The world climates have changed undeniably. Seasons have shifted noticeably and there are either no rains or too much rains in many regions. When they make movies out of such themes, it is often depicted in a calamitous manner with catastrophic extreme weathers, raining hell fire and cracks on earth that swallow whole buildings. Well fortunately for us, the impact of climate change has not been so catastrophic yet. I hope it doesn’t become so.
But apocalyptic theories aside, there is one thing which I believe is very much glaring at us, and that is food security. The human population around the world has thrived due to modern medicine and widespread availability of food, thanks to the mass agriculture and distribution across international borders. But the high number mouths to feed has made us more vulnerable to food shortages.
Crops are failing more often.
With the mercury rising, rains faltering and lands submerged in ungodly deluges, quite a few instances of crops failing have showed up in the recent times. And with the failing agriculture, there comes food shortages. Just about a year ago, the Indian govt. created quite a flutter by stopping rice exports to the world.
The reason was to try and control its food inflation, amidst expectations of production shortfall. Imagine a country which does about 40% of the global rice trade shutting its doors to the world: its scary to don the hat of a pessimist and think about what would happen if more crops fail and the governments start pushing the panic button.
This creates multiple handicaps in import dependent countries.
Such actions throw the dependent nations into jeopardy. And there are plenty of them in the region I live and work in: Nigeria and Ghana, to be particular.
Prices go up uncontrollably, raw material inputs dry up, the entire industry spirals out into an artificially caused food inflation. I have been in the middle of such chaos before in Nigeria, which unfortunately depends on a lot of imported food items. Literally everything we eat in Nigeria and Ghana comes from abroad: wheat, rice, vegetable oil, dairy products, you name it, and it is highly likely that all of the ingredients of other processed foods are also imported.
FMCG Food companies are left grappling for survival.
With crazy rise in input costs, small FMCG businesses find it hard to make ends meet. Bottomlines get eroded overnight and working capital disappears under such situations. Companies need to take price increases for their products and in some cases need to find cheaper substitute ingredients, which possibly compromises their quality as well.
If you take too much price increase, possibly your volumes will crash significantly because the purchasing power in countries like Nigeria and Ghana is not much. But if you keep your prices down, you are dead for sure. It is a catch 22 situation.
Survival becomes really tough and quite a few companies have gone belly up because of this in the recent years.
So, how can we survive such chaos?
1. Build your brands to weather the storm: Cut fat, not muscles.
When the going gets tough, the tough get going. It is always wise to build brands. Organisations thrive on the shoulder of strong brand names. That is how you can survive the chaos.
When the consumer starts pinching pennies, he or she will start letting go of what he holds least dear. In this scenario, the closer your brand is to his/her heart and mind, the better it is for your sales.
Do not cut advertising spend blindly. Cut down the fat. Reduce wastages. But do not treat marketing and advertising as wastages. Your brand strength is your muscle. Become more efficient in your spend instead. Focus on hitting the bull’s eye consumer and rely on the ardent followers. The hardcore fans will keep the flame burning and you will be able to weather the storm with your brand.
2. Instead of looking for cheaper substitutes, look for locally available alternatives: Shorten the supply chain
When the troubles start brewing, this is usually the first thing that people look at: cheaper alternatives. For example, to substitute dairy fat with vegetable fat, or to substitute sugar with sweeteners, to substitute fruit juice concentrates with flavours. That’s the sad truth of the industry today. It makes sense to the P&L. To sustain gross margins, COGS has to be maintained.
However, what we fail to see often is the long term harm done. Take the case of FMCG companies in India who are under fire due to cheap substitutes and misguiding messaging in their marketing. Kudos to people like Foodpharmer who started the Label Padhega India Campaign. His entire mission is to expose the fraudulent practice of putting cheap and unhealthy substitutes in food products.
Campaigns like this could cripple the entire brand if caught in the wrong. Years of trust building with consumers and billions of dollars of advertising spend will be washed down the drain just because you took a short cut of using cheaper alternatives without giving a thought to the long term impact.
So, please do not do that. Invest into R&D now, invest into backward integration now and find local alternatives. When the supply chains are longer, there is more likelihood of disruptions. You will need to invest into more means of controlling your supply chain by bringing them closer to your geography of operations. Once it is closer to the operations, it will help bring costs down as well.
3. Redefine the game. Set your own rules. Launch local products
I think it is high time that companies stop looking outward towards foods that can be replicated from other geographies into emerging markets. For centuries, the indigenous populations have thrived on local food. It is only in the recent years that the world was introduced to rice and wheat en masse.
I believe there is a lot of scope in local products and it is going to be more sustainable in environmental and economic ways. No doubt there is a huge need for R&D and product development for such things. And it might take a good deal of time to get to a point of being commercially feasible. But I have no doubt, if anyone can crack this, it is going to be a winning masterstroke in the fight against the impact of climate change.
I can’t but help wonder if I am the only one who is thinking about such things. I barely see anything happening around the world that doesn’t seem like greenwashing. Most leaders seem to be simply paying lip service and not doing any real work to push the circumstances into a better direction. I really hope that I am horribly wrong.
Meanwhile, I also hope that other likeminded people are hard at work delivering solutions to mitigate any impending crisis. And I hope they are ready on time for it.