that relies heavily on carbon offsetting. More businesses are now talking the language of deep decarbonisation – good news for citizens, campaigners and the planet.
The hope must be that in 2024 a balance is struck whereby hypocrisy continues to be exposed while those making measurable progress against credible ambitions are not scared into silence.
