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Major food merchants surprised market experts this week by publishing surprisingly robust quarterly earnings. Both ADM and Bunge were able to seize on the volatility created by the US-China trade war and the coronavirus pandemic to improve the results of their trade desks. Another factor that seems to have helped was the weak Brazilian Real, combined with a strong demand from China. Some of the strategic bets made by the firms also seem to have paid off, like ADM’s decision to invest in probiotic nutrition, or Bunge’s cost-cutting strategy. 

Similarly, Cargill performed very well in the year ending in May, data analysed by Bloomberg suggested – since the firm recently stopped publishing its full financial results. The volatile environment and the focus on animal protein paid off, as net income grew 17% on year to the fourth-highest ever. As a result, the 125 family members received a record USD 1.13 billion in dividends. 

Global trade flows remain at risk of coronavirus disruptions, however, as demonstrated by recent interruptions at Argentina’s major export hub in Rosario. COFCO, Bunge and Vicentin all reported disruptions after workers tested positive for COVID-19. Nevertheless, the three firms said they were diverting products to other facilities which should avoid creating significant delays. 

The global pandemic poses less of a threat to the UK’s food supply than Brexit does, a report by the Environment, Food and Rural Affairs Committee argued. The country is due to leave the EU on December 31 and is yet to ensure that food supply will remain steady. A third of the UK’s food is imported from the EU, some of it on a “just-in-time basis”. In Northern Ireland, grocers are already warning that they might have to increase prices or leave the region entirely because of the added costs created by Brexit. Since Northern Ireland will follow the EU’s customs rule in 2021, UK grocers like Tesco will need to produce extra documentation when shipping animal products.

On top of all that, the EU’s food supply is being threatened by the dry weather. Rainfall in France was 25% below normal in July, making it the driest month in 60 years. The corn harvest and beet crops were at risk as a result, while the country’s soft wheat production could drop 25% on year to a 20-year low. Production in the UK could be 30% lower and Romania expects a 6-year low harvest. On the other hand, recent rains helped the crops in Germany and Poland. 

The overall food trend over the next few decades, however, points towards abundant and cheap food, according to a group of economists disputing the idea that we are facing a potential food crisis with a growing population. Climate change could seriously challenge our ability to make food beyond 2050, but the main causes of concern for now remain conflict and poverty. In the meantime, more countries should actually consider paying farmers to turn crop land back into forests or grasslands, they argued. 

The fastest growing food sector in the world is aquaculture and half of all sea-food currently consumed is farmed. The sector holds great potential because of its unparalleled nutrient efficiency but is at risk of creating environmental damages if operations are not made more sustainable, a paper in Nature Food highlighted. Researchers laid out a series of improvements to address issues like the reliance on antibiotics or the use of wild-caught fish as feed. 

While Nestle’s sales for the first half of the year were down 9.5% on year, some product segments performed much better and the firm expects full-year organic sales to grow 2-3%. The pet food brand Purina and Nestle Health Science performed particularly well in the period. And the launch of new plant-based products allowed the segment to report a 40% growth in sales. To get into the mind of Nestle’s marketing genius, check out this story on how a psychoanalyst helped get Japanese people to drink coffee. By focusing on childhood and launching coffee flavoured KitKats, Nestle was able to create an emotional bond with coffee. 

Sales of fast food products in the US are surging with the reopening of some states and major fast food chains are now going on hiring sprees. Chipotle Mexican Grill, McDonald’s, Starbucks and Taco Bell all unveiled plans to hire thousands of workers, as half of all restaurant workers were laid off in Mar-Apr. The most exciting fast food news of the week, however, came with the launch of a fashion brand by Chipotle Mexican Grill. If you’re new to the world of fast food fashion, you need to check out KFC Crocs!

This summary was produced by ECRUU

Nestle has been using augmented reality to keep employees connected despite the coronavirus containment measures. Nestle’s team in Switzerland even managed to help set up a new production line at a Thai factory using the technology which, as a result, was completed ahead of schedule. A company official forecast that “Going forward, remote assistance will become a new way of working” as it will reduce traveling, and therefore lower costs and CO2 emissions. 

Another challenge for food and beverage companies has been adapting to online sales. For one, Coca-Cola is investing to become more visible and more attractive for online shoppers, including making images that are optimised for screens as well as better content, videos and descriptions. The idea is to have a product that is just as appealing online as it was designed to be in supermarket aisles. 

In China, Danone is following Nestle’s strategy and is focusing on importing premium water brands like Evian and Volvic. Nestle also launched a new sugar and sweetener-free flavoured water bottle range targeting children, as well as a coffee bean based bottled water. The Plant+Water by Buxton line is banking on the plant-based diet trend, an official said. As part of the same strategy, Nestle is launching the world’s first plant-based condensed milk from oat and rice flour. It will come out in September in the UK. Nestle also tied up with Starbucks to release plant-based creamers from almond and oat. 

Going back to the topic of water, Cargill has given more details on its new sustainability water targets. It plans to restore 600 billion L of water in priority watersheds – more than twice the amount of water the company uses across operations. It also plans to reduce 5,500mt of water pollutants – all of that by the end of 2030 and across its supply chain. The United Nations said this was the biggest water related sustainability target for a single company, especially as it does not only apply to its direct operations but also to its suppliers. Cargill explained that getting the right data was relatively easy thanks to its tie up with the World Resources Institute (WRI) but getting farmers to make the changes was a bigger challenge. To get other stakeholders to join the effort, Cargill and the WRI have worked on a Water Management Toolkit and made it publicly available. 

Governments around the world seem to be caught between a rock and a hard place managing the effect of the coronavirus. In the UK, the government has asked Nestle’s KitKat to rethink its decision to switch to buying Rainforest Alliance cocoa instead of Fairtrade cocoa. The Members of Parliament (MPs) said that poor coca farmers would be affected at a time when they are already struggling because of the coronavirus. The MPs said the move could affect consumer confidence in KitKat. They criticised the fact that farmers have agency over only one third of the Rainforest Alliance premium, compared to the full premium with Fairtrade. 

The UK government is being much more aggressive in its fight against rising obesity rates which it called a “a time bomb.” Backed by health data showing that 8% of those critically ill from the coronavirus were obese, compared to less than 3% for the general population, the government is banning the advertisement of junk food on television and online before 9pm. It is also banning ‘Buy one get one free’ discounts on products that are high in fat, sugar and salt, and these products won’t be allowed at checkout counters any more. Besides, big restaurants will have to display calories on their menus. Other measures that the government is looking at include completely banning online junk food advertising and adding calories counts on alcoholic drinks, among other measures. 

Critics say that the food, advertising and TV industry will be significantly affected. They also pointed out that the new measures are in direct contradiction with the government’s ‘Eat Out to Help Out’ promotion designed to stimulate the economy. The Advertising Association argued that junk food ads had already dropped by 70% over the last 15 years without any impact on obesity rates. Government officials, on the other hand, said that the sugar levy had been successful at forcing beverage companies to reformulate, adding that the new rules could have a similar effect. 

Similarly, analysts say that the coronavirus pandemic is hitting Mexico particularly hard because of the high incidence of obesity, diabetes and hypertension. While Coca-Cola noted a 28% global drop in sales during the second quarter due to the coronavirus and lockdown measures, sales in Mexico only dropped by 5% as people drank just as much but inside the home. 

The Minister of Economy said Mexico’s new labeling rules to highlight food and drinks products that have sugar, salt or fat content above a certain threshold will be rolled out as planned on October 1. He added that the coronavirus made this policy a priority. In response, the National Chamber of Sugar and Alcohol Industries (CNIAA) argued that sugar should not be blamed for the obesity crisis. Mexico’s per capita sugar consumption decreased by 36% in the past 25 years, while obesity and diabetes cases have been rising, it highlighted. 

Overall, however, the coronavirus pandemic is expected to cause a surge in obesity rates. A study by the University of Alberta found that stress, especially financial stress, enhances people’s urge to eat comfort food as the body, under stress, looks for high-calorie foods. To make things worse, many beverage companies, including alcoholic beverage makers, are facing a shortage of aluminium cans as producers have been adapting to the in-home consumption market and using cans instead of kegs. As a result, more companies are having to resort to using plastic bottles. 

If you’ve been thinking of switching to sugar-free Haribo Gummy Bears you may want to think again. A series of Amazon reviews brought to light the fact that the sugar substitute used, Lycasin, caused significant digestive and gut issues when consumed in large quantities. One review in particular caught the attention of The Mirror and likened the experience to a scene of The Games of Throne taking place in the bowel. 

This summary was produced by ECRUU

The changes in food habits caused by the coronavirus over the past four months are starting to have an impact – growers can no longer rely on predictable consumption trends when making planting decisions. One big winner has been Canadian durum wheat as the surge in pasta, flour and cereal purchases pushed prices to a three-year high. The situation was compounded by bad weather and a drop in output in Europe and North Africa. A Canadian industry member noted that as a result, “If you eat couscous in Casablanca, you’re probably eating Saskatchewan durum wheat.”

Not every product has benefited from the shift in consumer demand, however. Meat, cheese and butter, for example, tend to be used much more in restaurants than in home cooking. In California, a farmer was forced to destroy his lettuce crop because of the drop in restaurant demand. But restaurateurs are not giving up on their business model and are looking for new systems to adapt. Some are combining the concept of ghost kitchens – restaurants that only serve for delivery – with outdoor food halls to create “ghost food halls”. 

For the moment, online delivery continues to be the most obvious alternative in times of social distancing. In China, Starbucks expanded its partnerships with Alibaba to allow more consumers the option to pre-order drinks via mobile apps. But the surge in online orders is starting to have an impact on online prices which have gone up 4.2% over the last six months, data from Adobe Inc showed. The inflation pushed digital purchasing power into negative numbers for the first time. 

Many firms are also hitting a limit on capacity, like Campbell Soup which is facing manufacturing challenges after the demand for ready-to-eat soup surged 140%. One solution we mentioned last week has been to reduce the number of products on offer. Nestle announced that it was looking to sell its water business in China. The company previously said it might sell water brands in North America and the Chinese Yinlu Foods business. Similarly, Coca-Cola said it would stop selling what the CEO calls “zombie brands”, starting with Odwalla juices. For its part, Pepsi was able to weather the coronavirus downturn in the second quarter thanks to its wider product diversification, as it also owns Quaker Oats Company and Frito-Lay. 

The recent surge in online shopping and the simplification of product ranges were actually part of an ongoing long-term shift in the food supply, according to the experts at IDEO. As such, the coronavirus is not really “new information. It’s more of a reveal”, a consultant argued. The pandemic is also accelerating other ongoing changes, like the focus on regional food and farmers’ markets, along with a growing concern for working conditions in the food industry. 

The virus has highlighted the risks of animal diseases spreading to humans and the need to protect wildlife, according to a director at Danone. He suggested that our current system was “broken” although he was optimistic that shareholders and consumers would embrace a new approach based on sustainability. Danone was the first firm to entrench environmental laws in its official rules based on a 2019 French law. 

Cargill has also been busy reducing the impact of its operations around the world. In northeast Brazil, it has partnered with the Omega windfarm to supply port terminals in Bahia and Para with renewable energy. Cargill also unveiled a new water management practice to help make agriculture more regenerative. And in Zanzibar, Cargill is partnering with the Nature Conservancy to provide guidelines for algae farmers. When done correctly, algae farming can have a positive impact on water quality and wildlife habitat, a spokesperson highlighted. 

KFC is making progress on its effort to offer more meat alternatives as it announced that it will collaborate with Russia’s 3D Bioprinting Solutions to print chicken meat using cells and plant material. Although more environmentally friendly, the final chicken will still contain meat. Meanwhile, KFC’s fully plant-based fried chicken is being offered in more restaurants across the US. The chicken is made by Beyond Meat. 

In the same vein, Burger King is advertising beef made from cows that emit 33% less methane, thanks to the introduction of lemongrass in their diet. While the idea of modifying a cow’s diet to lower methane emissions has shown promising results, experts noted that the Burger King claim was not yet backed by peer-reviewed science. The move was still welcomed, however, as Burger King starts by accepting that “we are part of the problem”. 

Lastly this week, we recommend watching the “fascinating but useless” experiment conducted by an Australian marathon runner. He ate only tinned beans for the 40 days leading up to a 50km ultra-marathon. Besides showing his love for beans, the experiment was most revealing as it deprived him of a source of creative expression. It also gave him terrible wind, obviously. 

This summary was produced by ECRUU

Brazil’s private sector is putting pressure on the government to act and protect the Amazon from deforestation. Some of the country’s main corporations sent a letter to the President saying that concern over the Amazon was driving foreign investment away. Brazil’s poor environmental image is also being used against it in trade discussions, such as the in EU-Mercosur deal. The Ministry of Economy denied that investments were falling, noting a 26% increase in investments in 2019. It also argued that Brazil was one of the countries that did the most to protect its environment, with 60% of the territory preserved, almost twice that of the US and Canada. 

One of the companies involved in the letter, Cosan, argued that protecting the Amazon would help Brazil become more competitive. This comes as Brazil’s agribusiness exports reached a record high for the month of June, with sales up 25% on year. Most of the increase is due to a surge in soybeans exports to China, but sugar and ethanol exports combined increased by 75% on year. The head of Cosan said he had spoken with the President to work on a campaign to improve the country’s image. 

In China, the possibility that the Shanghai and Shenzhen stock exchanges may start to require disclosure of environmental, social and governance (ESG) information at some point this year could be a big step forward for the use of sustainable palm oil. A researcher explained that although China is the world’s third-biggest consumer of palm oil, there is very little consumer awareness in the country. Palm oil is almost always consumed within another product, notably in instant noodles, and is usually labelled as “vegetable oil.” As such, while the country’s main palm oil importers do trade certified palm oil, they mostly don’t import it into China as no one is willing to pay a premium for it. Palm oil has recently been displacing soy oil which has become more expensive due to the trade war with the US but also because the soybean meal industry, from which it was a by-product, collapsed with the African Swine Fever. 

A conservation professor noted, however, that while most of the world seems to have agreed that palm oil is bad and coconut oil is good, coconut palm trees threaten many more species than palm. This is because coconut grows in areas with far more biodiversity. Data from the International Union for the Conservation of Nature showed that, for every million tonnes of oil produced, coconut threatens over 20.2 species, followed by olive oil with 4.1 species and palm with 3.8 species. He argued that the solution was not to discriminate one oil over another but for each oil to be produced in the most sustainable way possible. 

Some of the world’s multinational food companies are reducing their product ranges to cut the costs of maintaining stocks in this new era of online grocery shopping. Mondelez, for one, announced it would shelve 25% of its products. The CEO said, “we have too many flavours, too many sizes.” Similarly, General Mills is reducing by almost half its range of soups. The CEO explained that websites could not host as many options as supermarkets so it did not make sense to have that many varieties of the same product any more. 

Another big change at Unilever is the group’s decision to put carbon footprint labels on every one of their products. An analyst noted that, a decade ago, Tesco had also tried, and failed. But he argued that Unilever’s tight supply chain would make the data collecting process more feasible. All they need now is an independent carbon labelling standard. 

Cattle ranchers frustrated with the meat labelling standards in the US are working on selling their meat directly to consumers under their own brand, a trend that has been accelerated by the coronavirus. They complain that meat that has been processed or packaged in the US can get the ‘Made in the USA’ label even if the animal was not born in the US. Congress is looking into making it easier for smaller slaughterhouses to operate but cattle ranchers say the cost of setting up is still prohibitive and it is unclear whether consumers are willing to pay a premium. Three groups control close to 60% of the US’ beef industry and, as of 2019, 12 plants processed over half of the country’s cattle. 

If you thought the issue of food labels was not complicated enough, pet owners are now getting worried that misleading labelling on feed bags could be contributing to their pet’s obesity. An estimated 100 million pets are overweight in the US and a law firm is looking for complainants to build a class-action lawsuit against a major pet food manufacturer. They argue that the suggested portions are deliberately based on a working dog’s needs, whereas most pets don’t do much more than relax at home.

This summary was produced by ECRUU

The World Bank’s International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) are being accused of falling short of their climate change commitments. An investigation by The Guardian and the Bureau of Investigative Journalism found that the banks had invested some USD 2.6 billion in large-scale livestock and dairy companies over the last decade. At the same time, the World Bank was involved in a new multisectoral report released last week recommending reducing beef and dairy consumption which account for 41% and 20% respectively of total agricultural emissions. The banks defended themselves, saying that the investments were to improve food security in poorer countries. Analysts, however, argued that a big part of the investments were made in rich countries, saying this was “not […]  justifiable.”

The apparent conflict between food security and climate change is exemplified in Indonesia where the government announced a plan to set up a 164,000ha agricultural estate in Borneo to ensure sufficient domestic food supply. The targeted area would require further land clearing, environmentalists warned, adding that the crops the government wants to grow, such as rice, are unsuited for the dry area and could lead to fires. 

To accommodate these increasingly complex scenarios, the Rainforest Alliance announced it was changing its certification system. The NGO said that certification was facing “much bigger challenges” because climate change was worsening social inequalities. The new certification will require its members to have a more proactive role in identifying and controlling their supply chain, in exchange for a mandatory premium. 

Food corporations, meanwhile, are looking at technology to help accelerate the process. Nestle joined The China Food Tech Hub, a consortium of 15 members, including Mars, Coca-Cola and Ferrero, designed to accelerate innovation in food by putting together multinational companies with startups. The areas of interest include plant-based protein and cell culture as consumers are increasingly concerned with their health, an official from the Tech Hub said. 

Unilever has tied up with Alibaba to use the Chinese company’s artificial intelligence and data on consumer behaviour for its digital marketing. Unilever explained that consumers’ buying patterns are changing very fast, adding that this was part of an intention to “reduce marketing waste.” This also comes at a time when Unilever joined several other companies, including Coca-Cola and Starbucks, in boycotting Facebook advertising for the way it’s been handling hate speech. Also in China, Walmart tied up with blockchain group Varcode, whose technology helps identify food that has gone bad. 

Cargill, meanwhile, tied up with Burger King and the World Wildlife Fund (WWF) in a grasslands restoration program. The idea is to reseed some 8,000acres of marginal cropland in Montana and South Dakota in the US, transforming the areas into diverse grasslands with the beef’s grazing as part of the ecosystem. Cargill also announced it had managed to completely trace its Brazilian soybeans supply chain, with several other countries to follow through by the end of the year. The group’s GPS data points enable it to identify the land of origin of the soybean it purchases, thereby ensuring it comes from land that was not recently deforested. An NGO complained, however, that “recent” was a relative term. COFCO International, meanwhile, said it was planning for its soybean supply chain to be fully traceable by 2023. 

In the EU, farmers are asking the Commission to ease rules on agriculture drones. They argue that the drone’s precision technology will help meet the bloc’s Farm to Fork strategy, which involves halving the use of pesticides. DroneDeploy, which is based in the US where the use of commercial drones has been allowed since the end of 2016, argues that the data generated from drones is also very valuable, helping farmers make better decisions with regards to their crops. 

In Brazil’s Mato Grosso, for instance, UISA and Vivo have tied up to cover some 90,000ha of sugarcane area with Internet connection by setting up 4G towers. The system will facilitate the control of self driven technologies as well as streamline data collection, which was previously done offline. A company official explained that this would improve the efficiency of both machines and people, thereby reducing cost. Similarly, a trial on a sugarcane farm in South Africa’s KwaZulu-Natal showed that using drones instead of helicopters to apply ripener, as is traditionally the case, led to a 1% increase in sugar recovery, which could translate into significantly higher revenues for farmers. 

Last but not least, you will probably have noticed how polarising the debate about whether to wear or mask or not has become. This can have some very real repercussions in food shopping aisles, as these videos aggregated by Eater show.

This summary was produced by ECRUU

The UK’s environment secretary said that food supply would not be an issue in case it has to leave the EU without a trade deal by January 2021. He explained that the supply chain proved to be “remarkably resilient” during the coronavirus pandemic. Besides, the food industry was able to find enough labourers thanks to the “Pick for Britain” campaign, ensuring there weren’t any significant disruptions in Britain’s food supply.

British farmers seem to be more concerned about what concessions the government would offer as part of trade negotiations with the US and EU. A new advisory group was launched to protect agricultural interests and make sure food and welfare standards are not compromised. 

Nevertheless, some UK lawmakers called for a reclassification of gene editing technology like CRISPR, which was classified under the same regulations as GMOs by the EU. A UK official argued that gene editing was merely “an extension of conventional plant breeding”. The National Farmers Union agreed, while another organisation warned that loosening the rules would make it much harder to reach a trade deal with the EU. 

As it slowly but steadily recovers from the coronavirus pandemic, China has been ramping up its purchases of agricultural products. Imports of US products, however, are still far behind the targets set under the phase one trade agreement, while US sanctions imposed in response to Hong Kong’s new security law could further deteriorate trade relations. China also took the surprising decision to ban imports from Tyson Foods following the COVID-19 outbreaks in meat plants. US exporters were asked to provide certificates to prove their food was not contaminated, something one company argued was “not based on any legitimate food safety concern”.

China’s demand for protein was boosted by the impact of the African Swine Fever and Brazil’s export sector has been reaping the benefits, in part thanks to bumper crops and the depreciation of the Real. Firms geared for exports are doing relatively well but a Cargill executive noted that the opposite was true for firms focusing on the domestic market. Consumers are starting to cut down on food expenses as the coronavirus continues to spread. The government, meanwhile, is trying to balance the need to contain the disease, protect food workers, and the importance of its food sector.

In neighbouring Argentina, the government took drastic action earlier this month when it unveiled an expropriation plan to revive the bankrupt Vicentin, once one of the largest grain exporters in the country. Sources said this would stop Glencore’s plan of purchasing a higher share in Renova, a joint venture between the two groups. Some experts argued the goal of reaching “food sovereignty” was misguided, although they believed that it should not affect exports for now. More recently, however, an official conceded that the government might review its plan and look to create a public-private partnership instead. 

The head of Louis Dreyfus Co mentioned that the company was on track to meet its sustainability targets for 2022, in part thanks to partnerships with certification bodies. The good progress was also a sign that the decision to link the financing model with sustainability goals was working. Bunge, meanwhile, said it should be able to deliver earnings to shareholders thanks to crush margins normalising and successful cost-cutting efforts. Bunge will continue to restructure and offload non-core business assets, the CEO mentioned.

While food firms have been involved in sustainability movements for some time, they are increasingly taking a political stance as well. Unilever, Coca Cola, Starbucks, Nestle’s Blue Bottle Coffee, Diageo and Hershey’s have all announced that they will temporarily stop advertising on social media platforms, as the #StopHateForProfit campaign continues to gain ground. 

The Roundup legal nightmare is close to being over – or at least Bayer hopes so – after the firm agreed to settle 95,000 lawsuits for USD 11 billion. The company has also set up a fund to deal with future cases. However, some lawyers noted that around 30,000 cases refused to settle as the financial compensation was too low, and they pledged to continue the fight. The settlement, which still has to be approved by a judge, also includes USD 400 million for farmers whose crops were destroyed by dicamba drifts. All the while, Roundup is still for sale as it is still considered safe by the EPA. And Bayer submitted to the USDA a new corn variety for approval that is resistant to a record five herbicides, including glyphosate and dicamba. 

Finally this week, the coronavirus pandemic created another unsual but excellent headline as Guinness announced that it will use “leftover lockdown beer to fertilise Christmas trees.”

This summary was produced by ECRUU