With domestic budgets and disposable incomes in Asia on the rise, consumers are seeking high-quality fresh and processed food and beverage products and are looking to reputable international markets for clean, safe produce. This presents a massive opportunity for agriculture, food and beverage (AF&B) companies wanting to grow their exports into Asia.
However, when setting up or scaling up for greater international supply, it is important to consider the specific attributes and demands of the Asian market, particularly in China. Businesses with aspirations to engage in these markets must develop strategies to futureproof their supply chains for ongoing quality, resilience and security, as well as continuity of supply and long-term asset value.
Quality is a key differentiator and is favouring certain imported products. This has been particularly evident in the market for infant milk formula, which has seen exponential growth in demand from Australia, New Zealand and others, due to a combination of domestic product failures in China and perceived higher quality standards in Australia and New Zealand.
It is not only the perception of higher quality that is driving increased demand. The controls applied by producers in developed economies to manage risks such as toxins, biosecurity, and emerging contaminants are, for now at least, considered preferential to those in many Asian markets. Thoroughly understanding and implementing these controls through all elements of the food supply chain is critically important for maintaining growth of supply into Asian markets.
In seeking improved yields and land productivity, AF&B businesses need to apply careful due diligence to their use of reclaimed or recycled water and soil ameliorants, such as biosolids or biochar, that may contain contaminants. Without appropriate checks, a clean property could easily become contaminated and tarnish the perception of quality in Asian markets.
Ensuring that farms where produce is grown are free from unacceptable contamination and environmental legacies is only the beginning. Dairy products, for example, should meet the World Health Organisation endorsed Codex Alimentarius standards for contaminants and toxins. Achieving this requires clean and environmentally sound processes throughout the supply chain. This means siting production facilities and distribution networks in locations that are not only free from contamination now, but also afforded adequate buffers to protect it from future encroachment and contamination, such as outside current or potential industrial hubs.
Building resilience and security
Issues of resilience and security are fundamental to futureproofing any AF&B business in any market. To maintain supply chains, it is essential to plan for the variability expected from changing climatic conditions and increased urbanisation.
Access to sustainable and varied sources of water throughout the life of a facility is critical to a futureproof operation. Considerations should include increased water efficiency and potential alternative water sources such as treated or reclaimed water or groundwater resources.
Maintaining the productivity of the land is another essential component for ensuring sustainability and longevity. It is important to identify innovative ways to retain or restore the productive qualities of soils, including returning nutrients to the earth, identifying new and environmentally safe fertilisers, or exploring best practices for efficient farming and land stewardship.
As populations increase it is also vital to protect high-quality arable land from the threat of continually encroaching urban expansion. Businesses in the AF&B sector will increasingly need to engage with planning authorities and governments to defend their interests, not only for export purposes, but also to maintain the production of food for these growing local populations. Demonstrated and meaningful socially responsible and sustainable operations will also be imperative to obtaining and maintaining a ‘social licence to operate’ near these local populations.
Ensuring continuity of supply
To maintain secure supply in a changing climate, decentralised hub-and-spoke production networks will be needed. In such networks, declines in yields from certain locations (spokes) can be offset by growth in others, all feeding into centralised (hub) production and distribution centres.
With ever-reducing margins and increasing competition, business sustainability will also depend on efficiently moving products to markets. Production and distribution centres should be strategically located relative to supplier networks and end markets, and logistics should be planned for quick turnaround, efficiency and accessibility to end markets.
Companies in the AF&B sector will also need their suppliers to remain productive and viable, especially in the case of business-critical ingredients where there may not be a viable alternative supplier. This is particularly crucial for ingredients that are central to the taste or quality of the product and provide its point-of-market differentiation. Therefore, it is in AF&B businesses’ best interests not to evaluate suppliers solely for commercial performance, but also to assist them with implementing effective solutions to maintain their own viability. In some instances, it may be necessary to acquire a supplier where its contribution to the supply chain is irreplaceable.
A further aspect for futureproofing the supply chain may be taking actions to support external suppliers to improve their own performance, particularly where there are lower levels of technological innovation, systematised quality control, environmental performance standards or safety culture.
Maximising asset value
In any AF&B business there will be facilities that reach their end-of-life. Still, there are opportunities for these end-of-life facilities to continue adding value to the overall business.
Strategic forward planning in asset renewal, rather than simple divestment, can present opportunities to generate revenue. Beneficial and valuable new uses for the asset may be able to be established, especially where the asset is well located relative to strategic residential or commercial growth areas, or to key infrastructure developments such as port or rail hubs.
Going the distance
Asia’s demand for safe, nutritious, high-quality and diverse food is only going to increase, as populations and incomes grow. To secure a place in this booming market for trusted food products, AF&B businesses will need supply chains that can manage complex risks as they emerge and can adapt as environmental and market conditions change.
Attending to the range of issues we’ve discussed here are big steps in the right direction. It’s all about making the journey sustainable, now or in the future, whatever the distance from paddock to plate