July 21, 2016

Big Food’s Multibillion Dollar Problem

by Carmen in News

Over the past few months the world’s largest agricultural and seed technology firms such as Monsanto, Dow and Syngenta have found themselves in the middle of a profound upheaval that not only raises questions regarding the future of the food system but also increases the value of organics in global food production.

Owning 75% of the agrochemicals market and 63% of the commercial seed market, the six largest agricultural organizations in the world have undergone a spate of mergers in an attempt to further consolidate power and influence in the sector. One example is the merger between Dow and Dupont last year. Now a $130 billion company, DowDuPont plans to focus on agricultural chemicals and seeds and will inherit a hefty market share accounting for 40% of the corn and soybean market in the US. ChemChina is another, announcing their $43 billion purchase of Syngenta that bolstered their genetically engineered seed capacity. They know manage the largest slice of the global agricultural chemical market. The remaining players, Monsanto, Bayer and BASF, will most likely follow suit sooner rather than later.

Consolidation in the agribusiness industry is widely interpreted as a concentrated attempt to acquire political power as giant firms lobby governments to shape the rules of the global food system in ways that support their interests. This agricultural model is also likely to have devastating environmental effects as large-scale chemical based farming is recognised to be a major contributor to both climate change and the extreme loss of biodiversity seen today. With a more informed consumer and weaker performance across the board, these giant agribusiness firms are failing to generate high returns for their shareholders. After all, small-scale farmers feed around 70% of the world’s population and do so mainly with seeds saved from one generation to the next.

Back to the Natural Way of Life

Source: Fortune (2015)

When considering food safety, trust is of critical importance to consumers. ‘Big’ has suddenly become ‘bad’ in the eyes of the informed consumer and as a result big agri has lost considerable market share. Major packaged food companies have lost $18 billion since 2009 ($4 billion of which lost in 2015 alone) as shoppers flocked towards organic alternatives. A new influx of smaller agricultural firms is now winning a greater share of the market as they offer more engaging, environmentally safe and sustainable product lines.

This search for authenticity has enabled organic food sales to more than triple over the past decade to $80.4 billion last year. Global populations are still buying more food than ever before, but they are now choosing brands that exclusively use safe, natural and recognisable ingredients. For the first time, these brands are appearing in the major distributors such as Safeway, Target, Wegmans and Wal-Mart. Rather than offering traditional products with declining sales, they are actively dedicated shelf space to a variety of new and organic players.

Producing with Positive Ingredients

as % of new food and drink launches

Source: Financial Times (2016)

Organic has certainly become a bright spot for our farms, our food and our future. 170,000 acres of the farmland in the United States are in the process of transitioning to organic as these foods are now present in 75% of all categories in supermarket shelves. The demand for an organic lifestyle is spreading worldwide, with consumers becoming increasingly aware of its health and environmental benefits. Legislators are also creating a favourable regulatory environment that supports increased organic production.

Few would dispute that the demand for organic, sustainable agriculture and food is set to increase. Mankind simply cannot afford the alternative. Neem, a feature of community life throughout Asia for centuries, is now becoming renowned around the world for its contribution to the organic supply chain in agriculture, healthcare and cosmetics. This gift of nature is set for a major demand and value increase as the market for naturally grown produce grows at a double-digit pace and as the global population continues to increase exponentially.