Consumers’ growing taste for information has farmers in a bind.
Do they respond with open and transparent supply chain to assuage fears over animal welfare or environmental impacts and risk a backlash? Do they control the message and manage risk?
This predicament is really a Hobson’s choice, according to Australian Eggs managing director Rowan McMonnies, who spoke at the recent ABARES Outlook conference in Canberra.
He says producers only have one viable option - they can either pick up and run with the consumer trust challenge, or get left behind.
The egg industry is one of the best local examples of how farmers are caught between the frying pan and the fire.
Competing demands from different consumer cohorts are simultaneously signalling support for cage egg production with their demand for cheap protein, while other consumers tilt toward free range with higher-cost, high animal welfare value.
Mr McMonnies gave two examples of how the industry could address the challenge.
“Let’s look at Farmer One. They produce grain fed, organic, pasture-raised eggs. It’s part of a clearly thought-out business strategy, supported by marketing to remind consumers of the wonders of these products,” he said.
“There’s still risks in this strategy. It may be hitting o what’s hip right now, but how do we know consumers will stick with it?
“So what does the farmer do to protect themselves? They engage with consumers in a much more formalised and resourced way to ensure continuing understanding the perception of value in the product and trust in the supply chain.
“But the narrative you develop around this can’t have any cracks. It must be genuine and authentic.”
Farmer Two goes the other way.
“They take the view that affordable, fresh protein will always be in style. Mr McMonnies said.
“They go with a low-spec quality product and focus on scale, consolidation and efficiency. They’re constantly innovating to come up with more affordable products.
“You might have a good solid segment of the market, say 50 per cent of consumers, who support the product.
“But they’re not the only ones with a relevant voice on the production system. The risk is consumers move on, and more importantly the community does too.
“So to be sustainable into the future they engage with consumers. Not just about what they want, but to understand why they want it.”
Mr McMonnies said both could be winning strategies - as long as the producer went beyond the old adage ‘tell us what you want, and we’ll give it to you’ towards understanding consumers’ fundamental motivation for their preferences.
The “seemingly terrifying dynamics” of consumer trends puts the onus on squarely on farmers to make smart choices today, he said
Farmers and industry that fail to adopt more open production systems run the the risk of stranded infrastructure, churning out produce the market no longer wants.
“Food in 2030 will in large part be produced by the long-term supply chain investments of today,” Mr McMonnies said.
“If we make the wrong move, if we zig and consumers zag, we’re left explaining to the bankers what went wrong.”
But what if the strategy of following consumer trends exposes farmers to capricious consumer trends? They could end up investing in production systems which quickly become redundant.
Mr McMonnies said the only viable solution was to take up increased consumer engagement and better understand your market.
“Farmers don’t get to choose their system, consumers do,” he said.
“Ultimately, transparency and engagement has the potential to reduce the volatility around these supply chain investments.”
Mr McMonnies said it made economic sense for all agricultural indsutries to join a sector-wide push for consumer trust and transparency - “using a single voice to demonstrate trust has value for industry”.
“It becomes difficult when there are competing narratives out there, it risks one type of production undercutting hte value of another,” he said.
“It is also an expensive process. If done properly it’s constant engagement that becomes part of the way we do business.
“Also, with combined research and development and representative groups can bring scale and efficiency as well as cross-pollination of ideas.”
The story Consumer trust, transparency to future proof producers first appeared on Farm Online.