Next Generation Food Sourcing
November 2017
Executive Summary
• Rescuing surplus food to feed the hungry will become more challenging as
demand increases and supply sources remain constrained
• This effect is already beginning to impact food banks, as GFN network’s year on
year growth rate of product distribution has declined since 2013.
• New strategies are needed to improve Food Sourcing capabilities for GFN and
member food banks to help them partner with donors differently for growth,
including:
1. Develop and adapt Food Sourcing approaches, tools from GFN’s training programs
2. Differentiate collaboration strategies across different types of partners
3. Execute change management plan to sustain new capabilities and partner relationships
2
Contents
• The Food Sourcing Challenge
• Forces Impacting Surplus Food
3
The absolute number of people affected by chronic food deprivation continues to
increase
Chronically undernourished people globally
- Global Implications -
(million people)
+1%
815
775
776
9
822
777
54
2013
2014
Source: FAO 2017 State of Agriculture
2015
2016
2017
4
Food distributed by food banks in the GFN network has increased by 50% in the last
six years, but the annual year on year growth rate has started to decrease
GFN network: food distributed vs. growth rate
(million kg, %)
YoY Growth Rate (right axis)
Kgs Distributed (left axis)
+50%
Implications for GFN
450
412
400
422
427
428
30
383
25
350
300
328
284
20
17%
15%
250
15
200
150
10
7%
100
5
3%
50
1%
0
0
2011
Source: GFN Annual Survey
2012
2013
2014
2015
2016
• Traditional donation
models are not enabling
sufficient growth
• Unless new strategies/
approaches are
developed, food banks will
struggle to increase their
impact over the coming
years
• A renewed emphasis on
Food Sourcing capabilities
will help increase growth
2017
5
The time is right to develop additional strategies to improve Food Sourcing to
supplement traditional food donations
If we succeed:
Growth rate comparison
Growth Rate
GFN network’s
food distribution
growth rate
1 Less people will be forced to make choices
between food and other basic necessities
Hunger Crisis: food
donations cannot keep up
with the hunger rate
Global hunger
growth rate
2 The hunger gap will not widen in the
communities served by food banks
Today the
hunger gap is
widening…
3
The risk of hunger-related symptoms (infant
mortality, illness, infection, etc.) will decrease
Time
Food Sourcing strategies must evolve for supply to keep pace with demand
Source: GFN Annual Survey, FAO 2017 State of Agriculture
6
Contents
• The Food Sourcing Challenge
• Forces Impacting Surplus Food
– Global Forces
– National Forces
7
Rescuing surplus food will become increasingly difficult
Global forces impacting surplus food
1
Increasing demand
for food
• World population is continuing to
expand, expected to exceed 9
billion1 by 2050
• People are living longer; global
median age will increase by 3
years to 331 years by 2030
• Food consumption per capita will
increase by 10-20%2 by 2030
2
• Land, water, energy and natural
resources cannot keep pace with
increasing population
• Agriculture already uses 37% of
landmass, 70% of fresh water
• The food industry is
consolidating, with 300-500
companies controlling ~70% of
supply and demand
The number of people who need
food will increase
1.
2.
3.
4.
Constrained
food supply
UN Medium growth projection
FAO – Towards 2030
Public Health Law Center – Liability Protection for Food Donation
AT Kearney Research
Surplus will become scarce as
supply sources continue to
become constrained
3
Corporate focus on
zero waste
• The food industry is focusing on
zero waste to landfills by
minimizing byproducts,
composting waste, etc.
• U.S. Department of Agriculture
and Environmental Protection
Agency – in partnership with
charities and the private sector –
are targeting a 50% cut in edible
food waste by 2030
Companies will reduce available
surplus through innovation and
more efficient operations
4
Regulatory
constraints
• Liability risk for food related
injuries/ illness is among the top
deterrents for not donating surplus
• Only 9%4 of countries have Good
Samaritan legislation
• 20-30%4 of countries lack
philanthropic tax incentives
Threat of liability and
unfavorable tax laws continue
to be major deterrents to
donating products
8
Global demand for food is expected to increase as the population increases, ages
and consumes more food per capita
1 Factors increasing demand for food
The world population is expected to
exceed 9 billion by 2050
People 65 and over represent the fastest
growing age segment
Food consumption per capita is expected
to increase in the developed world
Global population
(billion people)
Percent of Population aged 65 and over
Per Capita Food Consumption
(kcal/person/day)
9.7
2010
8.5
2050
2005
27%
3,360
3,220
25%
7.6
2,850
22%
7.0
2050
2,820
3,490
3,200
2,970 2,898
2,623
19%
6.1
2,293
16%
13%
13%
8%
7%
5%
2000
2010
2017
2030
Source: UN Medium growth projection. Excludes Oceania
2050
China
India
USA &
Canada
Source: UN Statistics, New York Times
Latin
America
Europe
China
India
Source: FAO – Towards 2030
Africa
Latin
America
Developed
Nations
9
Constraints on natural resource availability are contributing to growing food supply
uncertainty, eventually leading to insufficient food supply
2 Factors constraining food supply
Demand for energy is expected to grow
by 50% by 2030
Annual demand for water is expected to
grow 50+% by 2050
Primary Energy Demand by region
(Million Tons of Oil Equivalent)
Global Water Demand Projections
(Km3)
+54%
2010
3,742
2030
Arable land per capita is decreasing
Population vs arable land per capita
(billion people, hectares per capita)
Population
Arable land
5,450
.30
9.7
8.5
.27
7.6
7.0
6.1
3,550
2,416
2,214 2,206
5.6
.21
.20
.18
.16
1,837 1,835
1,300
691
China
India
856
586
Latin
America
Source: The Economist Intelligence Unit
USA
Europe
2000
2050
Sources: The Organization for Economic Co-operation and Development
1990
2000
2010
2017
2030
2050
Source: United Nations Medium growth projection year by year
10
Food industry is focused on zero waste, leading to a decrease in donatable surplus
available to food banks
3 Current change in waste flow1
Dumped
Emphasis on zero
waste decreases
overall product
losses…
Donated
Emphasis on zero
landfill waste
decreases overall
product losses…
Food Waste
Donated
Food Waste
Dumped
Desired change in waste flow
…while available
donations increase
due to emphasis on
identification/
capture of edible
waste throughout the
supply chain
…and decreases
available donations
Time
Example: Restaurants are
reducing the food waste, but
their waste continues to be
difficult to donate
1. Based on A.T. Kearney interviews with GFN and member food banks
Time
Example: Walmart increased
diversion of materials from
landfills while increasing
donations year over year
11
Lack of regulatory protection for food donations and gaps in philanthropic tax
incentives continue to be major deterrents
4 Regulatory and Tax Challenges1
(% of total countries)
91%
34%
23%
6%
Countries lacking Good Samaritan laws and/or philanthropic tax incentives
do not have philanthropic Good
Samaritan laws to protect liability
do not have individual tax laws to incentivize
people to donate (food or finanacially)
do not have tax laws to incentivize
corporations to donate (food or finanacially)
do not exempt non-profit
organizations from taxation
Removing these barriers historically results in a 10-20%1 increase in donation
1 - Nexus Global “Rules to Give” By Philanthropy Index
12
Contents
• The Food Sourcing Challenge
• Forces Impacting Surplus Food
– Global Forces
– National Forces
13
Several national factors are contributing to the difficulty of rescuing surplus food for
food banks
National Forces Impacting Surplus Food
1
Charity Mentality
2
Secondary
Competition
3
Unfavorable
Economics
• Corporate partners sometimes
view food banks as charities
• There are further opportunities to
position food banks as a partner
to mutually solve a business
problem
• New players (e.g. discount
stores) are entering the
secondary market and buying
surplus food
• Other food diversion methods
represent competition for surplus
and account for more than 75%
of food diverted from landfill
• More charities are competing for
the same surplus
• In select regions, tax laws work
as disincentives for providing
donations
• Logistics costs associated with
handling or transit distance act
as barriers (esp. in the
agricultural sector)
Relationships with corporate
partners are often
transactional/ charitable
Many new competitors are
seeking the same surplus that
traditionally went to food banks
Food banks need to creatively
solve financial and other
perceived barriers to partnership
Source: Based on A.T. Kearney interviews with GFN and member food banks
4
Resource Constraints
• Food banks are often understaffed
and have high turnover and do not
have dedicated food sourcing
experts
• Food banks may lack the
infrastructure (storage, trucks,
cold chain, etc.) to receive
donations
Donation potential is not fully
realized because not all
available food can be rescued
14
Opportunity exists for food banks to move from a ‘charity’ model to a mutually
beneficial ‘business partner’ who helps reduce waste by recovering surplus
Charity model
Partner model
1 “Quantify, Reduce, Donate” Process
From ‘Charity’ model…
Recover and
Donate the
Remainder
• Ad hoc / infrequent
• Short notice / reactive
• Charity mindset
…to ‘Partner’ model
Identify and
Quantify the
Waste
• Identify where the food
waste is occurring
Explore Ways to
Reduce the
Waste
• Identify the drivers for
waste reduction
• Investigate the root causes • Estimate how much
for waste
surplus will remain
• Quantify the waste
• Categorize the remaining
• Identify the decision-maker surplus
Recover and
Donate the
Remainder
• Determine if the surplus is
usable and if it can be
donated “as is”
• If the surplus needs to be
processed, identify the
required steps and cost
• Identify ways to cover reprocessing cost
Evolving to a partnership-like model will position food banks to rescue more food surplus
Source: GFN interviews, A.T. Kearney
15
Food banks are experiencing competition for surplus from secondary markets and
other waste diversion methods
2 Destination of Food Waste - Retail and Wholesale
c
(% of total food waste)
a Stronger competition to access
donation supply
•
•
Secondary groups are buying
surplus that could be donated
42% of
waste
diverted
13%
Donation1
Zero waste focused on reducing overall waste
•
Most food waste is dumped into landfills
•
Unilever and other companies are trying to
reduce waste, but there is still a sizeable
opportunity for waste reduction
New entrants and start-ups, such as
Ugly Produce Company are
monetizing this surplus
29% Recycled
Dumped
58%
b Other waste diversion methods are seizing a
larger share of the donatable surplus
•
Source: BSR Analysis of Food Waste Among Food Manufacturers Retailers and Restaurants
1. Donations to feed the hungry
Animal feed, compositing and other industrial
uses (biofuel, anaerobic digestion) represent
11%, 10% and 8% respectively of total food waste
16
Food banks have to overcome the perception of multiple, unfavorable economic
barriers to grow the relationship
3 Examples of the perceived costs that discourage donation
100%
a
b
10%
Example P&L
30%
Tax laws inhibit corporate donation
in certain countries
Cost of extra handling or running
lines longer discourages donation
60%
25%
a
35%
c
Travel cost to rural areas (e.g.
farms) is impractical for food banks
b
2%
7%
27%
c
d
d
Food banks do not have resources
to regularly purchase discount food
Gross Cost of
Revenue Sales
Tax
Sales
COGS
Gross Transport Margin Adjusted
Margin
Loss
Gross
Margin
Understanding the true cost of surplus will help food banks make the financial business case for
a sustainable partnership
Source: Based on A.T. Kearney interviews with GFN and member food banks
17
Food banks are often understaffed and frequently lack the infrastructure to receive
additional surplus
4 Insights regarding food banks’ resource constraints
“do not have funds to
hire more staff to help
with Food Sourcing”
“funders will not give general
operating expenses, they want to fund
a certain project”
“food banks do not always have
capacity to receive the donations or
the cold chain capabilities”
“we need more people”
“need additional funding to reach
farms that are outside the city”
“Food banks have to pick up the donation
in most countries and do not always have
enough drivers or trucks…”
“In terms of securing
new partners, the
issue has been
bandwidth mostly”
“Staff turnover at food banks and
across partners becomes an issue if
there is no transition plan or formal
donation process in place”
“The infrastructure for cold
chain needs to be there to
receive more food”
“Don’t always have the
capacity to pick up the donations
or resources to transport the
product...”
“60% of wasted products are
refrigerated…need more cold
chain capabilities…”
Donation potential is not fully realized because available food cannot be rescued
Source: Based on A.T. Kearney interviews with GFN and member food banks
18