Donald Trump has made no secret about desires to rollback a wide range of regulations. While the extent to which he can be successful long term is still to be determined, there are important questions to consider as the regulatory reins are loosened.
Among them, in what way might state-level regulations, as varied as they might be, step in where federal oversight is withdrawn? Will pressure from activist or special interest groups be loud enough to spark change in the name of the environment or animal welfare? And -- importantly -- will consumers be willing to pay the price for products grown to certain standards of sustainability, animal welfare or other criteria they determine to be important to them?
These were a few in a battery of questions raised in the 2017 Food Foresight trend discussion about whether or not the marketplace will emerge to fill voids left by future regulatory rollbacks. While the answers are to be determined, savvy organizations should consider new or strengthened market forces that may emerge as a result of environmental, social, and economic regulatory relief.
Food Foresight panelist Jeff Dlott, president of SureHarvest, a division of Where Food Comes From (WFCF), believes consumers will be willing to pay more for products with measurable sustainability attributes and that marketplace demands could supersede regulations, creating competitive advantages for companies and industry sectors that use technology and innovation to advance beyond regulations.
“Some areas of deregulation will likely not align with what consumers are increasingly demanding, particularly in the areas of resource management and social responsibility,” says Dlott. “Loss of confidence in regulations as a means toward delivering sustainability, paves the way for advances in smarter food systems that include management systems driven by smart, connected devices, ubiquitous internet access, and artificial intelligence.”
“Better, cheaper and faster smarter systems can deliver transparent and authentic outcomes to the marketplace and, in doing so, farmers and ranchers can reap big data-driven benefits previously the exclusive domain of very large corporations. These benefits include operational efficiencies, customer loyalty and, ultimately, profitability derived from smarter systems,” Dlott said.
Imagine a scenario where a farmer uses connected devices and predictive software to track water, energy and fertilizer inputs as well as carbon gas emissions. Inputs are compared to yields and outputs in real time, and adjustments are made to minimize use of natural resources, maximize efficiencies, provide greater alignment between supply and demand, eliminate waste and produce healthy, nutritious food to meet marketplace needs. Growers are happy and so too is the marketplace – consumers with a desire to protect the environment and natural resources.
While some see opportunity, others believe demands on suppliers – whether driven by regulations, consumer pressure, activism, or a variety of other factors – ultimately will transfer to higher costs of production and these costs will need to be recuperated. One of the central questions discussed during Food Foresight 2017 is “who and how do people pay?” The balance between regulations, taxes, and the social good compared to markets is being re-wired. Is consumer-demand and capitalism the driver or supply-side systems that have depended on regulations historically and have provided a license to operate at home and a license to trade in global markets?
Retail and foodservice chains are setting and publishing sustainable sourcing goals. Such goals help accelerate sustainable sourcing and procurement strategies, and can contribute to increased pressures put on suppliers.
“Regulations and or marketplace-driven demands may do a lot of good but they’re never free,” said Food Foresight economist Daniel Sumner who runs the Agricultural Issues Center at University of California, Davis. “The costs have to be absorbed somewhere, and in agriculture where margins are tight, these costs are split between suppliers, workers and the consumer.”
Sumner says the challenge is getting the right information to the right consumers so those willing to pay have that opportunity, while other consumers may opt out.
Nestle Chairman Peter Brabeck-Letmathe, believes we are reaching a tipping point where consumers are willing to pay the extra costs that may be associated with more sustainable food production.
“If you look at the millennials, they are the first generation now who are consciously willing to spend more for better quality, for sustainability, for traceability. I think there is a change,” Brabeck-Letmathe said on CNBC.
The debate about whether consumers will put their money where their mouths often are is ongoing, but before celebrating any de-regulation “wins” those in the agri-food marketplace would be wise to think beyond regulations to what potentially can be driving them: the marketplace.
About the authors: Kerry Tucker is chief strategic counsel at Nuffer, Smith, Tucker Inc., a strategic planning and public relations firm and founder of Food Foresight. Teresa Siles is managing director and senior vice president at Nuffer, Smith, Tucker, Inc. and co-publisher of Food Foresight.