Joining us from Auckland, New Zealand, we are delighted to welcome Ian Proudfoot, Global Head of Agribusiness for KPMG. Ian helps us to unpack the term ‘global agrarian revolution’, talking about the ways in which different technologies and ways of working are increasingly being fused to come up with innovative new methods of food production. A crucial part of this is consumer perception, and Ian shares his thoughts on the extent to which public expectations of the way in which food is produced and, perhaps more importantly, its origins are changing.
He explores how food has become a unifying point for many, in a time where other aspects of ‘normal’ day-to-day life have been stripped back and discusses the concept of a ‘now normal’ as the globe begins to work to come to terms with life in the wake of the COVID-19 pandemic and its as yet not fully known implications.
Q) You have spoken recently about the first truly global agrarian revolution. Can you tell us little more about what that will mean for the future of food?
The global agrarian revolution is a concept that we have been talking about now for around five years. It links in with the industry 4.0 concept, which is effectively what the World Economic Forum is referring to as the ‘fourth industrial revolution’.
It is all about the fusion of different technologies and different ways of working. What we are talking about in terms of agriculture is a new way of looking at the fusion between the biological solution, the digital solution and the physical solution. In the past, we would have taken a plant for example and applied a physical technology to it – perhaps a spade or a tractor – then a digital technology through the knowledge of the farmer. As a result, we grew something. Initially, we did it to feed ourselves and then we got better so we now do it to feed the population.
The global agrarian revolution we are now looking at takes this fusion to a whole new level: the biological solution is far more advanced and has been shaped by factors like gene editing and bio-technologies. The physical solution is evolving as well to include different types of farming platforms such as robots, drones and other new technologies. Equally, the digital solution is increasingly about using data and technology as they’ve not been used before, harnessing big data or AI. When these are all fused together, we still end up growing a plant or an animal, but we can do it far more efficiently, using a lot less of the earth’s natural capital and creating a real step-change in our agricultural system.
Across the world we are entering into a period where we are going to see the most dramatic shift in agricultural production systems probably since we started formal agriculture about 13,000 years ago. That is why we refer to it as the first global agrarian revolution.
"We are going to see the most dramatic shift in agricultural production systems since we started formal agriculture about 13,000 years ago."
Q) You are based in New Zealand – a country that has been acknowledged globally for dealing well with the COVID-19 pandemic – but obviously cover a global market in agribusiness. New Zealand is a major exporting country – what impact has the pandemic had on that both economically and socially?
As in every country, it has had a huge impact. We are a small island nation isolated at the bottom of the South Pacific and our economy relies heavily on two things: the first is our ability to produce and sell food across the world (we generated about 46 billion New Zealand dollars in export revenues this year) while the second big chunk of our economy comes from tourism. Because we are so far away, people tend to come for a long time and spend quite a lot of money, often seeing it as the trip of a lifetime.
We have had to turn our minds to what our future looks like in this world of significant change: there really is a sense of a new ‘now normal’ and one of the things that is beautiful about this is that people are becoming increasingly connected to food. Food has become really important to people, including where it comes from and its back story.
Now, the focus must be on making that step-change to create significantly more value from the products we have grown. Simultaneously, we have to face the reality that typically people now have significantly less money therefore we have to compete effectively to maintain our ability to create any wealth for our country. In fact, the industry has just today published its new vision Fit for a Better World. This is all about growing the industry but in a much better way than we were prior to the COVID issues.
Q) Your concept of a ‘now normal’ rather than a ‘new normal’ is very interesting. How do you see the global food market more broadly responding? Is it in a similar way to how New Zealand is responding or are you noticing any differences from a global perspective?
We are referring to it as ‘now normal’ because I don’t think the fundamentals that underline the shifts we are seeing are any different to those of six months ago. There is a significantly stronger focus on the environment which I think is just being highlighted much more. The consumer’s centrality to the food system was something that was already becoming increasingly apparent, and it has now just become even clearer. Additionally, the role of safety in food was already growing in importance, as was the role of health. All those trends been brought sharply into focus over the last three or four months.
What we are seeing globally is a general shift towards geographic isolation: countries are focusing a lot more on their own domestic food system and domestic food resilience. We are also seeing a greater awareness in countries about the huge numbers of people facing food insecurity in our societies and that is an area I think will see a real change in terms of public expectations of global food systems. The number of people that get left behind will be a real focus.
The UN has recently quoted a figure of 821 million people suffering from malnutrition on a daily basis¹. Our food system in the future mustn’t be able to allow that to happen: there will be an expectation and obligation on the food industry to respond to those figures.
With regards to whether companies in New Zealand are behaving significantly different to others, I think we have a real benefit in that we are largely operating within our own borders. As such, we’ve been able to really focus on recovery. I think we are lucky in that: we are probably a month or two ahead of other countries in terms of starting that journey.
Q) Is globalisation of food supply truly sustainable? And possibly more importantly, should it be?
Most countries are only now starting to think about whether they have a national food strategy. The experience of COVID-19 has been a huge disconnect event that has left us all somewhat dumbfounded about how the world can stop all of a sudden. For countries without strategies in place, we are seeing a lot of work to establish them quickly. I think we are seeing that particularly in the UK with the government now very focused on a national food strategy. Partly I think this was a piece of work that was bound to happen as the UK goes through Brexit, but it has definitely accelerated because of the impact of COVID.
Where we are getting to fundamentally is a position where countries look at their own domestic food supply. I think we will see much more use of technology in food production to enable it to be produced sustainably and closer to market. For exporting nations therefore that could well create some challenges in the future.
Q) Are there specific approaches or even geographies that you believe will drive forward recovery of local and global food recovery systems? Can these be examples to others or will it be a very specific approach for each region?
We are seeing some countries establish very clear goals around what percentage of food they want to source domestically. Singapore stands out at the moment as a leader, with clear ambition around transforming its food system, relying less on exports and utilising technologies to produce food in challenging and crowded urban environments. The same sort of innovation is also happening in places around the world, just perhaps not as in as co-ordinated a way.
In the past, we have solved the food system based on a calculation of how much land do we have and therefore how much can we produce, however people are starting to ask ‘what do we need in terms of nutrition’? From there, how do we produce the food and deliver that nutrition? It’s a very different approach that is much more analytical, starting at the market and working back.
I think that is probably the biggest pivot we are going to see in food production: it is no longer grow-centric, it is becoming very much more consumer-centric.
"The biggest pivot we are going to see in food production: it is no longer grow-centric, it is becoming very much more consumer-centric."
Q) As we move forward from the COVID-19 pandemic – what areas of agri production do you consider to be the most exciting or most in demand?
A couple of technologies stand out to me. One which IGS is in: vertical, highly-controlled farming systems. I see these as totally transformational in terms of changing how land gets used to produce more nutritional products and supply them direct to markets. I see that as significant from both the sustainability basis but also from the point of view of making sure that we address nutritional quality. The science around vertical farming and the range of products that can be grown is going to expand dramatically in the next decade.
It is interesting to consider what the impact of COVID might be on the emerging generation of protein products. Some argue their development will be accelerated because of COVID and that they will become more desirable because they are being designed to have specific health benefits. Analysis can prove what these products will give you in terms of their health attributes and can help address the growing concern that many global consumers have towards animals in our food system. There is a strong narrative emerging already that states that if we didn’t have animals in the food system, we wouldn’t have had COVID-19.
The face of ‘diet 4.0’ will no doubt be determined by food that is designed to fit into our lifestyles. Previously, we were thinking that was very much about food on the go because that was the lifestyle, with many commuting hours each day and working long hours.
That may all now change as suddenly we are mostly working from home. Perhaps the biggest impact I see from COVID is that it has opened up a whole potential transformation in how the future of our diet looks. It is going to be interesting to see which direction this goes in over the next year or two.
"COVID has opened up a whole potential transformation in how the future of our diet looks."
Q) Consumer perceptions of food are changing and have been for a number of years. How has the recent COVID-19 pandemic heightened this, and what will see emerging as consumer priorities as we emerge in its aftermath?
One of the big trends we have observed over the last ten years is the emphasis on attribute listing on packaging. If you go into a supermarket in the United States particularly and you buy a product it probably has eight different attribute markers: it might be GMO3, it might be gluten free. There is a whole range of different product attributes that are important to different consumers which helps create the value proposition around the product.
We believe that COVID will accelerate the importance of attributes, which tells me that safety is most important to people at the moment. We have all spent significant amounts of time being told to stay at home because everything around us is dangerous. Public perception of safety is very significant, which puts focus on how you manage your supply chain from farm to fork. How do you take human handling out of that? How can you give people an assurance that the products are being safely handled all the way through the supply chain? This is going to be really important and I think will subsequently become a front to back attribute.
Also growing in importance is a product’s ability to help boost the immune system. If a product is shown to make you feel better and increase immunity, that is something I think will become valuable to customers. We are already seeing businesses promoting that quite heavily: without claiming implicitly that their products are ‘COVID busters’, they imply strongly that if you eat one of these every day this will help you keep the doctor away. It’s back to the old apple a day story we had as kids.
Q) The KPMG Centre of Excellence in the Netherlands recently published a study comparing the cost of a head of lettuce grown outdoors in New Mexico and then flown to New York versus one grown indoors in New York and consumed there. Could you share a little about this research?
This was a piece of work that we did for a client that produces lights for controlled cropping and vertical farming systems. We used our true value methodology which looks at not just the economic costs and benefits of a strategy but also considers what the environmental impacts are. It then considers the social impacts of a strategy to give you what we see as a ‘triple bottom line’ equation as opposed to just considering the economics.
It was fascinating to look at vertical farming systems in this light. When we looked at the whole supply chain, given the carbon impacts of flying something across the country or moving it across the country alongside labour challenges (the traditional way of producing is incredibly labour intensive and uses particularly a lot of migrant labour in that part of the United States) there were actually quite significant benefits to utilising the controlled cropping system close to the market. That may not necessarily be the message you would get for looking at purely the economics.
I think this is reflective of the way people will consider investment decisions moving forward, particularly as we move into this world where purpose becomes more important than understanding not just what the simple dollars and cents are but actually what impact are you have on the environment. Are you able to use less of our natural resources than would reduce your footprint? Can you have more positive impacts on your communities? Those are the things that are going to become important to your customers, important to your investors, important to your employees and important to other stakeholders in the business as well.
"Purpose becomes more important than understanding not just the simple dollars and cents but actually what impact are you have on the environment."