Is your favorite snack doing more harm than good? How does climate change impact almond production? Is almond farming fueling environmental degradation?
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Chi brings up an interesting point. As Starbucks grows internationally, can they maintain their image as a global brand while only using beans grown within that region in order to reduce emissions from transportation? The downside is perhaps coffee consumption in a country like the US far exceeds local or regional coffee bean supply, so this policy would actually further deplete plantations while perhaps “starving” other suppliers of meaningful business.
On another note, I wonder if there’s more Starbucks can do to incentive farmers to make the sometimes risky and/or expensive tradeoffs needed to be more environmentally friendly. Right now, it sounds like they are donating money to communities that are affected by unexpected adverse situations like leaf rust outbreak. But, what if Starbucks guaranteed farmers an above-market rate price for beans to compensate for lower yields. Is this a cost they can pass-through to consumers? Are there enough consumers that care deeply about climate change and would be willing to incur an additional cost on their daily cup of coffee? Perhaps there’s actually some positive PR from these types of actions that would counteract the increase in COGS.
Another option that would likely be very controversial is to vertically integrate and employ farmers directly. Something I saw in Uganda and Kenya (very limited exposure) was that middlemen who purchased beans from the small farmers, managed the processing and packaging, and then sold to larger companies or local retailers were the ones making the most money. It sounded like the small farmers were getting robbed because they had no bargaining power – they were small and ultimately needed to sell their beans. So while vertical integration would invite criticisms around a large company taking advantage of small farmers and reaping all the benefits, I wonder if in some places it’s a better alternative to the current marketplace and supply chain (would need really strong controls in place to avoid abuse of power).
I agree that the long-term benefits to developing more domestic manufacturing are significant. However, it requires the Nigerian government to incentive private investment in infrastructure and the like while also using public funding to support these initiatives. I wonder if the opportunity cost of the public funding in the eyes of the public / media is too high. Presumably, there are many, perhaps more visible, needs that the people may demand the government support. How can the government manage its budget and manpower to set the country up for long-term success while also work to create a strong foundation and tackle everyday issues? Additionally, will consumers also react poorly to a decreased variety of goods available in the market as well as potential cost increases? How might that impact quality of life?
In writing the above, I realized that you can substitute the the Nigerian government for any other country’s government and/or private company’s management. Balancing short-term demands (of consumers, analysts, constituents) with decisions that will fuel long-term success are always challenging.
Your Nestle example is an interesting one. It made me think about whether you might need to institute a type of “cap and trade” system so that companies like PZ Cussons that rely heavily on raw materials that are not plentiful in Nigeria can avoid going out of business. The challenging thing for PZ Cussons is that even if they purchase palm oil domestically, it sounds like the total domestic supply is too low.
With a cap and trade system, the government could set a certain percentage of raw materials that need to be sourced locally (maybe this percentage increases over time). Companies like Nestle that are able to do this well, could sell their excess percentage points to PZ Cussons and then invest that money into continuing to build out operations and in Nigeria. It then buys companies like PZ Cussons time to make some of the longer term sourcing changes (and encourage the market to increase supply for raw materials needed).
I’ve used an app before called “Buycott” where you can choose to boycott companies due to certain practices (i.e. use of child labor or palm oil as a product ingredient). You could also support things like minority owned businesses. However, the data seemed to be user-generated and therefore not really reliable and the individual products you scanned (through the camera on your smartphone) were judged based on the actions of their parent company. So if you didn’t want to consume any products with added sugar, but the company had one product in its large portfolio with added sugar, in theory the app would suggest that you not purchase that product.
With better data enabled by blockchain, the data behind a consumer-facing app like the one described above will be more trustworthy. But I still think there needs to be a strong customer facing interface that works to translate the large amount of data into information users care about to make decisions (similar to certified organic stickers).
I think this data puts more power into the hands of consumers to make more informed decisions. I think what Big Food will have to decide is how much they want to adjust their behaviors to match consumer preferences (which are likely extremely fragmented) and if that will result in prices of goods increasing. I think there will always be consumers who purchase items solely based on price, even with more information about the supply chain – so I think Big Food’s economies of scale advantage will still be powerful.
This was really interesting Ally!
Assuming these aircraft carriers aren’t always near land or other supply ships, I am curious what the lead time is and potential variation to resupply some of the different items. For example, does the weight and volume of fuel mean that resupplying the aircraft carrier with fuel takes longer because it has to come from another ship or is the demand for fuel more predictable so the planning is easier? Would smaller more specialized orders of maintenance parts be able to be flown in?
At first, I was thinking that you could have automatic sensors to track consumption of the various items (at least those easy to measure) so the information is constantly getting “pulled” vs having to get “pushed” into the system by personnel – but, that magnifies the potential risk of cyber attacks.