Evolving Food Supply Chains: Public and Private Standards

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1 Evolving Food Supply Chains: Public and Private Standards Jill E. Hobbs Dept. of Bioresource Policy, Business & Economics University of Saskatchewan Presented at the 2 nd Saskatchewan Food Summit February

2 Outline Emerging issues in food markets Implications for food supply chains The role of public and private food standards Challenges and opportunities

3 Emerging issues in food markets Continued growth of further processed, readyto-eat meals, convenience, variety Growth in consumption of Food-Away-From- Home Technological change creates new opportunities for product differentiation, tracking and tracing Globalization: cross-border supply chains

4 Emerging issues in food markets Heightened awareness of food safety Multiple dimensions of food quality Environmental footprint; organic; natural ; animal welfare; origin/source/local; GMOs ; labour standards Consumers increasingly interested in where their food comes from and how it was produced Traceability, labelling, certification, standards

5 Implications for food supply chains Longer, more complex supply chains Closer supply chain coordination Differentiated supply ( value ) chains operate alongside commodity supply chains Feed/Input suppliers Ingredient suppliers Imports Hotels, Restaurants & Institutional Farmers 1 st stage Processors Further Processors Retailers Consumers Exports Distributors

6 Successful supply chains Build relationships, trust Have a clear, mutually agreed goal Are focused on the consumer Manage information flows effectively Are adaptable Recognize the strengths and limitations of individual core competencies/skills

7 Demand for product variety, quality, food safety Interest in where food comes from and how it was produced The consumer s information problem: How do I KNOW that this product is safe? How do I KNOW that this product is environmentally friendly? How do I KNOW that this product is Canadian? How do I KNOW that this product is authentic? Solutions?

8 Demand for product variety, quality, food safety Solutions? Source locally no guarantees Closer supply chain coordination Labelling, traceability Standards, certification All or some of the above... Occasionally there are spectacular failures

9 Sources: news.yahoo.com

10 Demand for product variety, quality, food safety Interest in where food comes from and how it was produced The consumer s information problem: How do I KNOW that this product is safe? How do I KNOW that this product is environmentally friendly? How do I KNOW that this product is Canadian? How do I KNOW that this product is authentic? Solutions? Source locally no guarantees Closer supply chain coordination Labelling, traceability Standards, certification

11 Public Standards Mandatory (regulatory) standards legal obligation for compliance Response to a perceived market failure Negative externalities/spillovers (food safety, environment) Information problems (labelling) Regulate to protect consumers, protect the environment, protect collective reputation

12 Public Standards - Examples Food safety: Mandatory HACCP; US Food Safety Modernization Act (FSM) (with inspections of foreign facilities, specified correct agronomic practices, much more) Environment: Pesticide residue limits; Pollution regulations; waste water treatment Animal welfare: EU ban on cages for layer hens (2012) Bans on confinement pens for sows (EU, US) Labelling, certification: Mandatory nutrition labelling National organic standards (EU, US, Canada) Mandatory traceability requirements

13 Public Standards - Challenges Compliance costs Different countries have different standards (social objectives; priorities; resources) Implications for relative competitiveness of imports, exports Pressure to regulate, restrict imports (environmental tariffs) WTO: trade restrictions (food safety, animal and plant health) should have a scientific basis A number of trade disputes (GMOs, beef hormones, COOL) Meanwhile

14 Proliferation of Private Standards for food safety and quality

15 Private standards 1. Proprietary standards (firms) E.g. Nature s Choice (Tesco PLC) E.g. WholeFoods (USA) 2. Third party standards NGOs, independent standard-setting bodies 3. Voluntary consensus standards coalitions of firms, industries, may involve government

16 Private standards 3. Voluntary Consensus standards Coalitions of firms, industries, may involve government E.g. GLOBALGAP (EUREPGAP) Business-to-business standard Retailer-driven, multiple countries (1997) Food safety, environment, animal welfare, worker health & safety

17 Private standards Voluntary Consensus standards E.g. Assured Food Standards Producer organizations (UK) Red tractor logo (consumer signal) Food safety, animal welfare, environment E.g. CanadaGAP Canadian Horticultural Council To merge with Canadian Produce Marketing Association Food safety program (RWFSP) in 2013

18 Private standards GFSI Global Food Safety Initiative (Consumer Goods Forum) Retailer driven: improvements in food safety management systems Attempt to consolidate private food safety standards Attempt to reduce duplication Benchmarks, certifies existing private standards: British Retail Consortium (food safety) Safe Quality Foods (SQF) International Food Standards (IFS) CanadaGap

19 Private Standards Economic functions Product differentiation: communicated to consumers (labelling) Enhance supply chain management Reduce liability Role for third party verification (certification) of private standards Can be de facto mandatory if majority of market adopts

20 Challenges posed by private standards Compliance costs can be significant Higher burden on supply chains from countries with lower public & private standards Challenge for exporters from developing countries Suppliers may become locked in (asset specific investments) Increasing concentration in retail sector: control access to global supply chains

21 Opportunities created by private standards International harmonization & mutual recognition occurring faster than with public standards, e.g. GFSI Access to global supply chains across multiple retailers in multiple regions/countries Encourages product differentiation and leads to differentiated markets Information for suppliers on best practices Provides additional information or assurances to consumers Likely to gain in importance: a market response to consumer preferences

22 Concluding Thoughts Recognition that the food sector extends well beyond the farm-gate Potential public sector role in facilitating voluntary quality verification, certification e.g. USDA Process Verified establishing & protecting collective reputation Saskatchewan food sector operates in a global food environment, interfaces with global supply chains Local food movement a valuable differentiation opportunity for some but not the answer for everyone Food security is not synonymous with self-sufficiency

23 Thank you

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