Researcher warns that processors may start producing their own food if they don’t receive what they need from farmers
Farmers should heed the advice of famous Scottish economist Adam Smith, says a market researcher.
“What Adam Smith said was, don’t make what you want to make, make what the market is asking for,” said Brett Sciotto, chief executive officer of Aimpoint Research.
“Make what the market wants and get paid a premium rather than make what you want to make and hope somebody will buy it.”
Farmers have been slow to respond to what millennial and generation Y consumers are seeking, he said during a recent webinar hosted by Agri-Pulse.
Food retailers and manufacturers are far more responsive at the head of the food chain and that is creating a whiplash effect at the back of the chain.
“If we continue to be defensive as an agriculture industry we’ll continue to see the rise of retail and food companies vertically integrating as a solution,” Sciotto warned.
Food companies are already starting to produce their own food instead of relying on farmers. He believes growers need to form partnerships with food companies and become an integral part of their efforts to adapt to changing consumer demands.
Today’s consumers are looking for healthiness in their food and they equate that to fresh ingredients, no pesticides, fewer preservatives and less processing.
“For the most part, our food producers aren’t meeting their needs,” he said.
“We are underperforming as an agri-food value chain on the things they say are most important.”
Growers need to figure out a way to produce food using less chemicals and food manufacturers need to create products that require less processing and preservatives.
Sciotto said 61 percent of daily caloric intake in the United States comes from heavily processed foods, which is high compared to the rest of the world.
“We (U.S. consumers) literally eat double the processed foods and I think consumers are starting to react to that,” he said.
Sciotto said the New Deal started the U.S. down the road of producing and consuming processed foods and it hasn’t turned back.
The New Deal was a series of government programs enacted by U.S. President Franklin Roosevelt to help the economy recover from the Great Depression.
The programs included farm subsidies to encourage the production of row crops like corn and soybeans.
Those crops were used to create processed foods that really took off during the Second World War because they could survive the overseas journey and help nourish Allied soldiers. After the war, they were sold to American consumers.
Today’s farmers continue to produce the high-yielding corn and soybean crops that are used in many processed foods.
“Quite frankly, the market is saying we want more diversity. We don’t want more corn. We don’t want more soybeans,” said Sciotto.
He said the farmer ignores the consumer at his or her peril.
“We have to continue to innovate and transform. We’ve got to move faster as an agri-food value chain,” said Sciotto.
“The fourth revolution of agriculture is here.”
That revolution is being led by the millennials, which are now the largest adult population in the U.S. and the largest workforce in the world.
Baby boomers seek out the lowest prices, are content to wait for new solutions to come their way and have an inherent trust in manufacturers and government.
“New generations are much more empowered. They’re not just seeking the lowest price. They’re seeking total value,” he said.
They are skeptical of manufacturers and government and want food products they can trust.
They are not willing to compromise taste for health or price for freshness.
“They believe that they can have it all,” said Sciotto.
Products that demonstrate shared values with consumers in the way they are packaged and branded are three to five times more likely to resonate with consumers than those inundating them with facts.
“This drives many of us in agriculture crazy as we try to advance the facts around GMOs or the facts around chemicals or the facts around why we use the management practices that we do,” he said.
Another source of frustration is that consumers claim to be interested in connecting with where their food comes from but many of them do so by visiting a pumpkin patch or apple orchard rather than a grain or livestock operation.
“They do it extremely imperfectly,” he said.