How food & beverage companies are adapting to rise in responsible consumerism

Authored by AXA XL Industry Practices Leader Alastair Baker

The move towards responsible consumerism continues to gather pace in the UK. Consumers, motivated by a desire to reduce the environmental impact of the products they buy or to consume products they consider to be socially responsible, are changing their buying habits. Alastair Baker, Industry Practices Leader at AXA XL, explains how the food and beverage sector is adapting to this change and ways in which they can prevent, prepare for and manage potential risks.

The stereotypical idea of a British meal of “meat and two veg” may not quite be a thing of the past, but recent years have seen many more Britons opting to change the way they eat meat and other animal products. Food and beverage producers are tracking and adapting to this trend, which experts predict will continue.

Several of the world’s largest food and beverage producers have signalled they plan to expand the range of plant-based foods they offer in response to consumer demand. Analysts at Barclays Investment Bank predict that the value of the global plant-based food and drink market could increase by 1,000% to £100 billion by the end of this decade.

A recent study by Finder.com found that 14% of UK adults said they were following a meat-free diet, with a further 12% indicating that they intend to become vegetarian, pescatarian or vegan in 2021. And while vegetarianism, pescetarianism and veganism are becoming more popular in the UK, a large part of the growing demand for plant-based foods is coming from meat-eaters who are following semi-vegetarian, or “flexitarian,” diets.

Consumers are eating more plant-based food products for several reasons, according to experts. Those include a desire to improve their health and wellness, to reduce their environmental impact and because they have concerns about animal welfare.

Ethical consumerism

And it isn’t just a shift in meat-eating habits that is driving changes to the way British consumers buy food and beverage products. Increasingly, consumers are also motivated by a desire to reduce the carbon impact of their purchasing or to buy products they consider to be sustainable or socially responsible, such as Fair Trade coffee or chocolate.

The Harvard Business Review describes ethical consumerism as “companies providing products that appeal to people’s best selves”. Over recent years, there has been a marked trend of consumers paying more attention to where their food and beverage products are grown or reared, the conditions in which they are kept and in which the workers who farm them are treated, and the environmental impact both of how products are made and from where and how they are shipped to the store.

According to the Coop’s most recent Ethical Consumerism Report, released late last year, total ethical consumer spending – including purchases such as clothes and travel – has grown more than four-fold in the past 20 years and now outstrips all UK household expenditure. The ethical food market now totals about £12.5 billion, according to the Coop’s report, and 32% of consumers surveyed said they intended to buy more plant-based and Fair Trade food and beverage products in 2021.

Know and maintain your supply chain

All this has led to greater numbers of consumers paying close attention to the provenance of the food and beverages they buy. They want to know where ingredients – even trace ingredients – are from and how they are farmed or produced.

A compromise to a supply chain can have a catastrophic financial impact on a company’s brand. Clear communication with regulators and customers is vital to maintaining brand loyalty - Shaun Russ, Senior Underwriter, Product Recall, at AXA XL

This means that, to retain customers and ensure brand integrity, it’s key for food and beverage producers to know their supply chains at every level – including second- and even third-tier suppliers. Above all, this requires transparency of information and good communication throughout the chain.

This is even more important following the impact of the COVID-19 pandemic on supply chains. While initially a short-term shock effect, what is becoming increasingly apparent are the more long-lasting implications for the way supply chains are managed around the world.

Our risk engineers are helping clients to better understand these impacts, who their suppliers are, throughout the various tiers of the supply chain, and their potential exposure to bottlenecks and weaknesses in their supply chain and to find ways to mitigate these risks.

We urge our clients to ensure they have a good overview of their supply chain and how resilient it is. They need to ask themselves “what goods do I need, where do they come from, and who ships it?”

As a general rule, the longer an item is in transit, the greater the number of risks. And over-reliance on a particular supplier or suppliers from one geographic region can cause problems if they are forced to halt or drastically cut their production because of a pandemic or other systemic risk.

In order to maintain their supply chain in these extraordinary times, many clients have been exploring using new carriers to keep their goods moving. It’s important that clients apply the same degree of rigour in assessing the operational security and safety standards of new logistics providers as they would in “normal” circumstances.

Have a Plan B

Recent events have also highlighted the importance of having a network of alternate suppliers on which to fall back. And it is important not only to know who your alternate suppliers are, but also what capacity they have.

There’s no point in having a back-up supplier if, when you have to call upon them, they are unable to deliver what you need when you need it. If your alternate suppliers are also alternate suppliers to others, in an event that affects several companies in the same industry, over-reliance on that supplier could create bottlenecks.

So, to the extent that it is possible, knowing who your alternate suppliers will be in the event of a crisis is invaluable – as is having industry intelligence that can alert you if a problem hits your sector more widely.

Brand reputation and risk management

For food and beverage companies, brand reputation is a top risk management priority. And the ethics of where ingredients or supplies come from is now a major factor – alongside issues such as supply-chain disruption and food tampering – in determining the strength of a food and beverage brand’s reputation.

The rapid way in which bad news can be spread via social media adds to increased pressure on food and beverage companies to prevent, manage and recover from risks to their brand.

Crisis management coverage can help food and beverage companies prepare for an event and recover from it should the worst happen. This type of coverage can give clients access to crisis response experts who can help with crisis prevention and response, starting with pre-event planning and training. Among other things, it can provide crisis communication support, for both internal and external communication following a loss event.

Such coverage gives clients access to expert media and social media monitoring. Crisis communication experts are also on hand to help shape messaging and develop statements. And press office support, including help with briefings and spokespeople can also be made available to help clients reposition themselves and recover from potential reputational damage.

Looking ahead

Food and beverage companies have always been alert to changes in the ways their customers want to buy and consume their products. The greater focus on responsible consumerism has prompted some to re-examine what they sell, and the potential risks inherent in the way they source ingredients.

Many major retailers are responding to the trend among consumers to shop more responsibly.

Risk experts and insurers are ready to help producers all along the food and beverage supply chain – from farm to fork, as the saying goes – to manage the risks associated with the changing ways we eat and drink in an holistic way.