Food System Transformation #6: The fresh produce supply chain

A “transformed” food system means a radical restructure of what happens between farm gate and retail outlet.

Why? It’s where most of the activity and nearly all of the profits lie.

One of the Players engaged with 30 others in our scenarios Game last year, was shocked about  how many don’t have a clue about any aspect of the food chain“.

This is nowhere more evident in that largely opaque space between farm gate and retail outlet.

Most people from across all walks of society has only a little understanding about how the billions of portions of fruit and vegetables get from the farm-gate (wherever it might be in the world) and into our shops.

This crucial part of the supply chain involves a series of complex, dynamically changing operations. A simplified (!) version of what happens is illustrated in the map below.

 

 

This map was first drawn on a flipchart by the fresh produce wholesaler and the supermarket exec at a workshop we ran as part of our submission to the National Food Strategy Call for evidence.

You, the consumer (and your wallet) are at the end of a host of processes largely hidden from you — unless you buy directly from the farmer. Even if you do, you’ll be aware that lots of farm outlets source the produce on their shelves from outside their farm gate; see for example, this blogpost about Beckett’s Farm in Wythall, just south of Birmingham.

The Beckett’s Farm blogpost highlights another, significant factor in the food system. It’s well nigh impossible to make a living as a farmer engaged solely in primary production. It’s worth remembering, too, that the margins along the whole fresh produce supply chain are tiny, 0%-2.5% was quoted to us a couple of years ago (see Back from the future, our horizon scanning report), and we’ve heard margins have been further squeezed since then.

Remember, too, this supply chain map is a simplified version. In reality every step of the way is far more complex, and involves lots of people, hefty expensive equipment (a grower recently told us that they’d spent some £400K on a robotic system for a single purpose, to plant sweet-stem broccoli), just-in-time logistics, inspections and testing.

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Simplified though it is, this map highlights these six points relevant to transforming the food system:

1. Capital investment & profit margins

  • The system requires high levels of capital investment to get a perishable primary product into the mouths of the millions in the UK, and in the face of competition from the billions of people overseas.
  • Every step of the way has to add value for the business carrying out the operation.
  • When margins are so tight, businesses have few options; they can leave the sector and making a living elsewhere, or diversify and/or supply a higher value niche market and/or they scale the business and/or they merge or acquire other businesses in the supply chain.
  • The requirement for capital investment, plus the slim margins, means there are high barriers to entry.

2. A few dominant companies

  • We should not be surprised, therefore by our dependence on a few dominant companies — at every level of the supply chain.
  • Nor should we be surprised by the proliferation of highly processed food and drink products, many with zero or close to zero nutritional value. An example of such products are those categorised as ‘drug foods‘.

3. Who owns what when?

  • Difficult if not impossible to know for any single product line.
  • Complicated by the fact that any particular product, a burger say, may contain many ingredients from all over the world, each one subject to dynamic change in provenance and use.

4. Local provenance for cities such as Birmingham?

  • Increasing production in one location, such as within the agricultural hinterlands of the West Midlands conurbation, contributes to food security for the UK and beyond, but has a minuscule if any impact on the supplies of safe, nutritious food for Birmingham and the wider conurbation, nor on the dietary choices and consequent health of its population.
    note: It’s surprising how many people, including some academic researchers, assume that such an increase would have such impacts.
  • This begs the question: Under what circumstances could local provenance of a proportion of the city’s requirement of fruit and veg? Under what infrastructure and economic changes would it be attractive for entrepreneurs to set up, say, flourishing market gardens in urban neighbourhoods or in our peri-urban environments?
    note: Beckett’s Farm is in the ambit of Birmingham’s peri-urban environment and they cannot make a living from primary production (see paragraph 6 below).

5. New technologies can suddenly change the system: Two examples

  • Home deliveries had double-digit growth last year, and new players are entering the market.
    Expect the unexpected; for example, the recent requirement by Just Eat that their suppliers have compliant Food Hygiene Ratings (FHR) generated a an increase in requests for food inspection here in Birmingham, with a knock-on effect of higher FHRs in food outlets across the city.
  • There is now investment in “dark kitchens”, that is robotic production of meals. The effects this development will have on the system is as yet unknown.

6. While primary production . . .

  • Across the world, farmers scrape a living. Arguably, you can’t make a living from primary production. Hence agricultural subsidies exist in many countries.
  • But without primary production, we haven’t got a food system.

Yet despite all the above, this complex supply chain all somehow configures itself so that a wide variety of food comes efficiently, seemingly effortlessly into our cities, so anyone with enough money to pay for it can tuck into a good meal, perhaps one of the delicious-looking plates of food in the image at the top of this blogpost.

It all works. Like magic.* But for how long?
* Any sufficiently advanced technology is indistinguishable from magic is the third of Arthur C Clarke’s Three Laws.

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