Supply chain transparency does affect food companies’ bottom line
Food traceability has gained importance in recent years as shoppers are concerned about their health, safety, and also about the development of local food systems have been a demand for a larger degree of transparency in the food supply chains.
It is no wonder that consumers now put food origin as the second most important factor (immediately after price) when making purchase decision, since they closely relate it to the quality of a product itself. In fact (as this research project from the EU commission suggests) more than 80% of consumers would choose a food product where they can check the origin over a product they are unable to do so if prices were comparable. The study published in Information & Management found that for some shoppers just having the information available is enough to influence a purchase. “Simply making this kind of traceability information available for food products will encourage more purchases of those products, and at a higher price, even if the buyer never uses that information,” says study co-author Rajiv Kishore, PhD, associate professor of management science and systems in the University of Buffalo School of Management.
Yet, according to our experiences, readiness of companies in food industry that would implement an OriginTrail solution, which enables shoppers to get quick insights into the supply chains, varies a great deal. So, what are the main determinants of a companies’ reluctance to show the exact origin of main ingredients in their products back to each farm that provided them?
One would intuitively speculate that the size of the food company predominantly influences readiness to show an exact origin of raw materials to consumers and that the bigger the company is, the more reluctant it is to reveal the provenance of its raw materials – be it meat, milk or vegetables.
This belief has been proven wrong by at least two large companies with international operations throughout the Central and Southeastern Europe, which we are currently cooperating with, namely Dairy Celeia (dairy products) and Perutnina Ptuj (poultry products). They do, however, possess at least two prerequisites that many other food companies lack – local supplier base and well developed IT systems that store traceability data. Readiness to cooperate is even more visible with slightly smaller companies. Case in point is Natureta, a vegetable provider in the regional market that decided to expose their suppliers in a market generally characterized by lots of misleading information.
To wrap up my reflection on the importance and benefits of revealing precise provenance of food products’ raw materials and factors that contribute to readiness of a company to do so, it is important to stress that consumers do reward greater transparency with shopping preference and confidence. Nevertheless, non-local suppliers’ base and poorly developed IT systems remain two mayor impediments for most of the food companies. Perhaps, one’s impediments may translate into other food companies’ comparative advantage if they decide to reveal more than the most. We are more than happy to help all brands that would decide that such path is something worth taking.