Did you know that switching out butter and eggs with plant-based alternatives can potentially save bakers up to 12% in production costs? Imagine the amount of money you could save if you understood exactly where your ingredients are from and what options you have to source them more cost-efficiently or even replace them less costly, high quality alternatives. (1)
Did you know that switching out butter and eggs with plant-based alternatives can potentially save bakers up to 12% in production costs? Imagine the amount of money you could save if you understood exactly where your ingredients are from and what options you have to source them more cost-efficiently or even replace them less costly, high quality alternatives. (1)
Saving money is only one reason that understanding and tracking the origin of your ingredients makes good business sense. Whether it is about maintaining your high standards, making your supply chain more crisis-proof or attracting customers that will remain loyal in the long run, the benefits of being in the know are plenty. Read on to find out how exactly knowing the origin of your ingredients saves you money, time and legal hassle in addition to making you more competitive.
1. Quality control
Knowing the origin of ingredients allows your company to ensure the quality and safety of your products. By tracking the source, F&B companies can verify if the ingredients in their products come from reputable suppliers who follow strict quality standards. This helps prevent the use of contaminated or substandard ingredients, reducing the risk of product recalls, customer complaints, and potential health hazards. (2)
One case in point: Who could forget the horsemeat scandal of 2013?
The Food Safety Authority of Ireland tested a number of frozen beefburgers and ready meals from supermarkets and found horse DNA in over a third of beefburgers and pig DNA in 85% of burgers. Subsequently, horsemeat was discovered in products from burgers to lasagne across all of Europe.
Two of the factories that were identified as the source of the contaminated meat were subsidiaries of one of the largest beef processors in Europe.The scandal caused a sharp decline in sales and consumer confidence, leading to significant financial losses and the need for product recalls and rebranding efforts.
More recently, in 2017, several European countries experienced a contamination scare involving eggs and egg products contaminated with the pesticide Fipronil. The pesticide, which is not approved for use in food-producing animals, was traced back to a Belgian company that had supplied cleaning products to poultry farms. (3)
As a result, numerous food products containing eggs had to be removed from store shelves. Even major food producers such as Nestlé and Aldi had to recall or withdraw egg-containing products from their stores across multiple European countries. These incidents led to significant financial losses, including the cost of recalls, reputational damage, and the need for implementing stricter ingredient tracking and quality control measures. (4)
2. Compliance with regulations
Another reason you will want to start getting to know your product ingredients inside out are the latest regulations that will make reporting due diligence obligatory in the near future. Many countries already have regulations and labeling requirements in place to ensure transparency and traceability in the food industry. The UK introduced the Modern Slavery Act, the French the Duty of Vigilance Law and just in January 2021, Germany put into force the Act on Corporate Due Diligence Obligations in Supply Chains. More laws, a majority of them EU-wide, are being introduced by the minute.
Just at the beginning of June 2023, the EU voted on the new Corporate Sustainability Due Diligence Directive (CSDDD) draft law, with the goal to ensure that companies consider human rights and the environment in their entire supply chain.
Once the law takes effect, companies from all over the world selling their products in Europe will need to implement due diligence processes, comply with checks on suppliers and take action when abuse is uncovered. Otherwise, they will face sanctions and fines of up to 5% of their global annual revenue. We explain the law in more detail in our video. (5)
Then there is the deforestation law which is also in the works, which means you won’t be allowed to cause any deforestation with the products you produce. Read more about it here.
These are just two of many recent regulatory changes F&B companies will need to comply with by accurately disclosing the origin of their ingredients to regulators and the public. Therefore, tracking the origin of ingredients will soon no longer be a nice-to-have, it will become a must.
3. Supply chain management
Not knowing where your ingredients come from further exposes you to risk as you could unexpectedly see your supply chain affected. Potential risks, such as geopolitical instability, natural disasters (which are increasing in frequency and severity due to the climate crisis), or seasonal fluctuations can affect the availability or quality of ingredients. Therefore, if you understand the origin of your ingredients, you can implement contingency plans and diversify your suppliers to ensure you never find yourself in a tight spot.
A case in point is the war in the Ukraine: Ukraine is nicknamed the breadbasket of Europe and the war has had a significant impact on wheat and grain supplies and costs. The UN’s Food and Agriculture Organization (FAO) estimated that a minimum of 20 percent of Ukraine's winter crops originally planted would not be harvested in 2022. Furthermore, as a direct consequence of the war, international prices for wheat, maize, and vegetable oils were driven up drastically. The FAO's Index revealed a significant overall increase of 33.6 percent in the prices of commonly traded food commodities compared to March 2021. Indeed, the FAO Cereal Price Index experienced a sharp rise of 17.1 percent in March alone. For F&B companies, this reality hit hard. Was it all they could do to pass the price hike on to the already cash-strapped consumers? Understanding both the geopolitical issues at play here and whether you source any products from Ukraine means being better prepared to handle the fallout from the war. (6)
Natural phenomena are also a concern, whose severity only grows with each year that the climate crisis continues. In 2022, olive oil production was seriously affected by drought. As a result, the eight main producing countries in the European Union came to a total yield of 1.5 million tons compared to 2.27 million tons last year and a 2.17 million tons average over the past five years. (7)
4. Consumer preferences and expectations
Today's consumers are increasingly conscious of the origin and quality of the food they consume.
A recent study conducted by FMI–The Food Industry Association and NielsenIQ indicated that consumers' expectations for transparency in the food industry have significantly evolved. They want to know more than just where their food comes from.
The majority are interested in details about manufacturing practices, ingredient sourcing, company sustainability efforts, and more. (8)
Indeed, 72% of shoppers consider transparency either important or extremely important. Furthermore, almost 8 out of ten respondents said they are more likely to trust companies that provide complete and easily understandable ingredient definitions. 64% of consumers would even switch from their usual brand to one that shares more detailed product information. (8)
Meanwhile, in Europe, consumer trust is at a concerning low. While consumers want to see more transparency from food manufacturers, the EIT Food Trust Report surveyed European consumers to discover that less than half (48%) trust food manufacturers and authorities and more than a quarter say they actively mistrust them. Two thirds of consumers believe companies are not open and honest about their role in the food system, quoting a lack of transparency as the root of their distrust. (9)
There’s no way around it; companies who want successful customer retention in 2023 have to be transparent about ingredients and processes not just towards regulators but also consumers.
5. Brand reputation and marketing
Less on the financial side, but also a considerable aspect is the influence of transparency on reputation and marketing. By highlighting the origin of ingredients, F&B companies can leverage their unique stories and create a compelling narrative around their products to enhance their brand reputation and attract consumers who value traceability and artisanal production.
A success story in this field is The Parmigiano Reggiano Consortium, located in the Emilia-Romagna region of Italy, which represents over 400 producers of the renowned Parmigiano Reggiano cheese. The Consortium has effectively capitalized on the origin of their ingredients, specifically the locally sourced milk from the designated production area. The Consortium promotes the strict regulations and techniques followed by its members. They have thereby attracted consumers who value traceability and traditional production methods. (10)
6. Sustainability and ethical considerations
Finally, understanding the origin of ingredients enables F&B companies to assess the environmental and social impacts associated with their supply chains. They can evaluate factors such as carbon footprint, water usage, deforestation, fair labour practices, and animal welfare. This knowledge allows companies to make informed decisions, promote sustainable sourcing practices, and align their values with consumer demands for ethical and environmentally friendly products.
One company doing well in this area is Les Jardins de Gaïa, a French tea company that focuses on sourcing and selling organic and fair-trade teas and herbal infusions. They work directly with small-scale farmers around the world, ensuring fair prices and working conditions. The company values traceability and transparency, as a visit to their page shows. There, they explain in-depth how exactly they operate. (11)
As you can see, tracking and understanding the origin of ingredients is vital for F&B companies not just to maintain product quality and comply with regulations, but also to meet consumer expectations and create more brand loyalty.
Where should you start? With inoqo!
It is our job to make being transparent as easy as 1,2,3. So you get all the information you need to satisfy regulators and impress your customers. Our AI-powered solution assesses all of your thousands of F&B products, so you can stamp out risks to your supply chain before they ever become a real problem, lead the way in sustainability and most iumportantly avoid paying the price of ignorance. To find out how we can make life easier for you and help you become transparent and more sustainable, simply message us at hello@inoqo.com.
Sources
(1) https://bakeryinfo.co.uk/promotional-features/simple-ingredient-switches-that-deliver-cost-savings-and-more/670088.article
(3) https://www.theguardian.com/uk/2013/feb/15/horsemeat-scandal-the-essential-guide
(4) https://www.bbc.com/news/world-europe-40878381
(6) https://news.un.org/en/story/2022/04/1115852
(7) https://www.oliveoiltimes.com/world/olive-council-forecasts-significant-production-decline/115544
by Laura
from inoqo
