Paths to food traceability: How entrepreneurs can find opportunities
As a part of our ongoing exploration of sustainability and tech in the food system at Orange Silicon Valley, we have teamed up with our colleagues at Food System 6 to publish a four-part series of insights about the challenges that exist surrounding traceability. While transparency is a goal that stakeholders throughout the food system share, the obstacles for consumers, actors throughout the supply chain, brands, and entrepreneurs can be entrenched and nuanced.
In the fourth part of our series, we look at the the opportunities that have emerged for entrepreneurs within the food system because of issues surrounding traceability. You can catch up on our previous looks at consumer issues, supply chain obstacles, and brand challenges here on Medium.
Why Entrepreneurs Can Have an Impact
In our previous Medium posts about traceability, we assessed what the path to better traceability standards will need to overcome. First, we laid out how changes in consumer demand are driving large-scale change in the food supply all the way back to the farm and boat. Next, we demonstrated how complex the food web can be throughout its many layers and international web of players. Third, we assessed how consumer brands are investing to substantiate their claims and meet regulatory compliance. In our final installment for this series, we explore something that emerges in each one of these arenas: opportunities for entrepreneurs to create new businesses.
Our journey through the food supply chain took us through farms, offices, NGOs, and retailers. As we discussed conditions with industry leaders, we identified several areas where recent technological advances create entrepreneurial opportunity. Broadly, these openings for innovation fall into two categories: storied traceability and shortened supply chains.
Recent advances in Internet of Things (IoT) sensors and networks, robotics, mobile computing, and hardware are making it possible to have untethered data collection in new ways that were not possible before.
This makes it possible to collect and digitize food data, which can then be passed along to other actors across the supply chain. This category includes IoT sensors and biotech products that can trace and/or differentiate products. In the case of food products such as fresh produce, for instance, sensors can be placed in boxes of produce to distinguish and identify that box, track its GPS location, record its freshness, record the temperature and humidity to which is has been exposed, and record the hands through which it has passed from farm to fork.
Even with commodity products like sugar cane and wheat, which are chopped up, mixed, and mingled, DNA tags can create a traceable record through the supply chain.
In addition to the data collection, there is an opportunity in funneling this information together and making it accessible. Since, as we showed in “The Food Web,” agricultural products like produce, commodities, dairy, meat and poultry, and seafood have entirely different supply chains, we believe that there is not likely to be a single software provider that can offer a systemwide solution to tie everything together. Nor will an industry trust this data with a single stakeholder. This is where we see a potential opportunity for the application of blockchain technology — the distributed ledger system used to power bitcoin.
In the case of supply chains for food, blockchain provides a token whenever a high-value item is created in the system. That token is issued by a trusted entity and is then used to authenticate the item’s point of origin and chain of custody as it changes hands.
Blockchain’s decentralized platform for distributing verification offers a means to curb forgeries, fraud, and other actions that might otherwise compromise authenticity. Thus, provenance can be more accurately tracked across the world’s complex food web.
Moreover, as we move beyond the passing of paperwork in the “one up and one back” system we noted in our second post, the blockchain-based method for passing data means brands can better connect their consumers with the origins of their food. Hence, we call this category, storied traceability.
Implementing traceability practices with blockchain technology is just one potential point of entry for entrepreneurs, though. The software for such a system needs hardware components as well. As costs come down for types of sensors and devices required will results in better, cheaper, smaller, and faster technology that will further expand the need for new products and services.
Shortened Supply Chains
The solutions to traceability problems are not limited to technology alone. New tech can improve capabilities and efficiencies, but entrepreneurs should see another crucial front for disruption in simplifying supply chains altogether. Thanks to the complexity of the global food web and the demands for transparency and a closer connection to food from consumers, there is value to be realized in strategies for shortening existing supply chains.
Shortened supply chains can take many forms. These include (but are not limited to):
- New food brands with fewer, cleaner, and more traceable ingredients
- Existing brands consolidating their suppliers or setting traceability standards
- Growing food closer to the point of consumption as is happening with the a nascent but growing indoor and vertical farming industry
The past decade has seen a wave of new brands trying to distinguish themselves in the marketplace with relatively short lists of ingredients. Simply Gum, for instance, in 2014 with only five ingredients on its label. Krave Pure Foods debuted in 2009 as an artisanal alternative in the jerky market. And KeVita has mainstreamed its sparkling probiotic drinks, which it touts as “certified organic, non-dairy, gluten free and vegan.”
In the meantime, many such brands have found new homes at larger companies. General Mills’ acquisitions alone have included the “simple ingredients”-laden Larabar brand, organic-minded Cascadian Farms, and sustainability-oriented Annie’s. Hormel acquired its own organic label in 2015 with Applegate Farms. And in poultry, Perdue Farms bought Natural Food Holdings, giving the company the Niman Ranch and Prairie Grove brands.
Elsewhere, established brands are working to publicly simplify their current supply chains. Take Dannon, arguably the most recognizable brand in yogurt, which shocked the industry with its July 2016 announcement that it would not only get rid of GMO inputs in its supply chain, but also consolidate its milk sourcing to a smaller set of dairies. In exchange, the company fundamentally changed its relationship with those dairies so that they would receive reliable income in the form of an agreement that will guarantee a certain margin of profit and offset costs.
Hershey’s had another big story, launching its Simply 5 campaign to promote a mission to reduce the number of ingredients in its chocolate syrup product from 11 down to five. Kraft’s reformulation of its Mac & Cheese product was another high-profile example of this trend in action, as was Frito-Lay’s Tostitos move to get its chips down to three ingredients.
At the point of harvest, indoor ag facilities have shown promise as vehicles for change. They offer local, short-range access directly to retailers and consumers, as well as manufacturing in many cases. You can read more about the technology layers involved in our 2016 “Bringing Digital Intelligence to Indoor Farming” report.
Supply chains vary widely by product, however. As we showed in part 2, agricultural products, such as produce, commodities, dairy, red meat, poultry, and seafood all travel through entirely different paths. Individual sectors — and potentially each actor — throughout the food web may need to implement customized platforms.
Finding opportunities is only the first step for entrepreneurs looking to participate in the future of traceability. Providing value and executing visions will be where success stories take root.
Data standards are sorely needed in this space to ensure interconnectivity and interoperability between disparate systems. Because of this, we believe that there will be no one-size-fits-all traceability software platform. Rather than creating a system that forms a backbone, there is more opportunity around the value-added services such as data analysis and predictive analytics where it is also easier to demonstrate a clear business benefit that traceability brings.
The paths to that success will require entrepreneurs to connect with their customers and determine who is ultimately willing to pay for new products and services. In many cases, there won’t be obvious natural customers.
Fortunately, the food web is full of stakeholders found across the globe between points of harvest and points of consumption. Our “Paths to Food Traceability” journey has looked at a handful of these stakeholders, which include consumers, brands, and other actors at various places along countless supply chains.
We encourage you to review the areas we have already looked at and reach out to us with your own thoughts as we continue to explore sustainable food practices at Orange Silicon Valley. You can find future food-related updates on OrangeSV.com and right here at our Medium account.
Read all of the published Medium posts from our “Paths to Food Traceability” report:
- Paths to Food Traceability: Consumer Views of Truth
- Paths to Food Traceability: Knots in the Food Web
- Paths to Food Traceability: The Biggest Challenges for Brands
- Paths to Food Traceability: How Entrepreneurs Can Find Opportunities
Disclaimer: The views and opinions expressed in this article belong to the author and do not necessarily reflect the position or views of Orange or Orange Silicon Valley.