The Food Dive Outlook on 2023

As the calendar turns to 2023, food and beverage companies have a new focus on consumers.

The sector has always tried to give consumers what they want, but this year, new technologies and new ideas bring that consumer focus to light in new ways. As a tight economy and high rates of inflation continue to challenge the business, food and drink companies are eyeing new ways to capture those hard-won consumer dollars.

The movement toward more RTD cocktails will continue, with beverage manufacturers of all kinds exploring ready-made drinks to provide consumers with more convenient and tasty options. Precision fermentation technology is ramping up to offer large amounts animal-free ingredients with the taste and function of dairy, eggs, collagen and gelatin. Cultivated meat, which is grown from cells without any animal slaughter, is likely to debut on the U.S. market in some form this year.

Consumers who are interested in sustainability will find more carbon-neutral and upcycled products on the market. Pending new labeling regulations and commitments will provide consumers more transparency about the products they are purchasing — and will spur reformulation.

And artificial intelligence and machine learning will help companies develop and manufacture products in more cost-effective ways, helping them control prices for consumers.

Here’s a look at the trends experts and analysts say will shape the industry in 2023.

 

Alcohol makers get buzzed on RTD cocktails

As alcohol consumers look for more ready-to-drink cocktails, beverage makers are poised to flood the market with more of the trendy products in 2023.

In the coming months, Brown-Forman and Coca‑Cola will introduce a ready-to-drink cocktail combining Jack Daniel’s Tennessee Whiskey and the iconic soda brand. Coca-Cola and Molson Coors also are gearing up for the debut of Topo Chico Spirited. 

Diageo is partnering with The Vita Coco Company on a line of premium canned cocktails crafted with Captain Morgan rum and Vita Coco coconut water expected out early this year. And Truly from Boston Beer, which launched in October, will aim to gain momentum in the new year. 

“I would not be surprised if RTD spirits were the largest single entity in beverage alcohol” a decade from now, said Nathan Greene, an analyst at Beverage Marketing Corporation. 

Greene said hard seltzer, which has seen its popularity wane after years of triple-digit growth, laid the groundwork for RTD spirits. Consumers started paying closer attention to the flavor inside the can and gravitating toward the drink’s refreshing profile. 

RTD cocktails can tap into the same attributes, but unlike hard seltzer, they have access to a wider variety of alcohol and the ability to combine with other beverages (such as soda, juice or coconut water.) With consumers eager for choice and variety, the belief is that a deeper portfolio of options could increase the longevity of the category.

Ready-to-drink cocktails — led by High Noon, which is made by winemaker E. & J. Gallo — were the fastest-growing spirits category in both revenue and volume in 2021, according to the most report issued by the Distilled Spirits Council of the United States (DISCUS). 

Supplier revenue for these cocktails and spirits rose 42.3% to $1.6 billion during the period. Growth was forecast to continue into 2022, according to Beverage Marketing Corporation.

One roadblock that could potentially tamp down growth in RTD cocktails is widely varying state regulations. RTD cocktails are typically subjected to higher tax rates – giving a slight price advantage to beer – and some states don’t allow retailers to sell beer, wine and spirits together. If states, eager for additional sources of revenue, remove or ease these hurdles, it could build further momentum for the RTD cocktail category. 

“If the regulatory environment continues to open more and more, it’s going to take, particularly from beer, especially if it's close in terms of economics and/or retail channel access over time,” Greene said.

Precision fermentation breaks out

A few years ago, the idea of using fermentation to recreate proteins that are found in animal-derived food or difficult to find in nature sounded like a futuristic science project.

In 2022, companies using precision fermentation — modifying organisms like yeasts so that they produce a certain protein when fermented — started to become big players in the ingredients market. Animal-free whey protein from Perfect Day, the largest and most developed precision fermentation company, started to be less of a novelty ingredient and something that is more common. Last year, products powered by Perfect Day became available from large and small manufacturers, including Mars and Nestlé. 

But Perfect Day isn’t the only precision fermentation company that had a big year in 2022. Just before the end of the year, Oobli, which makes sweet proteins through precision fermentation, launched a chocolate bar containing 70% less sugar than other brands. And precision fermentation egg white protein maker The Every Company partnered with hard juice maker Pulp Culture to make a protein-boosted alcoholic beverage last fall. 

Emma Ignaszewski, associate director for industry intelligence and initiatives at the Good Food Institute, said the organization supporting the alternative protein industry identified more than 60 companies leveraging precision fermentation. More than two-thirds of them, she said, have come out of stealth in the last three years.

Meanwhile, 2023 is shaping up to be an even bigger year for precision fermentation in food. CPG giant Unilever has said it is interested in launching ice cream made from animal-free dairy. New Culture, a company that makes cheese using casein made by precision fermentation, plans to launch in pizzerias this year. And companies including Remilk and Onego Bio are positioning themselves to enter the market.

Ignaszewski said it is apparent that the larger CPG space is seeing deep potential in precision fermentation-derived ingredients. In turn, that is helping the whole space gain momentum. 

“Today's alternative protein products, including products made with precision fermentation, are taking this new approach that we've seen in the last decade of appealing to omnivores with products that not only mimic the taste and texture and sizzle of conventional animal products — but in this case, are those very same proteins,” she said.

As more and more CPG companies adopt precision fermentation-derived ingredients, they also can help the companies that make them scale manufacturing, Ignaszewski said. In turn, that creates wider availability, lower prices, and more places for manufacturing.

It’s also getting easier for new companies just starting in the precision fermentation space to begin their work. Last year, Perfect Day launched nth Bio, an enterprise biology business to help newer companies with tech and scale-up services. Liberation Labs, a new venture dedicated to building scale-up facilities for precision fermentation startups, recently closed a $20 million funding round to build a 600,000-liter commercial scale launch facility. And stalwarts including Archer Daniels Midland are making investments and providing assistance to companies in the space.

As more precision fermentation-derived products come on the market, Ignaszewski said she sees an easy ramp to consumer acceptance. After all, most of the rennet used to make cheese has been produced by precision fermentation for more than two decades, so consumers have firsthand experience with the ingredients.

But more importantly, taste and eating experience are key to consumer acceptance. Ignaszewski said precision fermentation can deliver both of them to the alternative protein world.

“As consumers become more familiar with not only the idea of these products, but familiar with the products themselves, … and as they use them in meals that they know and love, we expect that acceptance will continue to grow,” she said. “I see food innovation in alternative protein and consumer acceptance as a potentially virtuous cycle.”

CPGs look to lower carbon emissions through products

The food and beverage industry accounts for roughly a third of the world’s greenhouse gas emissions, according to the United Nations. In order to achieve goals for reducing the carbon footprint of their supply chains, companies are launching products that they claim compensate for the greenhouse gases they emit.

Various products on the market now make “carbon-neutral” and “regenerative” a key selling point. The companies claim that the emissions created to produce and ship the products are then offset, either through regenerative agriculture methods or nature restoration projects. These foods and beverages often also achieve certification from a third party organization or nonprofit in order to verify their claims. Alcohol giant AB InBev launched Bud Light Next beer, which it said offsets the carbon it takes to produce through forest management efforts. Conagra debuted carbon-neutral Evol frozen meals, which offsets carbon through wind and forest projects. And Fresh Del Monte will launch carbon-neutral pineapples this year.

Along with established CPGs, smaller brands are introducing themselves to consumers by touting their carbon neutrality. Neutral Foods, which can be found at Whole Foods stores nationwide, has introduced their dairy products to consumers by touting that it offsets the carbon produced by the cows by converting it to renewable energy.

Mai Ichihara, program manager for the Soil Carbon Initiative, told Food Dive achieving third party certification should be a priority for CPGs looking to because it assures consumers that the company is not greenwashing. The organization certifies products as regenerative — which includes a “Soil & Climate Health Initiative Verified” label — if they set commitments to track and increase biodiversity in their soil. She said the company thinks “regenerative” should not be misused by companies not actually putting in the work of implementing carbon offsetting practices into their supply chains.

“There's fidelity and integrity behind the meaning of regenerative,” Ichihara said. “The term ‘sustainability’ has already been used and abused, and we don't want that happening with regenerative agriculture.”

The meat industry, which has been roundly criticized by environmental groups, accounts for roughly 14.5% of worldwide greenhouse gas emissions, largely because of the methane resulting from beef production. Companies announced last November their intention to set goals to decrease their carbon footprint by 2030. Through product launches of carbon-neutral or low carbon meat — such as Applegate’s hot dog grown through regenerative farming methods — processors could signal to consumers its commitment to lowering the amount of carbon they produce. New Zealand beef company Silver Fern Farms debuted Net Carbon Zero Certified Beef in the U.S. last year.

Artificial intelligence and machine learning becoming the norm

Once the future, artificial intelligence and machine learning are poised to become an even bigger part of the present for more food and beverage makers in 2023.

The use of these tools is attractive to CPGs for several reasons, but ultimately it boils down to dollars and cents. 

Companies can forgo some of the difficulties and costs that arise with attracting and retaining workers if they have machines. With artificial intelligence, businesses can increase the output, quality and reliability of what comes out of their factories.

Marcel Koks, industry and solution strategy director at Infor where he works with companies to incorporate AI and machine learning, said many firms are interested in using the technology but are unsure how to do it.

“Our customers know machine learning and artificial intelligence exist, but they are struggling to define the use cases,” Koks said. “We are doing a lot of work with our customers to explain what you can do.”

Koks said one fruit and vegetable company Infor worked with used AI to determine the best conditions to store produce, increasing the shelf life and lessening the chance of food waste, he said. Another dairy firm used machine learning to improve the reliability of milk production, including how much of the liquid is produced and its protein content. Even a 1% loss in milk production can mean hundreds of thousands in lost revenue, he said.

“In the past, they could do simplified analysis once a month, looking back at the output from the factory,” Koks said of the dairy company. “It was too late to do something about it, but with machine learning, it’s nearly in real-time.”

In other cases, food companies use artificial intelligence to expedite product development or plan for the future.  

McCormick & Co. partnered with IBM three years ago to comb through data faster and more effectively by knowing which ingredients work together or which ones can be used as substitutes for each other. It has released several products so far.

Greg Longstreet, CEO of Del Monte Foods, said the CPG uses AI to plan and estimate future demand and ensure it has enough supply to meet it – factoring in volatility in weather, climate change and the introduction of new products. 

AI also helps it determine where to purchase and install equipment. With machinery now taking as much as 19 months to get operating due to industry-wide supply chain headaches compared to six or nine months in the past, AI allows the fruit and vegetable giant to be more proactive.

“We really need to be farther up and more forward-thinking about how we run the business and how we plan,” he said.

Cultivated meat goes from the lab to the plate

Ever since there have been companies working on cultivated meat, many of them have been saying that their products would be available in the United States “soon.”

“Soon” could very well be this year, said Amaru Sánchez, an attorney at Wiley Rein who works with companies on FDA and USDA regulatory issues.

“I'm going to be ambitious and optimistic and say that we're gonna see the United States’ first commercially available cultivated poultry products by the end of 2023,” he said.

The process seems to be moving in that direction. The FDA issued its very first tacit approval of a cultivated meat product last November, granting a “no questions letter” to Upside Foods for its cultivated chicken. This means FDA believes Upside’s chicken product, which is grown from cells in a bioreactor, is as safe to consume as traditional slaughtered chicken.

Under a 2019 agreement, most cultivated meat, which is made of animal cells grown in bioreactors, needs to receive approvals from both the FDA and the USDA. The FDA is responsible for regulating the cells that are grown for meat, as well as the processes used for their cultivation. 

Unless those cells are seafood, which is only regulated by FDA, they transfer to USDA jurisdiction when they are harvested from the bioreactor. USDA is responsible for inspecting the products and facilities, as well as for labeling.

Upside Foods’ chicken still needs to get USDA’s greenlight before it can go on the market. A statement from a spokesperson at the department’s Food Safety and Inspection Service said applying to them for a grant of inspection — an assurance that processes are safe and sanitary — is the next step. Cultivated meat and poultry will be inspected at the same standards as already exist for slaughtered meat.

It’s not known when that might happen — USDA didn’t answer questions about its regulatory timeline. It’s also not clear how far along FDA’s reviews of other cultivated meat companies are, and when decisions on their products may be released. Many cultivated meat companies have been working with FDA toward approval since 2018, and FDA has not commented on what comes next in its process. 

At the very least, Emma Ignaszewski, associate director for industry intelligence and initiatives at the Good Food Institute said, the FDA greenlight for Upside’s chicken represents a “significant point of de-risking” for the sector. Until FDA’s regulatory action, cultivated meat in the United States was an industry of doing science, not one of making food.

“It's still a nascent industry, and we anticipate that this milestone will be able to usher in a new wave of investments, talent, innovation and the subsequent steps in the regulatory process,” she said. “And one of the things that could be possible here, then, is that people or companies who may have been on the sidelines, waiting to see if cultivated meat can become a commercial reality in the U.S. in the near term can now sort of roll up their sleeves and dive into the sector with greater confidence.”

Among those likely to dive in, she said, are large CPG companies. It’s already started to happen, with JBS purchasing a cultivated meat company in 2021, and Nestlé working with Believer Meats, formerly known as Future Meat Technologies, to explore the possibilities of the space. But now, the doors are opening wider.

This year is also likely to see the beginning of many construction projects for commercial scale cultivated meat facilities, Sánchez said. Only one is currently being built — Believer Meats broke ground on its commercial-scale facility in North Carolina last month — but several other companies have said they are in the site selection and design phases for their large facilities. While it’s not likely any of these facilities will be able to produce meat this year — Believer said its facility won’t be operational until the first quarter of 2024 — it’s likely that there will be more on the way before the year is done. 

Better nutrition labeling spurs reformulation

This year, label changes in the works means consumers could be getting much more clear information about food and beverages by just looking at packages.

Six years after collecting comments and holding a public hearing on how to define “healthy” on food product labels, FDA issued a proposed rule in September.

The long-awaited definition could certainly make a huge change in how products are labeled and marketed. Consumers would be likely to believe that a regulated “healthy” claim represents a product that is unequivocally good for them to eat.

The preliminary rule syncs up pretty closely with the Dietary Guidelines for Americans. In general, “healthy” items have the equivalent of a serving of fruits, vegetables, grains, proteins or dairy as indicated in the Dietary Guidelines. There are limits to the amount of less beneficial nutrients — including added sugars, sodium and saturated fats — that “healthy” items can have.

The rule is still preliminary, and FDA is accepting comments on it until Feb. 16. But manufacturers are likely to start working toward making products that can bear the “healthy” label, said Amaru Sánchez, an attorney at Wiley Rein who works with FDA and USDA regulatory issues. The preliminary rule says that raw, whole fruits and vegetables can automatically use the label, so Sánchez said that companies that make salads or raw vegetable products may start going ahead with the label claim.

“They have this pretty much green light that they can put ‘healthy’ on it, even though they've always known that,” he said.

Reformulating products to become “healthy” is also likely to start, though there is a lot of hashing out to do before getting to the final rule, Sánchez said. It’s still not known where fruit and vegetable powders fit into the picture in terms of determining a product’s intrinsic nutritional value. Concerns have also been raised about potential inherent exclusion of products including peanut butter and eggs from the “healthy” label. These are likely to be addressed as the rule becomes finalized.

FDA is also working on consumer research on a front-of-pack symbol to let consumers know when a product has met the “healthy” threshold. While this research may not be completed and a new label may not be implemented this year, manufacturers are likely to spend 2023 getting ready to have products that can bear the seal — which can more quickly communicate a product’s nutritional value to consumers.

More informative labels are also on the way to alcoholic beverages. Nearly 20 years after consumer groups first petitioned the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for some nutritional labeling on beverages — and after a lawsuit was filed to force labeling to come — the department agreed to begin the process for a required “Alcohol Facts” label on beverages it regulates.

Alcoholic beverages have never had many nutritional labeling requirements before. A letter from the Treasury Department states it will work on creating a labeling rule for alcoholic beverages to disclose their nutrient contents, alcohol content, major food allergen presence and ingredients. The Treasury anticipates publishing notices on all of these labeling rules in 2023.

Sánchez said that while alcoholic beverage makers may have the same reasons to push back against labeling rules that they did in 2003, quite a lot has changed in two decades.

“One is the consumer demand for this,” he said.

Even without the requirement, the Distilled Spirits Council of the United States committed to having its members include “Serving Facts” labeling — including serving sizes and calories, carbohydrates, protein and fat per serving — on product labels or online by June 2024. Some of those labels are likely to make it to consumers this year, providing a new degree of transparency.

 

Upcycled products on the rise as industry aims to cut food waste

Consumers are increasingly aware of food waste and swayed by sustainability claims on products. The food industry is taking notice, as more companies are beginning to use product launches to signal a commitment to lowering the amount of food that does not get sold.

The USDA estimates that 30% to 40% of the country’s food supply goes to waste. At the United Nations’ COP27 conference last November, three U.S. government agencies USDA, EPA and FDA set targeted goals for tackling food waste by making supply chains more climate-friendly. Companies looking to lower the amount of food waste in their own supply chains are including ingredients that would have otherwise gone to waste into new or existing products.

The nonprofit Upcycled Food Association (UFA), which launched in 2019, is flexing its muscle in the food space, having declared over 250 consumer products and brands as Upcycled Certified. Smaller companies are using upcycling as a way to distinguish themselves from other players in the industry. Snack maker Barnana, which launched in 2017, makes plantain chips with bananas that would have gone to waste. And Atomo — whose coffee alternative is created using upcycled date pits — has received $51.6M in funding to date. It is pitching its product as a sustainable beverage for the future, as climate change impacts coffee production.

Launches of products containing upcycled ingredients increased 122% in the five years ending 2021, and there are signs that number is only increasing as larger CPGs aim to combat food waste. Del Monte launched products this year made with reused pineapple juice that received Upcycled certification. Ingredients makers are reusing the grain used to produce beer for new proteins for use in other foods. Kerry created a protein crisp, while EverGrain used AB InBev’s barley waste to craft a new plant-based protein ingredient.

A main point of focus for companies in the upcycled space is educating consumers about their goals and sustainability benefits. While roughly half of consumers said that they are looking to cut their food waste according to Innova Market Insights, only 10% surveyed by the UFA were aware of the upcycled foods movement.

There is untapped potential for products to create using upcycled ingredients from across the spectrum of foods, something that many producers can take advantage of as consumers become more aware of upcycling. Case Samuel, chief sales officer of Sunrise Fresh Dried Fruit Company which sells upcycled dried cherries, told Food Dive CPGs are taking notice of the trend and are signaling interest in the capabilities and potential for upcycled food.

“In that 40% of all food that goes to waste, there are just almost infinite possibilities,” Samuel said.

For Mike Kirban, co-founder and executive chairman of coconut products giant Vita Coco Company, uncertainty has been a consistent part of doing business. 

Early on, executives at Vita Coco, which traces the company’s roots to a cold winter evening in 2003 at a New York City bar, had to convince people to buy its product. Then they worked to keep up when demand soared.

The past few years have brought on a new set of challenges, with industry-wide shipping costs soaring from $2,000 a container two years ago to more than $10,000 at its peak last summer, and the availability of shipping containers significantly throttling product availability.

Market conditions caused pineapple and mango puree shortages that impacted the availability of some of Vita Coco’s flavored coconut water on store shelves last summer. And for available products, it took longer for them to go from the factory to its warehouse; taking three months at one point from the customary two weeks. The elevated expenses sliced gross margins at Vita Coco nearly in half last year, and led to two price increases.

“That's the beauty of these businesses. There's always a new challenge,” Kirban said with a laugh from Vita Coco’s headquarters in New York City. “We've learned a lot. We've gotten better at a lot of things to be able to survive through the tough environment that we've [had] the last couple of years.”

He said Vita Coco, which also makes water packaged in aluminum cans, energy drinks and protein-infused water along with its namesake coconut beverage, has seen costs start to stabilize, though labor, packaging and ocean freight remain high. The last few years have prompted Vita Coco to make changes to the way it does business, spanning everything from how it sells and markets its products to the strategy it uses for samples and innovation.

Volatility reigns

Still, there’s mounting evidence that the challenges Vita Coco and other CPGs are facing will remain in 2023 and may force further changes at companies already facing one big hit after another.

Supply chain headaches, inflation, the ongoing war in Ukraine and surging input costs have proven to be a test for even the most seasoned executive. Leaders in the C-suite must now strategize how to plan for the future when there are few answers or historical blueprints they can tap into for a guide.

Krishnakumar Davey, president of client engagement at IRI, recently discussed procurement and supply chains with top CPG executives. He was surprised to hear the rather dire outlook they gave for this year.

“They said ‘Look, [2023] is going to be as volatile as [last] year and the last couple of years,’ ” Davey recalled. “I was quite taken aback by what they said.” 

Neil Saunders, managing director with Global Data, agreed. He said most food and beverage manufacturers are expecting 2023 to be “quite a difficult year ... because the consumer is still under a lot of pressure.”

At Del Monte Foods, the manufacturer of canned vegetables and fruits, Contadina tomato products and College Inn broths and stocks, is moving forward with what CEO Greg Longstreet said will likely be its last round of price increases for a while in February. 

But with costs for packaging, ingredients and transportation remaining elevated, Del Monte Foods continues to look for ways to reduce expenses throughout its supply chain and increase the attractiveness of its product to the consumer, he said.

To do that, Del Monte has introduced more products whose price point resonates with consumers looking for value and convenience, such as multi-packs of fruit cups and canned vegetables. It's also more than doubled spending at its plants during the past four years to increase speed and efficiency.

“For us to compete ... we have to be highly automated, high speed and efficient to provide those units at a better value to the consumer,” Longstreet said.

More job cuts ahead?

The wildcard for many companies is whether the country is headed into a recession and how severe it becomes if it occurs.

A recession would place further pressure on consumers already dealing with more expensive borrowing costs following a series of rate hikes from the Federal Reserve and higher prices for everything from food and clothing to medical care and travel. 

Reports last month that PepsiCo — widely seen as a bellwether — is planning to cut hundreds of corporate jobs in North America could be a prelude to further tightening at other food and beverage CPGs that have so far been largely immune to shrinking payrolls that have impacted other sectors, economists said. It could signal that even though price increases have helped offset rising expenses, companies realize they need to do more to reign in costs.

It’s a sharp contrast to the economic climate during the pandemic when food manufacturers were boosting their ranks to address elevated demand for products as homebound consumers spent less time going out, traveling or working in the office. While workers responsible for manufacturing the products should be largely protected in the coming months, corporate America may not be unscathed.

“The pandemic was quite good for most food and beverage companies because they saw a spike in consumer spending, and people were very carefree about hiring,” Saunders said. “Now that position has reversed and people are starting to say, ‘Well, we need to consolidate. We need to look at whether all these roles are necessary. We need to revisit some of the forecasts that we have.’ "

‘People have to eat’

Inflation data released last month by the U.S. government provided a glimpse of the struggles CPG executives are facing. The Labor Department estimated for the month of December that consumer prices for food at home rose 0.2% from November, contributing to an 11.8% jump from the prior year. Overall, inflation across all baskets of goods fell 0.1% in December, its biggest drop in nearly three years.

Even if inflation eases from its multi-year high, prices are expected to remain elevated compared to before the pandemic. Further price increases could still work in certain product categories, but, for the most part, many consumers may not be in a position to swallow larger ones on top of previous hikes implemented in 2022.

Valerie Oswalt, a former Campbell Soup executive who took over as the CEO of Kodiak Cakes in November, said the manufacturer of high-protein, whole-grain pancakes, waffles, bars and baking mixes is keeping a close watch on everything from demand for private label products to how often consumers are eating out. She said the company is monitoring product volumes and working closely with its suppliers and procurement team to drive efficiencies. 

“Our first job is to really try to drive productivity to offset the inflationary headwinds,” Oswalt said. “You have to be very careful with your pricing” so you don’t drive consumers away from your product.

Davey said CPGs may attempt to cut costs by simplifying production through fewer SKUs, cutting inputs — like something as simple as the number of bottle caps they purchase to boost efficiency — scaling back on advertising or marketing, and shrinkflation, a practice of reducing the contents of a package while keeping the price the same.

He said food makers also could replace or reformulate ingredients that are cheaper or more reliable, while incorporating more automation and artificial intelligence into their operations.

“There’s always lots of opportunities ... CPGs are just getting started. There’s still a lot of opportunities for them,” Davey said. “During the last two years, they haven’t been cutting costs as much because CPGs and food have had some really strong growth rates.”

With food and beverages an essential purchase for consumers, people may choose to look for ways to save money within the category.

Saunders said these options could include shopping more at discount stores, eliminating certain nonessentials, or trading down to cheaper offerings. Private label, which has thrived in recent years, will remain in demand.

At the same time, premium offerings are expected to remain in demand as shoppers take money saved from dining out less frequently to buy these products while continuing to show a willingness to pay more for an item is higher quality and has unique attributes. 

Despite the ongoing uncertainty plaguing the food and beverage space, the category remains relatively stable compared to other industries such as technology, manufacturing or retail, economists said. 

Marcel Koks, industry and solution strategy director at Infor where he works with companies to adapt to the market, said while “disruption is the new normal,” the food industry as a whole “has been a very stable” sector.  He noted its resilience after recent recessions around 2001 and 2008.

“When you look at the food industry compared to other industries, food has always done relatively well,” Koks said. “When you look at the total value, it will still be there. People have to eat.”

Ahead of the United Nations’ COP27 climate conference last fall, beverage giant Coca-Cola was announced as a sponsor. Immediate backlash ensued.

Sustainability activists accused the UN of greenwashing by inviting a company responsible for large amounts of plastic pollution, which is accountable for 3.4% of global emissions according to the Organization for Economic Co-operation and Development (OECD). A petition signed by 240,000 people was created, requesting that Coca-Cola be removed as a sponsor, which ultimately did not occur.

In an open letter, at least 60 public health groups called for an end to “corporate capture” from polluting companies in climate talks. Coca-Cola told PBS its participation underscored the company’s commitment to lowering its emissions.

The petition and the attention it received brought the deep rift between advocates warning of impending climate collapse and the food sector into sharp focus.

In response to increased pressure from sustainability advocates and consumers, food and beverage companies have laid out plans to lower the greenhouse gas emissions emanating from their supply chains over the next decade. But whether the companies can make real progress is a major question, according to experts.

Some companies, like Mars, signaled their commitment by saying they would tie executive pay to meeting emissions goals. Three major CPGs — Mars, PepsiCo and Nestlé — each told Food Dive they are on track to reach their own lowered emission goals and aim to make substantial progress toward them in 2023.

While some experts view CPG efforts thus far as a step in the right direction, they are skeptical that the industry will be able to reach their time-based goals in the coming years. This will likely fuel even greater pressure from activists, who lay a large share of the blame for the climate crisis at the foot of food and beverage makers. The food industry is responsible for a third of global greenhouse gas emissions, according to the United Nations.

Sustainability advocacy group Food & Water Watch’s policy director Jim Walsh said the industry’s current efforts will not drive meaningful results on curbing emissions. “This is big agriculture really engaging in a marketing campaign to greenwash a destructive global food system.”

 

CPGs aim to sequester carbon

At least 110 different countries have agreed to achieve net zero emissions — which would mean achieving an equal balance of emissions produced and taken out of the atmosphere — by 2050, according to emissions measurement company Net0. This will require a massive overhaul of how countries, businesses, and consumers approach food production and consumption.

Marketing, as well as new product creation, have become an important piece to how CPGs go about communicating their carbon reduction ambitions to the consumer. Some brands — both legacy products such as Bud Light and new entrants to the market such as Neutral Milk — have launched carbon-neutral products, which they claim compensate for all of the greenhouse gasses emitted during production. This typically involves the company purchasing carbon credits or investing in carbon offsetting projects, such as replanting trees in areas hit by deforestation.

Reliance on carbon offset credits could prove to be an unsuccessful measure and call their credibility into question, said Shon Hiatt, an associate professor at University of Southern California’s Marshall School of Business.

“I think they’re going to set themselves up for some reputational threats, because people can say it’s greenwashing,” Hiatt said. “It’s not well regulated, so there’s a higher risk.”

Companies also are embracing carbon “insetting” projects — such as restoring forests and agricultural land — which do not include the purchasing of carbon credits and are about “doing more good rather than doing less bad,” according to the World Economic Forum.

Seizing on regenerative agriculture

The industry differentiates between Scope 1 and 2 emissions — those that emanate from their own operations and facilities — and Scope 3 emissions, which result from indirect sources, such as those stemming from the producers they source from and transportation of products. Scope 3 emissions account for 90% of food companies’ emissions, according to sustainability nonprofit Ceres.

In most food companies’ emissions goals, “regenerative agriculture” takes center stage as a key solution. These practices are a mix of agricultural techniques that farmers adopt to restore the soil and water used in the production process. According to the Chesapeake Bay Foundation, some examples of these practices are cover crops, continuous no-till farming and crop rotation. Tilling can erode the microorganisms in soil, which harms its biodiversity and overall health, according to Colorado State University.

But not all agriculture experts are on board with the practice. No-till agriculture requires significant pesticides and chemical fertilizers, making it more damaging than beneficial, according to Food & Water Watch’s Walsh.

“These companies throw around regenerative agriculture and because it's largely undefined, it allows them to justify ridiculous and harmful practices that offer little to no climate benefits whatsoever,” Walsh said.

While some practices that fall under “regenerative agriculture” could be beneficial, Tara Chandrasekharan, a senior ESG analyst at sustainability investor group FAIRR, said the companies must be more transparent about how much they believe regenerative practices can reduce emissions. Nestlé, she said, is one company that was sufficiently candid in detailing how its practices will reduce emissions in its lengthy Net Zero Roadmap document released in 2021.

“For these actions to be robust and reliable, companies have to both measure and disclose the extent that these practices can mitigate emissions,” Chandrasekharan said. “The main concern with soil carbon sequestration is how sufficiently it can sequester carbon, and that can vary by region and soil type.”

Nestlé — the largest food company in the world — said it has implemented a mix of techniques in order to reach its goal of halving its absolute emissions by 2030. These include regenerative agriculture practices and insetting projects. Individual brands in the company’s portfolio can offset their emissions by purchasing carbon credits, the CPG giant said.

In an emailed statement to Food Dive, Nestlé said one brand that is embracing reduced tilling of soil is pumpkin maker Libby’s. The company said it is working with a third-party organization, Sustainable Environmental Consultants, to collect and measure agricultural data in order to assess their emissions.

“By utilizing sustainable, reduced tillage practices, Libby’s farmers saved the equivalent of approximately 43 dump trucks of soil—or 694 tons of soil annually—from being lost to erosion in just the first year of our data collection, as compared to conventional tillage,” Nestlé said. “We are using our scale and global reach to find innovative and new approaches, leverage farmers’ unique expertise in their field, and to partner with third-party experts and industry leaders to ensure our work is effective.”

Candy giant Mars Wrigley — which has pledged net zero emissions across its company by 2050  said it’s on track to hit its goal of reducing total emissions in its operations by 42% before the end of 2025, based on its work to eliminate deforestation and embrace “climate-smart” agriculture practices, specifically in the cocoa sector.

“We have a number of future forward programs, such as our farm-level cocoa initiatives at Mars La Chola in Ecuador and the Bacao Farm in Columbia, where we’re optimizing inputs like fertilizer and water use, using renewable energy, and leveraging the power of trees to sequester carbon in soil and biomass,” Alastair Child, chief sustainability officer, told Food Dive in an emailed statement.

Soda and snack behemoth PepsiCo sees its regenerative agriculture approach as the key to transforming its supply chain and reaching its goal of achieving net zero emissions by 2040. The company believes it has a solid foundation to build upon its emissions reductions in 2023, Roberta Barbieri, vice president of sustainability, said in an emailed statement.

Some new efforts the company has adopted include a project to decarbonize a snacks plant in the Netherlands through storing and transforming renewable energy, and installing a biodigester — which breaks down materials like fat and greases — at a PepsiCo factory in Portugal.

But Barbieri said there are difficulties associated with getting partners in its supply chain to deploy new technologies, which require greater investments. Another challenge standing between the company and its regenerative agriculture goals is being able to manage data about how the projects are progressing, which she said has room to improve.

“Outside of some of our large suppliers, there is a broad need for more education and capacity building to address climate change,” Barbieri said. “Small and medium size suppliers also struggle with lack of staffing needed to lead change at the scale required.”

Skeptics raise questions

While companies focus on these goals, experts are doubtful companies will be able to meet them in their intended timeframe, given the significant and costly overhaul of global supply chains that would have to occur.

Some of the practices that fall under the umbrella of “regenerative agriculture” are questionable, said Jason Hill, an environmental expert and professor at the University of Minnesota. For one, the term itself has faced accusations of greenwashing from some activists because of its lack of a clear definition. There’s also the question of whether the farming methods reduce emissions as much as the industry claims.

“With reduced tillage of row crops, the jury’s still out on whether that results in carbon storage to the extent that it’s often held up to do so,” Hill said.

The meat and dairy sector is responsible for 14.5% of manmade emissions according to the Food and Agriculture Organization of the United Nations. The sector has come under specific scrutiny because of its production of methane, a greenhouse gas which is at least 25 times more potent than carbon dioxide according to the Environmental Protection Agency.

Sustainability investor group FAIRR, which tracks the emissions of livestock companies, said meat giant Tyson will not be able to reduce emissions 30% by 2030. This goal is outdated compared to its peers, FAIRR said, and emissions stemming from its operations have increased by 7% compared to its baseline target. Tyson said in a 2021 statement it aims to update the baseline of its emissions goal by the end of 2023.

In order to track emissions, many companies rely on third-party organizations to get an accurate picture of their carbon output.

Climate Trace, a nonprofit that tracks emissions for livestock companies, said it is challenging for companies to determine their progress toward emissions goals because there is a lack of accurate data sources to determine if they are succeeding. The nonprofit estimates emissions from farms by calculating the methane they produce — through cattle burps and manure, rice cultivation and application of synthetic fertilizers.

“The Environmental Protection Agency does not regulate or monitor greenhouse gas emissions from animal feedlots and in fact, does not even have a complete inventory of feedlots in the country,” said Lekha Sridhar, partnerships manager for Climate Trace. “We apply satellites, other remote sensing techniques, and artificial intelligence to deliver an independent look at global emissions and get as detailed as possible.”

Can policymakers and investors force the industry’s hand?

While CPGs indicate confidence in their own abilities to curb their emissions, sustainability groups do not think that is enough. These groups strongly advocate for U.S. lawmakers to regulate the carbon footprint of Big Food companies.

Senator Cory Booker, a Democrat from New Jersey, introduced a bill in 2021 that aims to reform the farm system to improve its sustainability. 

Walsh said passing Booker’s bill is the number one thing Congress can do to both lower the industry’s emissions and add more structural security to the supply chain in times of crisis — especially with the factory farm system.

“Factory farms are creating a food system that is less sustainable and less resilient to various shocks in the supply chain,” Walsh said. “When you have massive agricultural entities and Big Food giants, one problem within those institutions can have repercussions around the world.”

FAIRR, with its investor network representing assets worth $70 trillion, believes its reporting of carbon emissions in supply chains can be used by investors to pressure companies to enact more robust emissions goals, said Thalia Vounaki, senior manager for research and engagements at FAIRR. “We've got that information, that data set is available for investors to then use as part of their individual engagements.”

While the food system has always been a vital component of climate change, it’s largely been ignored in favor of attention to other sources, such as emissions from factories and vehicles. Until last year, that is. 

The 2022 United Nations Climate Change Conference, commonly called COP27, featured the first-ever Food Systems Pavilion. And, for the first time, agriculture and food systems took the main stage in discussions about climate change.

Eat Just founder and CEO Josh Tetrick used that conference opportunity to make the case for food as a climate solution.

“You’re not going to solve climate change unless you talk about meat,” he said. “And I know it’s hard to talk about meat because it feels very sensitive when you talk about meat. 

“It’s a lot more emotional than talking about not drilling for oil,” Tetrick said, “but you’ve got to talk about [meat] because something has to be done about it.”

Eat Just, which is the only company in the world with regulatory approval to serve cultivated meat, hosted a special tasting of its Good Meat chicken at COP27 last November in Egypt. For people who weren’t completely aware of the connection between animal agriculture and sustainability, Tetrick said the tasting helped them to connect the dots and see both the problem and a potential solution.

Cultivated meat is grown and harvested without traditional animal agriculture. A life cycle analysis of the cultivated meat industry by CE Delft, which was commissioned by the Good Food Institute and European animal rights group GAIA, cultivated meat could cause up to 92% less global warming, 93% less air pollution, use up to 95% less land and 78% less water, compared to conventional beef production.

However, just because the connection between food and sustainability is becoming more familiar to the public, doesn’t mean the problems are close to being solved, said Sheila Voss, vice president of communications at the Good Food Institute, an international organization that promotes the alternative protein space. After all, she said, about a third of all emissions can be attributed to food and agriculture, according to a UN-backed study published in Nature-Food in 2021.

“There’s a far way to go in terms of translating that momentum into actual policies, investments, governments investing in food and ag and alt protein R&D, as well as organizations really prioritizing the solutions of how food and ag can contribute to some of the world’s biggest issues and challenges,” Voss said.

Connecting the dots

Dhanush Dinesh, founder of “think-and-do tank” Clim-Eat, which uses science and policy to bring about policy changes in the food system, is well known for his activism. But he worked in energy and forestry policy before moving into food system advocacy. 

“Many times, the pressure on forests is because of land expansion as a result of agriculture expansion,” Dinesh said. “I saw that from the forestry side, and I thought, ‘OK, I need to understand the other side to connect the dots.’”

Dinesh, who attended COP27, said more education is needed to help people understand the complex role that food plays in sustainability. Where do you start making changes? Where do you need to stop? How can you implement solutions that work worldwide with different cultures, behaviors and economic systems? 

Eat Just’s Tetrick said that even among more educated urban and affluent consumers, there is still a low level of awareness about the connection between animal agriculture and the environment. Many people would say that animal agriculture isn’t great for the environment, but they may not know the basics of why. 

“That doesn’t mean that they’re going to switch to something else, unless that something else ultimately is better in really important ways for their lives,” Tetrick said. “...And they believe it to be better from a health perspective or a taste perspective or a cost perspective or all three of them.”

While organizations and companies, including Eat Just, have worked to raise awareness of the food and sustainability connection, a major world event a year ago sharpened that focus across the world: The war in Ukraine.

The severe reduction in wheat and sunflower ingredients usually exported from Ukraine led to high prices and shortages around the globe, which in turn led more people to think about how the food system can be more sustainable and resilient, said Helena Wright, policy director at the FAIRR Initiative, an investor network focused on environmental, social and governance risks in the food sector.

“Investors are trying to reduce the risks through their whole portfolio, including the companies that they invest in, and that’s a really effective lever of change in terms of them being the shareholders of companies,” Wright said. “And then in some cases, we do see companies in the private sector getting ahead of regulation. They’re trying to get ahead of where policy is, where regulation might change in future. And a lot of companies are also global, so if a regulation or policy comes in one place, it will affect the company’s whole supply chain globally as well.”

Getting on the menu

Making a difference at COP27 wasn’t one of Clim-Eat’s policy objectives when the organization started about a year ago, Dinesh said. As he has seen for years, the huge international bureaucratic process tends to move slowly and isn’t always effective.

Dinesh started Clim-Eat as a result of his disappointment in outcomes for food sustainability policy and awareness at COP26 in 2021. The result, according to a recap from the European Commission’s Directorate-General for Agriculture and Rural Development, was an agreement on the need for a transition to more sustainable food systems – without any roadmap.

The COP27 presidency asked Clim-Eat for advisory assistance on the topics of food and agriculture, Dinesh said. Several other food organizations sought out Clim-Eat to convene a Food Systems Pavilion. Suddenly COP27 became the first of the large-scale international policymaking climate conferences in which the sustainability of the food system had a place in the spotlight.

“It’s been a big leap forward, I would say, in terms of putting food out there,” Dinesh said. “It's interesting, because I keep going into COPs, and there are some people working on food and we all know each other, you know, but this is a time when other sectors, other people, were thinking about food, and looking at food, and thinking about it as a sector which is important.”

Voss said the Good Food Institute also observed COP26 in 2021 and wondered why food did not play a more central role in the discussions or potential solutions. GFI joined the coalition of organizations co-hosting the food pavilion last year.

At COP27 and other global climate conferences, the consensus has been that countries around the world need to cut emissions in half by 2030. Voss said that there are some realities about the food system that seemed to resonate among conference delegates, such as choosing plant-based alternatives to animal food products could help reach those emissions targets within seven years. 

COP27’s Food Systems Pavilion was located next to pavilions devoted to nature and water, Voss said. All three worked together to show how they were interconnected. For example, GFI partnered the Nature Conservancy and the World Resources Institute on panel discussions to show how they can work together to become a better sustainability solution. After all, Voss said, those traditional conservation groups are using the same statistics and have the same end goal as GFI.

Besides Eat Just’s meat tasting, the Food Systems Pavilion also featured other companies demonstrating how the food system connects with sustainability. Gabriel Levesque-Tremblay, co-founder and chief technical officer of cultivated wagyu beef company Orbillion Bio, participated in a panel discussion to talk about cultivated meat with Aleph Farms CEO Didier Toubia.

Levesque-Tremblay said that many people at COP27 seemed to know basic information about cultivated meat, such as what it is and the way it was created. “I was surprised how little they needed education on that. They knew,” he said. “What they wanted to know [was] what the relation is between food and climate. That was unclear for some.”

In Levesque-Tremblay’s panel, a lot of the questions came from people asking whether cultivated meat is targeting traditional farming. On the video, they appear somewhat hostile toward cultivated meat. 

But Levesque-Tremblay said he didn’t take away any negativity about wagyu beef. Orbillion Bio positions itself as a more sustainable option to high-end beef, not an entity that will put the cattle industry out of business.

“I felt like people have so much curiosity towards it,” Levesque-Tremblay said. “And at the end of the day, food is a choice, right? You will always be able to eat whatever you want on the market if it's available.”

A personal politics ‘hot potato’

Jan Dutkiewicz, a policy fellow at Harvard Law School, said the scholarly research on the connections between food and sustainability in the last decade have made it impossible to keep this discussion off the table.

On a policy level, Dutkiewicz said, people have historically been reticent to engage with food. “People treat it as a bit of a hot potato,” he said. “You can acknowledge that it’s a problem, but then you want to pass it on, rather than dwell on it because it’s a politically unpopular thing to deal with.”

Dutkiewicz said it’s easy to point a finger at faceless entities that are seen as sustainability issues — oil companies, fracking operations, car companies — and say they are problematic. It’s also easy to look at Big Food and say companies are making choices that are detrimental.

“Drill down into the fact that we need major production level changes, that we may need dietary changes, or changes to what’s available on supermarket shelves or the choice architecture within institutional food settings, and so on and so forth,” Dutkiewicz said. “Once it gets personal, I think it starts being politically tricky.”

That makes it difficult to discuss, Dutkiewicz said. People essentially cast their vote for different ranges of food products three times a day. Food isn’t just about what people prefer; it comes with questions around health, the way it is produced and access. 

“The more you’re talking about what people might perceive as personal sacrifice, the more difficult it gets — which is why, be it meat, or sugar or fat are so difficult to talk about, or legislate, or whatnot,” Dutkiewicz said.

Eat Just’s Tetrick said the company, which makes plant-based Just Egg, the top-selling egg substitute in the U.S., has done policy work behind the scenes for years to get around personal politics. The company, he said, welcomes leaders — governors, senators, department and ministry heads — to show not just what Eat Just can do in terms of food, but what the company can do for governments. 

“I want a senator from X state to understand what making meat and eggs is, without requiring an animal,” he said. “How that actually can mean thousands, tens of thousands of jobs in their particular state. 

“I want a minister or a prime minister of a country to understand that investing lots of energy in building a new meat infrastructure is good for food security,” Tetrick continued. “It’s really important to build that kind of resiliency. It’s a way to develop their economy.”

Too often plant-based food is polarized in the political discussion as a radical leftist idea. But Just Egg is made in a factory in Appleton, Minnesota, located in a Republican district with residents who voted for Donald Trump for president.

They “don't really care about whether it’s a vegan egg or not,” Tetrick said. “They care [about] are we providing jobs? Are we providing equity or are we providing insurance? Are we bringing energy to the town? …If more and more alternative proteins from plant-based to cultivated can show those kinds of results, I think that really does help to activate policymakers, sometimes more than then than these other things.”

Taking the next step

While many participants at COP27 discussed the food system, Dutkiewicz said that food being “on the agenda” by itself doesn’t mean much. There were no sweeping policies or commitments that came out of the conference to make a big change.

“It’s more just that a lot of ideas got in front of people,” Dutkiewicz said. “And what’s done with that is unclear.”

The new spotlight on sustainability issues in food and beverage on its own can only do so much. The annual Coller FAIRR’s Protein Producer Index, released last month, showed the food system has a long way to go in terms of responding to sustainability issues. 

Only 14% of the largest protein companies in the world are disclosing all of their emissions — from both animal and feed farming — and companies are unprepared to adapt to biodiversity targets. More than half of all companies — 55% — are ranked “high risk” in the index.

While these results are not necessarily promising, Wright said they have been getting better during the last five years FAIRR has produced the index report. She expects the results will continue to improve this year based on the larger focus on sustainability and several nations starting to call for emissions disclosures. 

In its five-year agricultural plan released in late 2021, China listed cultivated meat, plant-based eggs and recombinant proteins as priorities for the country’s future social and economic development. Through its “30 by 30” goal — producing 30% of all food locally by 2030 — Singapore has supported the alternative protein industry. 

Israel’s government declared food tech with an emphasis on alternative proteins as one of its five national priorities. In the U.S., where government policy generally has stayed away from endorsing alternative proteins, President Biden signed an executive order last year making biotechnology a national priority in a variety of fields, including food.

“I think it’s also clear that it’s an all-hands-on-deck [issue],” Voss said. “It’s not going to be solved by one magic sector. It’s not gonna be solved by government, or just by private sector or just by the civil society. It has to be all those.”

Too often, Voss said, new technology and alternative proteins have been pitted against the incumbent industry. Instead the policy approach should be similar to how energy transition policy has been approached. Those who work in traditional food could become incentivized to become more sustainable in their practices — changing the crops they grow, learning more about technology to make protein production better for the environment, working toward creating more sustainable jobs in food production.

“That’s how GFI is trying to engage and trying to convene and trying to get policies that actually really help this transition in a really smart way,” Voss said.

Non-governmental policy groups, scientists, researchers and companies big and small that participate in the space also can help drive change. Dinesh said that is why there were more than 200 organizations at the Food Systems Pavilion at COP27: They all had potential solutions to parts of the larger problem.

“That’s kind of showing that things can be done differently. We’re doing it,” Dinesh said. “From an advocacy perspective, it kind of changes your narrative, because if you just keep saying, ‘This is important,’ for the last 10 years, at some point, someone's asking, ‘But so what?’”

Last year, the Good Food Institute published a report looking at the state of national policies dealing with alternative proteins across the globe. The organization produced the report for information’s sake but also to stoke some competition, Voss said. If countries can see what others have done in a clear and concise report, it may spur them to do more in the name of global competitiveness and food security.

The international developments toward more alternative-protein-friendly policies and continued exposure for food and agriculture give Voss reason to be optimistic.

“I definitely think that the seeds that were planted — pun intended — in 2022, and even in the years leading up to that,” she said, “I think 2023 will absolutely see many of those seeds start to germinate and break through the surface.”