Crisis Point?

Food Processing Technology: Have you seen any changes in the food processing market due to the current 'food crisis' as announced this month by the UN?

Clive Hayden: The food crisis announcement has not changed anything [in the food processing market] – the crisis is based in the poorer communities as it always has been. The fact that there has been an announcement has not changed anything, only possibly caused some companies to look harder at the developing nations for expansion.

There is always a food crisis of some type [in the world] – the worldwide middle classes and wealthier nations will always be able to buy their pizza, KFC, frozen veg and so on. The problem is the poorer people of the world who cannot afford the basics: staples, seed and fertiliser. They have the crisis.

So the announcement that we have a food crisis is not new, I can remember at least three other 'food crisis' announcements in the past 30 years from different bodies.

The positive thing coming from such announcements is that it does start some people thinking but it would be very similar to announcing that 40% of the world is hungry or 50% live on less than two dollars per day.

[Any change seen in the food processing industry was] reactionary but very low key. The main effect [seen to date] is an increase in raw material prices and the delay in this being transferred to the market.

FPT: How has the food processing industry reacted to rising prices in food as a result of the 'food crisis'?

CH: It is always difficult when raw material prices rise. The main problem [for the food processing industry] is the delay in being able to raise prices to the retailer – this can take months.

Another problem occurs when packaging costs increase due to the rising oil price which forecasters say will not be coming down again.

I think the first thing the industry does [in such a situation] is look at improving operational efficiency and delay or reducing capital projects. But this can be a downward spiral as often the capital projects are needed to improve the efficiency.

FPT: Which part of the world do you see most action in the food processing market at present?

CH: Asia is the most active by far – the economies of, in particular India and China, mean the vast middle class want more processed and convenience foods. The food processing industry is still developing but much slower than demand due to lack of familiarity.

FPT: Which food processing industries around the world, both in vertical and geographical terms, do you think will, if at all, be most affected by the food crisis?

CH: The staples [industry players dealing with raw product, in particular rice, corn, potatoes and pulses] are the main players as processed food is out of reach of starving people. If there is indeed a crisis then it is these items that are affected. I believe any effect would be in agriculture rather than processing though.

The crisis is not really about food, it's more do with poverty and culture. If it is profitable the world can grow enough food. In fact, in real terms the cost of main food items and staples at present are lower than in the 1970s. Agri-food production volumes improve every year with improved yields and varieties – this can keep up with our present population growth. The problem is the distribution to the poorest people in India, China, Africa and other developing nations.

FPT: Is there a level of social responsibility felt by the food processing industry in regards to the rising cost of food?

CH: I think there is but it is mainly thought of as an agricultural problem, as previously mentioned. In Europe and the US we are far away from the problem and unless people spend time in the areas where help is required there is little appreciation of what is required.

FPT: You say poverty and profit are the main issues – is there anything the food processing industry can do to help ease the effects of the current crisis?

CH: This is very difficult. We [HM Food Consultants] for example, have in the past been involved with some initiatives. One such was many years ago in Russia where the potato crop was being totally wasted as the costs of transporting to the markets or the processers were greater than the value of the crop itself. We developed a mobile dehydration system which meant that the water was taken out of the potatoes virtually in the field, so the potatoes were 15% of their original volume and worth much more per kilogram. Local people could also store the dehydrated flake and use it throughout the year.

The problem is, that to keep such projects going in many countries, [you are up against] political expediency and corruption. This affects decisions on initiatives and means the benefit is rarely passed on to the people who need the help.

I do think there could be some synergy between wealthier nations and the people who need help. Generally, in developed countries we are very quality aware. In many food processing industries waste and rejects are given or sold to farmers for using on the land or to waste disposal specialists.

I think there is an opportunity in many food industries to produce easily reconstituted cheap foods for consumption in poorer areas of the world. These people are not interested in high quality and what seems unpalatable to us would provide a meal for someone who is hungry. We completed a project several years ago which took carrot peel waste, (a thick orange porridge), and turned it into good carrot juice, high in vitamins and so on. This would be a typical project.

FPT: How do you think technology will play a part in the outcome of the 'food crisis'?

CH: I think the supply chain in countries such as India and China is in [desperate] need of development, and there are some companies which we are working with that are considering investment in this area.

The difficulty for most foreign companies in these investments is to adjust their way of doing things to compensate for the considerable cultural and operational differences.

The prices of many vegetables, fruits and raw materials is higher than in Europe, the margins are very low, therefore the improvement in quality afforded by better distribution and technology does not have a payback.

Much of this price differential is due to inefficiency and yields which tend to be less than a third of the European figures.

FPT: Have we seen any efforts by companies to downsize, or pull in operations of late?

CH: Yes, but it has not been due to the announcement of a 'food crisis' but over the last five to ten years there has been a move to larger companies concentrating on core products and consolidating. There have been opportunities for the smaller producers with co-packing operations and acquisition of these hived off non-core production facilities.