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Parts 1 and 2 of this three-part series discussed the dilemma in which companies often find themselves when incorporating natural food additives into their food and beverage products as well as the reason food additives are essential to the global food supply. Part 3 discusses the importance of securing a sustainable and traceable supply chain for food additives for food and beverage companies.

Natural Additives and the Sustainable Supply Chain

Natural may not be enough for the increasingly savvy consumer. Millennials, for example, believe that the source as well as the content of their food is increasingly important. Instead of simply asking if the food is natural, they want to know if it is natural and sustainable. All generations from Baby Boomers on have a greater understanding of healthy and organic ingredients. Fair trade product sales increased 12% worldwide in 2011 due to ethical sourcing and increased customer awareness and demand.

This interest and demand in healthier food is going to increase the stress on the sustainability of raw materials supply. Companies that truly desire to offer natural and organic products may not be able to simply because the natural materials do not exist or do not exist at an equitable cost. Jamie Rice, RTS research and marketing director, says that we simply cannot grow all of the natural ingredients to meet current demand. He anticipates it taking another ten years to reach parity with synthetic ingredient production.

The volatility of commodity prices for natural ingredients makes frequent headlines. This year corn prices are skyrocketing due to prolonged droughts and concern over production volumes in the Midwest. Similar conditions in Europe are not helping. Chocolate manufacturers like Ferrero, Mars and Nestlé have made pledges to source more cocoa from certified fair trade farms due to NGO pressure on human rights. Mars has committed to sourcing 100% certified cocoa by 2020. These companies will certainly help to drive down the overall costs of fair trade commodities so long as production volumes and quality continue to increase with this global support. Companies that take more proactive steps now to secure a sustainable, socially responsible and compliant food supply stand to gain the most in the future.

California Proposition 37 mandating labeling of genetically engineered foods or GMOs looks like it will pass in the November elections. This will create a critical challenge for U.S. food and beverage industry as 94% of all soy, 90% of sugar beet and canola, and 88% of corn grown here use GM seeds. So, will that put natural food producers out of business? Not necessarily. It largely depends on the ingredient. Soy proteins can now be sourced from China often at a much lower cost. However, non-GMO sweeteners like high fructose corn syrup will be substantially more expensive than their GMO counterparts that benefit from an enormous and highly efficient supply chain. An option for companies is to switch from maize to wheat or from soy to sunflower, but this may not be practical for many companies as the end result in taste and consistency may differ from their current taste profile.

A Sustainable Choice that Pays Off in the Long Run

Here is the good news. Companies that already embrace sustainability and ethical sourcing have a leg up on their competition. These companies typically have better supply chain traceability and integrity on ingredients and sourcing. They need only to fine-tune their processes versus fully overhaul their supply chain practices and product formulas in response to new regulations, raw material availability and consumer demands. Systems are coming online to assist greening the supply chain beyond ISO 28000 such as the Sustainable Food Trade Associations 11 Areas of the Declaration of Sustainability and the Social Accountability Index’s Social Fingerprinting.

Natural ingredients sustainably sourced will also allow companies to protect their brand image, and further enhance it through consumer confidence and loyalty leading to improved growth and market share. Consumers are increasingly paying attention to product labels and packaging to guide their environmental and socially conscious purchasing decisions. Companies that are well positioned with a sustainable and traceable supply chain strategy can provide this information with integrity and reliability. They will more easily win the hearts and wallets of the consumer.

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