Food supply chains: recent growth in global activity.

INTRODUCTION

Where does our food come from? The answer is from farms and fisheries, but as consumers in our developed urbanised society we know the reality is from a retail outlet. In other words; we shop.

In my youth, shopping meant a trip on foot to a variety of small retailers, stocking post-war English commodities, some of which were rationed. I first saw a banana at age about five, and developed a passion for exotic pomegranates in my teens. My mother spent at least 25% of her waking hours preparing meals for the family.

On the other hand, my children drive to a supermarket where everything is to hand, they complain if the mangoes aren't fresh and buy international cuisine, microwaveable within minutes. How did this change occur within one generation? The answer is 'progress and success' in the development of the food supply chain. To map its history, we must first understand the 'players' and the factors driving change. The dominant driver is easy to identify.

Since the whole chain is in the hands of the private sector, the motivation for all the players is profit and survival against competition. The stories of growth, survival and decline of the various players relates to their ability to provide benefit to their customers, and eventually to us, the consumers. That some are financially successful is beyond doubt. Table 1 gives the data on the performance of the major global players, several of whom have turnover and profits comparable to the GDP of nation states.

Hunting, gathering, fishing and farming

We begin with primary production. Developments in this sector go hand-in-hand with the rise of human civilisation. Certain forms of biological materials are ideal for human consumption. Nuts, fruits and berries can provide nutrition without any processing. Milk is similar and most meats, fish and vegetables, can either be consumed raw or with minimal processing, providing they are eaten fresh. Horticulture and animal farming can be seen most simply as a labour-saving method of keeping the food source immediately available to the producer, avoiding the need for tedious and possibly dangerous activities in their harvesting. For land-based production, hunting has largely died out, probably because of man's incredible efficiency and advanced hunting 'tools'. (The seemingly inexhaustible supply of bison meat in North America was decimated in less than a generation with the arrival of the rifle.) Fishing remains as a hunting activity but the factory ship, with sonar detection and enormous nets, is such an efficient device that global fish stocks are now threatened. Aquaculture is becoming economically competitive even with its higher input costs of feed and species management.

The types of food mentioned above require distribution and consumption to be rapid, or dangerous microbial contamination or chemical degradation will occur. Originally this meant short distance in the supply chain; the hunter could eat at the site of the kill, or simply walk back to camp. Now airfreight, fast land transport, temperature control and sophisticated packaging allow operation internationally. The producer can also be the distributor and retailer (a vertically integrated business). Modern specialisation usually means that produce will go through several business partners. Nonetheless, we can identify the 'fresh chain' (Figure 1).

[FIGURE 1 OMITTED]

The unstable nature of this produce requires speed of distribution unless preservation techniques are employed. Traditionally, drying and fermentation were used, adding value by providing safety, reducing losses, utilising by-products and creating variety in sensory impact. Dried meat, fish and fruit, fermented milk, meats and fish products are to be found in most cultures and throughout history. These food technologies, which have now become international businesses, developed from the obvious advantages of storing food safely and successfully controlling microorganisms, even though the latter were not discovered until centuries later. Recently food science has understood the principles by which these technologies can be practised and has systematised their use (Leistner & Gould 2001).

Arable farming is different. The rise of cereal crops and pulses in the 'Fertile Crescent' marked a major event in human civilisation but the crops produced are not food. We do not eat unprocessed seeds of the Graminacea in large volumes, even in breakfast cereals. These seed crops, however, have the major advantage of biological stability so that seasonal cycles can be damped out by grain storage, and they contain a concentrated form of macronutrients which can be transported at ambient temperatures and manufactured into finished foods closer to the market. The foods we make from them require the process steps of milling, mixing, fermentation and baking. All of this was originally done by hand, but it was soon realised that these energy intensive processes could be optimised by the engineering rules of economy of scale. For example, operations such as milling were soon optimised at a large scale with long production runs, whether the energy source was human slaves, draught animals, wind, water or electricity. Likewise, the baker's skill has both been upscaled and automated to factory processes, giving economy of scale; or incorporated into the modern hypermarket for its nostalgic appeal.

Oilseeds have similar mandatory requirements for crushing, and separation, to which the more sophisticated chemical engineering processes of hydrogenation, fractionation, and crystallisation have been added.

In most cases, therefore, the products of arable farming require a processing and manufacturing industry between themselves and the wholesaler or retailer of finished foods (Figure 2). The success of modern civilisation owes much to engineering and cheap energy sources.

[FIGURE 2 OMITTED]

Processing, manufacturing and the rise of technology

We have identified several reasons for the presence of processing and manufacturing within the chain. These include the practice of food preservation and safety, separation and refinement of raw materials, and finished product assembly. Like any other manufacturing and processing industry, the impact of the Industrial Revolution was huge. Instead of reliance on animal or human muscle power, or even unreliable wind and water, the advent of the industrial engine driven by fossil fuels allows the development of very large scale factories and the consequential economies of scale that translate down the chain as cheaper and more plentiful supply. However, operations at large scale require greater understanding of how raw materials interact. The chemical industry, with its higher added value products and processes lead the way, but all the techniques of unit operation engineering, materials science and product assembly have been adopted by the food industry. Our materials are much more complex and annually variable, so it is not too surprising that the control of fabrication of a plastic bottle is better understood than an extruded starch-based snack, even though the science and engineering principles are the same.

Further, identification that continuous rather than batch operations are more efficient, also requires the conversion of a food factory from a 'big kitchen' to a streamlined, low labour input, continuous automated unit. This is still occurring in our modern industries, and those that do not convert will fail or have already disappeared. In many cases, the brand name of the original product survives, but the process of its fabrication would be unrecognisable to the original inventor.

The particular processes of fermentation and preservation are peculiar to the food industry. It has independently developed starter culture techniques, sterilisation, pasteurisation and critical control point (HACCP) technology, not just out of interest but as competitive weapons in the market place, producing variety and enhanced safety for its customers. Such exploration is still continuing, with the use of high pressures and pulsed electric fields to wage war on microbes. These processes were not developed for the food industry, and so need to be adapted and understood. The opportunity to achieve safe stable foods, nearer in colour and texture to the fresh material, is the technical and financial target.

As in other manufacturing industries, new process developments and novel products can be protected by patent, giving an even greater exclusivity to successful companies. Although there are few genuinely novel foods, the processes by which they are fabricated and the materials from which they are constructed are now very different from those of the artisanal product from which they were derived.

Many global manufacturers begin their operations in foods where major processing input is mandatory (eg Nestle--milk; Unilever--edible fats; Kraft--cheese). Their company culture of increasing profits and volume sales by technology, upgrading globally sourced primary produce, and branding the final product allowed them to acquire businesses in other food sectors and apply this approach in a similar way, with varying degrees of success. Initially, they were vertically integrated--contracting their producers, performing their own processing, refining raw materials and fabricating finished products. Recently, the higher margins and direct consumer appeal generated from branded finished products and the advantage of sourcing raw material and ingredient supplies world wide has led them to focus only on finished product manufacture, assembly and marketing. Primary processing has gone into the hands of other specialist global players, eg Cargill, ADM.

The international reach of these very large companies accelerated dramatically in the 1990's as international trade barriers were lowered. Growth occurred by acquisition based on the significant borrowing power of these capital and revenue rich companies. Major acquisitions by Nestle, for example, were:

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