Editor’s note: This story is the second installment in a three-part monthly series looking at trends that will shape the food and beverage space in 2018. Previous articles sponsored by BMO Harris Bank can be found here.
Sustainable business practices are no longer the exception across the food and beverage industries. In today's environment, they’re the rule.
Consumers increasingly care about where their food comes from, and expect manufacturers to be transparent in their efforts to be good stewards of the environment. Nielsen found that a company’s commitment to this cause can sway product purchases for 45% of consumers. For companies that don't take these steps, they potentially risk losing millions of dollars in sales to their competitors who do.
Sustainability is becoming intrinsically woven into the day-to-day operations of most food and beverage companies. In recent years, businesses including Mars, PepsiCo, Coca-Cola, Unilever and Walmart have announced some type of pledge — most often focusing on where their products come from, who produces them, how they are manufactured and their impact on the environment.
“People are getting more and more conscious that we live on a planet with limited resources,” Ruben O. Morawicki, who worked as a senior research scientist at Tyson Foods before joining the faculty at the University of Arkansas as an associate professor of bioprocessing, told Food Dive.
Morawicki, author of the Handbook of Sustainability for the Food Sciences, said this consciousness is creating a sense of urgency for companies to look at their own sustainability practices and see where they can improve.
In addition to consumer demand, there is a monetary motivation to make the switch to more environmentally friendly practices. According to Nielsen, 66% of all consumers are willing to pay more for sustainable brands. This figure is even higher for millennials (73%) and Generation Z (72%).
“Our sustainability commitments are grounded in our purpose, which is enhancing quality of life and contributing to a healthier future.”
Communications manager for Nestle
Nestle, one of the world’s largest food and beverage companies known for brands such as Butterfinger and Lean Cuisine, decided in 2006 that it would contribute to society without affecting the long-term success of its business. The three areas of focus for Nestle are individuals and families, communities, and the planet.
“Our sustainability commitments are grounded in our purpose, which is enhancing quality of life and contributing to a healthier future,” Emily Dimiero, communications manager for Nestle, told Food Dive.
Nestle has already made strides when it comes to water use and conservation. In October, Nestle Waters announced it received certification from the Alliance for Water Stewardship (AWS) for four bottling facilities, including three in California. AWS is considered the first comprehensive standard for measuring water stewardship, akin to the LEED certification for buildings.
To reach this goal, Nestle adopted various conservation techniques, like using reverse osmosis to better filter wastewater, which is then used in areas such as landscaping and irrigation. Nestle Waters has since announced plans to certify 20 factories by 2020, the first beverage company in the world to make such a commitment.
The Swiss company's sustainability efforts also have included children and working with farmers. One initiative aims to reduce child labor, improve the quality of the cocoa beans grown and adopt better agricultural practices. Another measure focuses on coffee farmers to ensure the sustainability of its supply chain.
While establishing and achieving sustainability goals has been fulfilling for the company, Dimiero told Food Dive it has not been without its share of challenges.
“Some of [the pledges], there’s a clear path forward and we have the science and technology to innovate and reach our goals, and we may have the path forward in mind. … But sometimes the challenge can be knowing you’re accepting a certain level of unpredictability, or a certain level of uncertainty," she said. "We know we’ll just need to continue to advance our research and development.”
In the future, Dimiero said Nestle will work to reduce its indirect emissions through the procurement of renewable energy. It's also reducing its waste output — as of 2016, 60% of Nestle’s factories were landfill free, but the company is hoping to improve that percentage.
"Part of our culture"
The world’s largest brewing company, AB InBev, also has been involved in sustainability. Katja Zastrow, vice president of corporate social responsibility at Anheuser-Busch, tells Food Dive its conservation efforts are imbedded in its cooperate culture.
“We even had (AB InBev CEO Carlos Brito) out for a watershed cleanup in the Bronx, cleaning up in the East River,” she said. “He’ll get in the boats, and pull trash out of the river. So you have that kind of personal commitment.”
For 2018, Anheuser-Busch is focusing on two areas: renewable electricity and water conservation.
The producer of Budweiser supports A-B InBev's global commitment to have 100 percent of its purchased electricity come from renewable sources by 2025. Anheuser-Busch also is researching new crop management techniques, developing seeds that require less water to grow and working to reduce water usage — a key component in making beer — in its facilities. So far, the brewer has reduced water consumption across all of its U.S. breweries by nearly 50% during the past decade.
Aside from these two conservation pillars, Anheuser-Busch also has focused its efforts on packaging and recycling. Since 2009, it claims to have reduced its packaging materials by 75,000 tons and achieved a more than 99% recycling rate at all of its U.S. breweries. Recently, the beer maker made headlines by committing to order 40 of Tesla's new electric Semi trucks — part of Anheuser-Busch's broader effort to reduce its operational carbon footprint by 30% by 2025.
“It’s really part of our culture, something all of our employees take pride in,” Zastrow said.
More than just jerky
Field Trip Jerky, a six-year-old meat snack manufacturer, recently switched over to a grass-fed protein model. Sustainability has been a priority for the business since the beginning, Tom Donigan, a founding partner of the company, told Food Dive. This latest decision underscored that commitment.
“It wasn’t that we wanted to start a company and make money," he said. "We wanted to start a company and make a difference.”
During the last two years, Donigan and his partners watched consumer demand for grass-fed beef increase and decided their company should make the switch. He added that sales have increased as a result, though he declined to say by how much.
“It gives us an additional edge over those competitors,” Donigan said. “It’s an additional piece that we can offer our consumers. Ingredients you can understand, and products that are sourced responsibly."
The meat sticks and jerky maker has seen tremendous growth since it’s launch in 2011. Field Trip Jerky's products are sold in all 50 states, and it has 35,000 points of distribution. Despite transitioning to a more expensive grass-fed beef, its prices have not changed. Donigan said because volumes have increased as the company has expanded, it was able to negotiate with suppliers so the cost of the more expensive ingredients wouldn't be passed along to consumers.
“Sourcing definitely has been a little more challenging than it use to be to make sure that the farms are checking all of the boxes that we require as a company," he said.
After its latest transition to grass-fed beef, Field Trip Jerky is already plotting its next move. Donigan hopes to convert over to a recycled package at some point. Meat snacks require a specific kind of barrier to make their product shelf stable, which doesn’t currently allow for a completely recyclable product. Donigan is confident the technology will be available within the next five years.
Cost of sustainability
One challenge that faces most food and beverage companies like Field Trip Jerky who embrace sustainability is the cost of switching to more environmentally responsible practices.
“The problem with the food industry is that the margins are very slim," said Morawicki, the University of Arkansas professor. "Sometimes the cost is one of the problems.”
He adds that this affects smaller companies more than larger ones, making the prevalence of sustainability claims among these startups all the more impressive.
“You can reduce your carbon footprint significantly. I wouldn’t say [it’s] easy, because it takes quite a bit of investment, but it’s doable. And it's something that five years ago wasn’t.”
Ruben O. Morawicki
Associate professor of bioprocessing at the University of Arkansas
Sourcing renewable energy is a major trend that Morawicki sees coming to the forefront. He said the reason it's an attractive option for companies is because solar cells have come down significantly in price in recent years.
“You can reduce your carbon footprint significantly. I wouldn’t say [it’s] easy, because it takes quite a bit of investment, but it’s doable. And it's something that five years ago wasn’t,” he said.
Looking ahead, expect to hear about more sustainability pledges both in headlines and on packaging — it’s a practice that’s good for both the environment and corporation’s bottom line.
“Resources are getting more and more scarce," Morawicki added. "Based on that, we’re probably going to need to be more responsible in the ways that we use" them.
The "A Balancing Act" series is brought to you by BMO Harris Bank, a leader in commercial banking. To learn more about their Food & Beverage expertise, visit their website here. BMO Harris Bank has no influence over Food Dive's coverage.