The food industry is being tested by shifting consumer tastes, new technology and global trade disputes. Those are among the issues on the agenda Monday in New York at The Wall Street Journal’s Global Food Forum, which includes important players in the sector such as the chief executive of Mondelez International Inc., MDLZ -0.93% the president of McDonald’s U.S.A. and Cargill Inc.’s sustainability chief.
Check back throughout the day for updates.
Cargill Executive Urges End to Trade Tensions
Trade tensions with China have hurt U.S. farmers and agribusiness companies lately. Ruth Kimmelshue, Cargill Inc.’s head of operations and supply chain, said that “over time there will be normalization,” but urged Washington and Beijing to find a solution as quickly as possible. “The longer it takes, the more irreversible the changes will be,” she said, with the Chinese turning to other countries for agricultural commodities.
Mr. Kimmelshue said the tariffs battle between the two countries also has a bearing on sustainability issues. “One of unintended consequences we are leaning into right now is ensuring we can produce soy in a sustainable way,” she said. Farmers in South America are motivated to convert land to growing soybeans to take advantage of the new demand since China isn’t buying soybeans from the U.S. because of the tariffs. “From a sustainability perspective it is challenging,” Mr. Kimmelshue said.
Wanda Patsche, co-owner of CW Pork Inc. in Welcome, Minn., said President Trump still has the support of farmers despite the trade headwinds they face. “We don’t want additional regulations that make it harder for us to farm,” Ms. Patsche said.
While the trade dispute with China continues, Agriculture Department official Ted McKinney described the trade deal with Japan as “absolutely enormous,” citing the size of the Japanese market for pork and beef. He said the deal with Tokyo could serve as a model for deals with other countries. Mr. McKinney, who is undersecretary for trade and agricultural affairs, also said the U.S. shouldn’t ignore smaller markets for farm exports.
—Annie Gasparro and Jaewon Kang
Healthier Snacks Growing Faster: Mondelez CEO
The market for healthier snacks currently is growing globally about 6% to 7% annually, Mondelez International CEO Dirk van de Put said. That is faster than the 4% to 5% growth among indulgent snacks, which still make up 80% of the market, he added.
Globally, consumers are snacking more, creating opportunities for Mondelez, said Mr. Van de Put. Today, people are eating 2.5 snacks each day, up from two a day just a few years ago. Busier lifestyles are supporting the trend, he said.
Food makers have to distinguish between trends and behavior, said Mr. Van de Put. While consumers claim they want healthier products, they are still buying indulgent items. “There’s a difference between what people say and what they do,” he said.
He added that the snack giant is trying to move faster to bring products to market by testing out new items in a few markets and building from there. One downside with the approach is it simply takes longer to scale products up amid the challenge of predicting consumer behavior.
The company has had misses with product development, Mr. de Put said, pointing to a high-fiber biscuit that took three years to create and didn’t do well after lots of people weighed in. “We ended up with a camel designed by committee,” he said.
Kraft Heinz Loses Favor
Kraft Heinz Co. has struggled to convince consumers to buy its brands, which have fallen out of favor amid interest in new products, different kinds of diets and fresher food. Paul Fribourg, CEO of Continental Grain, which invested in the two companies that formed Kraft Heinz, said one lesson of the Kraft Heinz experience is simply how difficult it is to predict how younger people will eat. “My generation, we were all conditioned to follow our parents and grandparents. The younger generation isn’t going to do that,” he said.
Mondelez International CEO Dirk van de Put said there is no reason for Mondelez and Kraft Heinz to re-merge. Mondelez International was formed after splitting with the predecessor of the latter firm. “It doesn’t make a lot of sense to put that back together,” he said, adding that Mondelez wants to stay focused on its core snacking categories.
Protesters Target McDonald’s, Cargill
McDonald’s Corp. MCD -0.38% drew protesters chanting “Me Too McDonald’s!” as Chris Kempczinski, the company’s president for the U.S., spoke at the WSJ forum Monday.
In August, the fast-food chain said it planned to train all employees at restaurants on workplace antiharassment matters after facing criticism about the issue. Some workers have also called attention to cases of alleged sexual harassment at McDonald’s restaurants.
“We have a responsibility to take action on this issue,” Mr. Kempczinski said previously.
Environmental groups also staged protests, targeting Cargill Inc. The supplier of agricultural commodities missed a deforestation target earlier this year.
“We engage with all those voices to create more sustainable supply chains,” said Ruth Kimmelshue, Cargill’s sustainability chief.
She said Cargill is also feeling pressure from consumer-food companies, which have heightened expectations around environmental practices and the impact of agriculture. “Their brands are on the lines,” she said.
—Heather Haddon and Micah Maidenberg
Plant-Based Burgers Spread Roots
McDonald’s Corp. is now testing a plant-based burger made by Beyond Meat Inc. BYND -1.61% in Canada. Unlike other restaurant chains that have embraced the plant-based alternatives, McDonald’s isn’t using Beyond Meat’s name in the offering, instead calling it “P.L.T.” for plant, lettuce and tomato.
“There is a customer expectation of what a McDonald’s burger tastes like,” said McDonald’s U.S chief Chris Kempczinski, when discussing the company’s evaluation of the new burger and potential suppliers.
The chain will take months before deciding if the test should be further expanded and if suppliers can meet the needs of the world’s biggest fast-food company by sales, he said.
Representatives of meat producers said they are ramping up marketing to underscore the difference between their cattle-made products and new meatless rivals.
“We want to be out there telling the truth,” Jennifer Houston, president of the National Cattlemen’s Beef Association. The trade group also wants legal limits on the ability of plant-based producers to call their products meat.
The federal government is processing 13,000 comments received on whether plant-based foods should be able to carry terms such as “meat” and “milk” on their packaging, said Frank Yiannas, deputy commissioner for food policy and response for the Food and Drug Administration
Burger King has added plant-based burgers to its menu, but Paul Fribourg, a board member of Burger King parent company Restaurants Brands Inc., said they will remain a niche product.
“I don’t think the beef or chicken industry have to worry in the next 20 years that they will be put out of business,” he said.
—Heather Haddon and Micah Maidenberg
Mission Not Impossible
An early investor in plant-based meat company Impossible Foods says the next big market to target is China through the introduction of fast-food items like Burger Kings’ Impossible Whopper. “Young Chinese consumers love new technology,” said Paul Fribourg, CEO and chairman of Continental Grain Co., an investor in Impossible Foods. According to Mr. Fribourg, who is also a board member of Burger King parent company Restaurants Brands Inc., the introduction of the Impossible Whopper in St. Louis proved the concept for the product. “There were lines out the restaurants.”
—Kirk Maltais and Heather Haddon
Startups Left Out of Farm Deal Spree
Over the past four years, agriculture sector giants have spent tens of billions of dollars on mergers aimed at cutting costs and streamlining innovation. As a result, startups are being overlooked, said Kiersten Stead, managing partner at venture firm DCVC Bio Data Collective.
“Because they’re going through this big consolidation spree, they’re not being as acquisitive as we’d like them to be,” she said, lamenting the mere $1.6 billion in M&A directed toward startups over that time.
Ms. Stead said venture-capital investors are getting deep into the agricultural supply chain. Her firm has backed a startup that is working to help crops like rice and corn produce their own nitrogen fertilizer, and she said the goal is to transform the $180 billion fertilizer market. Such products will only get adopted if the commercial rationale is strong, she said. “You need to help the farmer make more money.”
Sanjeev Krishnan, chief investment officer and managing director of S2G Ventures, which invests in food and agriculture, said his firm is betting on products, including perishable goods, that are typically sold at the perimeters of groceries, such as fresh fruit and vegetables, yogurt, cheese.
He said that part of the store is growing two times faster than the center of shops, where retailers usually offer packaged goods. He added that there is often less competition among products sold along the perimeter, and that supply chain complexity creates a barrier to entry.
—Jacob Bunge and Micah Maidenberg
Milk: Got Competition?
National Milk Producers Federation CEO Jim Mulhern said that plant-based beverages, which have been getting a lot of attention, will continue to grow, but a bigger hit to the dairy industry over time has been bottled water. Decades ago, it wasn’t normal consumer behavior to buy a plastic bottle of water, he said, but that is a commonplace purchase now.
He added that the battle for supermarket shelf space between traditional cow’s milk and almond, soy and other plant-based milk rivals may turn in part on dollars. While plant-based milks make up anywhere from 8% to 13% of the overall market, Mr. Mulhern said the “dirty little secret” of the alternative products is that “they pay for that footprint” via stocking fees that secure preferred placement in dairy sections.
Jessica Almy, policy director for the Good Food Institute, which promotes plant-based products, said plenty of traditional dairy brands similarly pay for grocery store space.
—Micah Maidenberg and Jacob Bunge
Meeting Environmental Challenges
Dairy farmers, who are facing a tough year amid low dairy prices, have to walk a tightrope if they hope to not poison the groundwater near them while maintaining an efficient operation. “We need to be able to eat, we want to be able to have milk, and we want a [good] environmental outcome,” said Suzy Friedman, senior director of agricultural stability for the Environmental Defense Fund. Proper manure storage and use of cover crops can help, she said.
While the cost of new technology can be intimidating or unrealistic for U.S. farmers, this has been effectively mitigated by farmers teaming up to be stewards of their collective farmland, said Don Niles, owner of Dairy Dreams and the president of Peninsula Pride Farms, a group of Wisconsin-based farmers. According to Mr. Niles, the roughly 50 farmers that are members of Peninsula can figure out how to work their farms while limiting pollution in an effective manner. Machinery such as methane ingestors can help to rectify the surrounding environment
Crop One Holdings thinks that in five years, the company can figure out a sustainable farm that reduces climate-change-causing carbon. Still, CEO Sonia Lo said the effort can’t just be philanthropic, and their vertical-farming efforts must be profitable to be viable. The company is building one of the largest vertical farms in the world today in Dubai.
—Kirk Maltais and Heather Haddon
FDA Keeps Working at Food Safety
The Food and Drug Administration is working on getting faster at pinpointing the source of food-borne illnesses, said Deputy Commissioner for Food Policy Frank Yiannas. “We have to speed up the response,” he said. “Lack of traceability is the Achilles heel for food safety.” The irony of this effort to improve traceability is that as the FDA gets better, it leads to more recalls, which sometimes confuses consumers to make them think food is less safe. They shouldn’t, Mr. Yiannas said. “Our ability to detect food-borne illness is better than ever.”
More Automation Is Coming to Farms
A global population shift from rural areas to cities is making it difficult for farmers to find workers, and pushing them toward automation, said John Stone, a senior vice president at Deere DE -0.95% & Co., which makes farm equipment. “The labor is already gone,” he said. “The machines have to get smarter.” Last fall, Deere started offering a new combine harvester that can analyze grain quality as it comes into the machine, he said.
Deere processes mounds of data from farmers, Mr. Stone said. The company collects that data via a cloud-based platform, analyzes it and pushes it back out to customers so they can use it in their enterprises, he said. One challenge for the company, however, are gaps in broadband coverage in rural areas.
Abundant Robotics Inc. is creating the first combines to harvest tree fruit, an area of agriculture that hasn’t been automated to date and is worth billions, said the company’s CEO, Dan Steere. “It’s never been possible before,” he said.
The debate about the impact automation has on jobs and employment can be contentious. But Mr. Steere said deploying such tech on farms “prevents food costs from rising dramatically.”
—Heather Haddon and Micah Maidenberg
Closing a Food Gap
Lower-income communities often have less access to healthy food, and the role that can play in causing obesity and other health issues is the target of research at the College of Agriculture, Health and Natural Resources at the University of Connecticut, said Indrajeet Chaubey, dean of the college.
“There’s no one magic bullet,” he said, speaking on the sidelines of the WSJ Global Food Forum. Mr. Chaubey said UConn’s research is focusing on how to alleviate these problems in the local community around Hartford, Conn.
Low Crop Prices Pinch Profitability
Low crop prices this year are pushing farmers to fundamentally change their point of view in order to survive in a tough agriculture economy. “Low commodity prices are causing farmers to think outside of the way that they normally think,” said Sanjeev Krishnan, chief investment officer of S2G Ventures, which invests in food and agriculture. Because farming is a high volume market with low profitability, the thinking must change to view business in terms of profitability per acre instead of yield, said Mr. Krishnan.
Meanwhile, the low crop prices aren’t slowing farm consolidation. University of Missouri agricultural policy professor Patrick Westhoff said that while there remain roughly 2 million farms in the US, the number of small-scale operations—think 70 dairy cows—is dwindling as profitability is pinched. Minnesota hog farmer Wanda Patsche said larger farms in her area have been buying up smaller ones, and more farmers are entering into contracts with meatpackers to help survive. “We’re trying to hold our own,” she said
—Kirk Maltais and Jacob Bunge
The wet weather that disrupted spring planting in the U.S. is making a return visit with the fall harvest season looking waterlogged in some areas. “It’s October 7, we haven’t turned one wheel,” said Wanda Patsche, a co-owner of CW Pork Inc. in Welcome, Minn. Ms. Patsche said the farm has received 3-4 inches of rain this fall hindering efforts to harvest soybeans or raise hogs. In the county, over 20,000 acres were declared under prevented-planting coverage, she said.
Technology Can Help Reduce Water Use
One way that U.S. farmers can wrestle further profitability out of their crop acres is to further embrace genetically edited crops—these plants “being able to provide traits…. reducing the inputs needed for farmers,” said Peter Beetham, co-founder, president, and CEO of Cibus, a biotechnology company specializing in genetic modification. Mr. Beetham said that by creating strains of crops that more disease-resistant and more efficient in their consumption of water, farmers can notably cut into the cost of maintaining their acres, using less pesticides and water.
Technology is coming into focus to reduce the amount of water used across the entire agriculture system, said Ertharin Cousin, a visiting scholar at Stanford University’s Center on Food Security and the Environment. Businesses are seeking to utilize less for transporting produce and also decrease the cost of desalination, she said. “The challenge of water is always local,” Ms. Cousin added.
—Kirk Maltais and Jaewon Kang
Sweetgreen Sees Robots, Profitability Coming
Jonathan Neman, co-founder and chief executive of food startup Sweetgreen, said robots have a future in restaurants and his company is investing in them. While robots won’t replace humans in restaurants, they will become more common due to the rising cost and availability of labor and advancement of automation. Mr. Neman also said Sweetgreen’s stores are profitable even if the company as a whole isn’t. “We are not far from profitability,” he said.
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