Whether we like it or not our food industry is global and events around the world impact what happens here at home. The unprovoked attack on Ukraine will have impacts on the supply and cost of food around the world. The global supply chain we operate in really has evolved in recent years to adapt and work hard to feed a growing population. Google can provide definitions, but it does not always help you understand the importance of the term or perhaps even a specific meaning in our industry. We are going to share some food and beverage industry terms and explain how they can benefit or impact your business.
Global supply chain is the complicated international production, processing and delivery of food, from farm to table. The food industry does operate on supply and demand. Food is essential to life and it has become a massive machine, with so many interlocking links. In the end, it is driven by consumer demand and producer and processor ability to supply. There are so many complexities that an event such as the invasion of Ukraine will impact the supply of basic commodities and the cost of energy. Both will likely be in shorter supply, which will drive costs up.
West meets east
We have all seen the chilling images coming from Ukraine. It is also scary to see the allies in the west line up against Russia and their allies. We do have sophisticated supply chain for food, that has been tested in the last two years with the pandemic. Now it will be tested again as many countries of the world unite in their opposition to Russia. When you think about food the truth is Russia and China produce vast amounts of food, much more than many of the western allies. Two other countries that have not lined up with the western allies are India and Brazil. They also produce huge quantities of food. The majority of this food from China and India is used to feed their own populations, but it is all part of the global supply chain. We know all food has it’s origin in primary agriculture, with the exception of some new lab produced items. It is enlightening to explore where primary agriculture happens around the world. Obviously, climate, arable land, labour and technology impact the amount of food that can be produced. Even if processing is done in North America, many of the raw materials can be or are being produced elsewhere.
Diet also has a huge impact on the global supply chain. Demand for certain items is much higher in some areas. One of the complexities of the global supply chain is when products produced in other parts of the world are ingredients. If supply is short or costs increase significantly it can impact production of many processed items.
According to the Food and Agriculture Organization of the United Nations, the following nations produced the largest quantities of food in each category. These charts do not provide amounts so they do not illustrate the proportion from each country.
Although our population in Canada is small, compared to some other countries it is surprising how few times we see Canada in the top food producing countries, given the land mass we have. Cereals include the top 3 producers and in 14 categories Canada is only there for canary seeds and oats. The top 3 wheat producing countries are China, India and Russia.
In the 27 vegetable categories, which include the top 5 producers, Canada only appears twice. We lead the world in the production of lentils and rapeseed. In the 27 fruit categories Canada only appears once with blueberries.
When you review the vegetables and fruit categories China leads in 13/27 vegetable categories and 9/27 fruit categories. India is in the top 2 in 14/27 vegetable categories and only 5/27 fruit categories.
Animal protein is another primary agriculture to consider when understanding the global supply chain for food. Again, Canada is not within the top 5 for any categories. Brazil has made significant investments in these items and they export considerable quantities. China are one of the top 3 in every category except turkeys.
Not surprisingly Canada does not appear in the drinks category either. Coffee and tea are dominated by southern hemisphere countries.
Dairy is interesting given the different diets in different countries. In Canada we might be looking for some of these items but probably not too much of the camel milk. I can honestly say I have not tried it so perhaps I should reserve judgement until I do!
As you can see the supply of food is global and we do rely on different parts of the world for a lot of the food we consume. If the invasion of Ukraine does continue and we see the world separate into 2 sides, it will have significant impacts on our global supply chain. One of the tactics employed by the west is to impose economic sanctions. In many cases this means we do not purchase products from Russia and allies. Given the source of food in the world we will have to make some changes to what we eat and how we process food. It is true our global supply chain is already somewhat aligned with our allies but some items will not be available and costs will increase on others.
If you are interested in global food production, I have a website for you. In 2019 I had the opportunity to speak at the CRAAQ conference in Drummondville, Quebec. George Steinmetz also spoke at the conference. He is a photojournalist from the U.S. He was tasked by National Geographic to explore how the world will feed itself. His images of food production, around the world were fascinating. The images are beautiful and so interesting to see how things are done in different places and the scale at which they are doing them.
What does this mean for suppliers in Canada?
It is ironic to talk about the impact of a global supply chain when I would also tell you food produced in Canada is more popular than ever. The fact is many Canadian products include ingredients from all over the world.
Just when we thought the pandemic might be easing up, you now have to be concerned if any of your ingredients or other inputs such as packaging or even fertilizer are at risk. Russia supplies huge amounts of natural gas used to make nitrogen fertilizer. With the economic sanctions in place, we already see energy costs rising and it is staggering when you understand the amount of agriculture inputs that come from eastern Europe.
Your cost of inputs could increase (again) and supply could be a challenge. Time to review with your suppliers (again) that they will have what you need it, when you will need it and how much it will cost.
Keep your customers informed of any challenges you see on the horizon.
Consider shifting the sourcing of inputs, if possible, to countries more aligned with the view in the west. To date China seems to be quietly supporting Russia but wanting to do business with the west. Obviously if this changes, it would have a huge impact.
Food security will be in the news and remember to tell your own story. If your products are produced in Canada consumers want to know about it more than ever.
Remember this causes great upheaval for your customers too. Retailers are sourcing products from all over the world and this will cause them more work. It is not easy bringing fresh produce from all over the world. I remember someone at Loblaw wiring money in advance for a container of cherries from across the world. The money went but the cherries never came. Global sourcing is not for the faint of heart!
We can all hope for a change and peace in the region and a chance for our global supply chain to breathe and recover from the pandemic.
If you have any questions or require help with the global supply chain, you can always send me an email email@example.com or call me at (902) 489-2900.
As we start into the new year we are going to focus on some terms in the food and beverage world for upcoming weeks. I am going to select a different term each week and give you a good definition and also some insights into why it could be important for your business. If there are any terms you would like me to focus on just let me know.
If you see things happening let us know so we can share them with our community. We also want to hear if you find this helpful and benefits your food and beverage business!
Changes in technology to produce our own food
As I write about global supply chains there are changes happening everywhere. As you can see here significant investments are being made in B.C. to reduce the dependence on imported food. There is no doubt it makes sense for a lot of reasons. We just have to figure out how to do it so it is reliable and a realistic price.
Technology evolves in retail
Amazon continues to invest in technology to change the retail experience. They recently opened a Whole Foods Market in Washington, D.C. that uses the cashier less technology. Consumers scan their palm on the way in and then just walk out when they are done shopping. Amazon will send you a bill on your Amazon account. We did see the small Amazon Go stores before but this is an entire Whole Foods Market!
Crazy to think they know exactly what you are buying! Next generation of self-checkout is no check out.
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