Which cow provided the milk for my Hershey’s chocolate bar?
Consumers are increasing their demands for transparency in the food they eat, and digitalization trends are poised to deliver the solutions.
It’s no secret that consumers have become savvier about reading nutrition labels before purchasing packaged food products, but the demand for information has not stopped there. The question around labeling for genetically modified organisms (GMO) has become a political hot-topic, and the sustainability impacts of ingredient sourcing have also become newsworthy. Those are only two examples out of many questions consumers have begun asking about their food as they look to become “more socially, environmentally, and nutritionally conscious of their purchases.” [1]
This challenge will require unprecedented transparency from big food companies, like Hershey, to earn back the trust of skeptical consumers. These companies are finding that they cannot combat this mistrust with marketing campaigns alone; rather, they need to open up about their supply chains more publicly than ever before. [2] In fact, research has shown that honesty is the most important quality consumers demand from large brands and thus a key factor driving buying behavior. [1] Enter: SmartLabel, a platform developed and launched in 2015 by Hershey in partnership with the Grocery Manufacturers Association. [4] It is the first major step towards digitalization of the food supply chain, putting nutrition, ingredient, allergen, and third-party certifications at consumers’ fingertips through the simple scan of a QR code or online search (example). [3] Hershey has committed to provide SmartLabel information for its entire portfolio by the end of 2017 and add the physical QR code to all packaging by the end of 2018. [4]
Although a good first step, simply adding more detailed information about the ingredient deck and GMO disclosure is not enough to satisfy customers’ desires to understand where their food is coming from. Again, Hershey is at the forefront of introducing new technology. It recently announced a pilot with Sourcemap, an interactive tool that allows people to trace an ingredient’s sourcing journey from the farm and learn about sustainability projects currently underway. Although only two products are currently available on Sourcemap (example), Hershey plans to utilize customer feedback on this pilot to roll-out the concept to other brands in their portfolio in the coming years – particularly with other non-chocolate confections to create differentiation between the maps. [5]
This improved transparency of the entire upstream portion of the supply chain will require more careful management of suppliers. As Hershey continues to pull back the curtain on its sourcing, it needs to ensure it is only partnering with suppliers whose practices it can defend. Hershey needs to focus not only on the technology that enables transparency, but also on the supplier relationship management required to maintain a network it is proud to be so open about.
Sourcemap gets the consumer one step closer to understanding the origins of her chocolate bar, but it is still only generalized information. Is it possible to track what went into the exact chocolate bar in her hand? IBM has recently announced a partnership with several large food companies (not Hershey) and retailers to begin tackling this question through blockchain technology. [6] It would enable all members of the supply chain – from grower to producer, distributor, retailer, and ultimately consumer – to trace the specific inputs of a product all the way from farm to shelf [7] and create a reliable source that contains all this information in one place. This type of solution is still in development and will likely not greatly impact the food supply chain in the near term, but the potential for enabling radical transparency is huge. [6] For that reason, I believe that Hershey, as a champion for the advancement of traceability in this industry, should find a way to be involved in the learning and development process and join this partnership with IBM.
Incorporating blockchain technology into the food supply chain would result in more benefits than consumer transparency. Perhaps the most impactful change would be on food safety and the ability to accurately and quickly trace the source of food contamination during a recall. A tracing process that currently takes weeks could be done in seconds and result in less food waste and a smaller economic impact compared to the overly-conservative recalls we currently see due to lack of accurate information. The broad participation in blockchain development for food also indicates that stakeholders throughout the supply chain see this as a shared responsibility – to collaborate to improve food safety – not as a competitive advantage. [6]
All this change in the digital traceability of the food supply chain still leaves big questions unanswered:
How can a brand leverage industry-wide technology, such as Sourcemap or blockchain, in a way that creates competitive advantage?
How does this type of technology change the balance of power between Big Food and smaller start-ups who currently have the advantage of consumers’ trust? Does this transparency “level the playing field” or are there still other major barriers to consumer trust needing to be broken down?
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[1] Source: Wilkinson, Dan, “How SmartLabel Delivers Product Transparency To Build Consumer Trust,” Food Manufacturing, 2 October 2017, ABI/INFORM via ProQuest, accessed November 2017.
[2] Source: Charles, Dan, “Can Big Food Win Friends By Revealing Its Secrets?,” NPR: All Things Considered, 25 December 2015, via Factiva, accessed November 2017.
[3] Source: Driggs, Joan, “SmartLabel brings transparency to CPGs,” Retail Leader, 20 January 2016, via Factiva, accessed November 2017.
[4] Source: “New Hershey Commitments Expand Efforts to Help Consumers Make Informed and Smart Snack Choices,” Food Manufacturing, 24 April 2017, ABI/INFORM via ProQuest, accessed November 2017.
[5] Source: Turcsik, Richard, “Straight from the Sourcemap.(Trade/talk),” Grocery Headquarters, 1 July 2017, via Factiva, accessed November 2017.
[6] Source: “IBM Announces Major Blockchain Collaboration with Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestlé, Tyson Foods, Unilever and Walmart to Address Food Safety Worldwide,” PR Newswire Europe Including UK Disclose, 22 August 2017, ABI/INFORM via ProQuest, accessed November 2017.
[7] Source: O’Marah, Kevin, “Blockchain: Enormous Potential Demands Your Attention,” Supply Chain Digital, 14 March 2017, via Factiva, accessed November 2017.
This article highlights one of the main benefits of traceability in supply chains, i.e. the ability to react to contamination issues and efficiently carry out a product recall. One of the other potential benefits mentioned briefly was improved social and environmental consciousness for the consumer about their purchases. I think this would indeed be interesting data for the consumer, but they would need to see this info in some broader context to compare/contrast purchases. I.e. if this Hershey bar generated say, 0.1 kg CO2 in its production process, is that objectively a good or bad figure? Similar to nutrition labels, could the environmental impact values be given in context of a “recommended daily value” for carbon footprint?
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.
I absolutely agree with the author that the digitization of the food label is not nearly enough to drive different behavior by Big Food. The blockchain technology is a step toward the right direction, however, as Justine mentioned in her comment, I think this is still inherently difficult to understand as a consumer as there is just too much information to sort through. It is helpful from an accountability perspective as Big Food will have to think more deeply about their supplier selection knowing consumers have such easy access. Nevertheless, I think the biggest competitive advantage that this initiative could drive would be from a cost perspective. Big Food likely spends significant amounts of money on ensuring their products are approved by the FDA. Through the creation of the blockchain database, Big Food could significantly reduce the administrative burden of the FDA’s auditing process and shift or reduce the resources related to regulatory compliance.
This is such an interesting article–thank you so much for sharing this information with us!
As I was reading the article, I was thinking about the additional implications that might be had by a brand should it leverage industry-wide technology such as Sourcemap. For example, by being able to better trace a product’s ingredients from the farm to the final product, a brand would be better able to recall products in the event of a situation where one of the ingredients was known to have issues. For example, last year The Kashi Co. (Kashi) had to recall products that contained sunflower seeds due to potentially Listeria monocytogenes contamination. [1] If Kashi sourced its sunflower seeds from various locations but was able to identify that the Listeria monocytogenes only came from one supplier due to technology such as Sourcemap, Kashi would be better positioned to recall the specific products coming from the affected supplier. Not only would this reduce costs for Kashi, but it would also help to contain potential hysteria from customers.
Alternatively, I can also see this fueling some customers’ hunger for even more information, which might come at a greater expense to both the brand and the brand’s suppliers. For example, some customers might not be satisfied with just knowing what exact farm the milk in their Hershey’s bar came from. They might also demand knowing what the cows on the farm ate, how the cows were treated, and how much open grass the cows had to roam on, etc. While this might be extreme, in a growing age of technology and data, there is a potential for customers to want to know even more. Like trying to eat only one piece of chocolate, digesting small bits of information could lead to a bigger craving.
[1] http://www.foodsafetynews.com/2016/06/kashi-products-added-to-recalls-because-of-sunflower-kernels/#.WiGrJbQ-cWo