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The Business of Food

Podcasts | 6 October 2021

Nick Wailes

Professor, Senior Deputy Dean (External Engagement) and Director AGSM

Nitika Garg

Professor

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This episode investigates how the food industry is responding to the sustainable food movement

Have you ever questioned how the food in your local supermarket got there? Consumers are increasingly thinking about the origins of their food, and it's shaping their choices around who they shop with. However, shopping with a conscience comes with a cost, which can lead to a difficult trade-off for customers who want to shop sustainably.

In this episode, we’re exploring The Business of Food, and how the food industry is responding to the sustainable food movement. We’ll unpack the challenges and opportunities facing both retailers and consumers, and ask how technology will improve the way we shop.

For a first-hand perspective of today’s business landscape, Professor Nick Wailes, Senior Deputy Dean and Director at AGSM is joined in conversation by Tristan Harris, Co-CEO of Harris Farm Markets. We’ll learn how Harris Farm is tackling important issues like food wastage with their ‘Imperfect picks’ Fruit & Veg boxes, and how the supermarket led the move away from single-use plastic bags in Australia.

We also hear from Nitika Garg, Associate Professor of Marketing at UNSW Business School, an expert on consumer behaviour trends and the emotions that drive them. Nitika speaks about the tension that exists between consumer emotion and purchasing behaviour.

Speakers:

Professor Nick Wailes, Senior Deputy Dean and Director at AGSM
Tristan Harris, Co-CEO of Harris Farm Markets
Nitika Garg, Associate Professor, Marketing at UNSW Business School

Transcript:

Narration: Have you ever been in a supermarket and wondered how the food actually got there? If so, you’re not alone – consumers are increasingly questioning the origins of their food, and it’s shaping their choices around who they shop with.

New research shows that while 87 per cent of shoppers are more likely to purchase products that are sustainably produced, only 41 per cent are willing to pay a premium for ethically sourced goods. So does consumer intent match the reality, or are we forced to trade-off ethics for cost when wanting to shop sustainably?

Welcome to The Business of Food, part of the Business Of’ podcast series brought to you by the Australian Graduate School of Management at the UNSW Business School.

In this episode, we’ll explore how the food industry is responding to the sustainable food movement. We’ll unpack the challenges and opportunities facing both retailers and consumers, and ask how technology will improve the way we shop.

Professor Nick Wailes, Senior Deputy Dean and Director at AGSM is joined in conversation by Tristan Harris, Co-CEO of Harris Farm Markets.

We’ll learn how Harris Farm is tackling important issues like food wastage with their ‘Imperfect picks’ Fruit & Veg boxes, and how the supermarket led the move away from single-use packaging in Australia.

We’ll also hear from Nitika Garg, Associate Professor of Marketing at UNSW Business School, an expert on consumer behaviour trends and the emotions that drive them.

So grab yourself a snack and enjoy listening.

Nick Wailes: Welcome, Tristan Harris, CEO of Harris Farm Markets. Great to have you here. Tristan, just to start off, you could tell us a little bit about the business and what a day in the life of a CEO in the business of food is like.

Tristan Harris: Sure. Well, the business Harris Farm Markets was started in 1971 by my dad, David Harris, and ably assisted by my mum, Kathy Harris. And they had planned on a different kind of business, but then circumstances all changed and they ended up buying a fruit shop. And from that fruit shop, they grew it through the eighties, and then went through some really tough times, and it got shrunk right back down to a single store. And then, so we’ve started regrowing from about ‘91, through to the present day. So that’s been sort of two cycles, one 20 year cycle, one 30 year cycle. And the business is now up to 27 stores, we’ve just opened in Queensland and we’re in a bit of a spurt, we had a change of strategy, through from about 2013, through to the current period. And that’s been a period of changing out our stores and realigning where we sold product and what product was sold. And now, we’re really starting to ramp up our growth plans again.

Day in the life of a food CEO? I’m in quite an unusual position, in that I share my role with two of my brothers. So, we’ve got a three-way co-CEO ship, which is quite an unusual leadership model. But it means that each of us can spend a little bit more time looking externally, engaging externally, and looking for inspiration and ideas externally. And we can also spend more time operationally, getting down and getting our hands dirty and getting in the detail; which, if there were just one of us, we would not have literally the physical time to be able to do. So, I spend a lot of my time in buying and marketing areas of the business and touch into IT and the wholesale sides of the business, in a more significant way than I do for the parts of the business that my brothers run, such as the retail operations or the people and culture, or the online business or finance.

Nick Wailes: It’s almost a perfect model having three genetically linked CEOs so you can be at three places at once.

Tristan Harris: Yeah. I’m sure most people who have got siblings, would say, “I could never work with my brother/sister.” And I would also say, “I could never work with my two brothers,” but I do. We get it done. But it can be challenging, but it can also be very, very effective and very rewarding.

Nick Wailes: Today, we’re going to talk about sustainability and how that’s influencing the business of food. I’m really interested in one of your initiatives, this Imperfect Picks initiative. Maybe you can just talk us through where that came from and how it’s been for your organisation, and what you learned from it.

Tristan Harris: Yeah, sure. So, the retail industry is very good at what we call R and D, which is not research and design, but rip off and duplicate. And everybody does it in retail. And an old saying is there’s nothing new in retail.

We had always sold fruit that met this kind of criteria. Some older listeners might remember, we used to have a table in each store with buckets on it. And each bucket had about a kilo of fruit in it. And we sold it by the bucket. So, two bucks for a bucket of apples, for example. And this was fruit that was not quite making the grade for supermarkets, and so people would find an outlet for it at some of the markets, an outlet for it in some of the foodservice. Or, if they couldn’t find enough of an outlet for it, it would get dumped. And a lot of food was getting dumped, sort of 20 per cent of what’s grown in Australia approximately, according to Horticulture Australia, is getting thrown out.

And then a supermarket over in France, Intermarché, ran a programme called Légumes Moches, I think it was, so ‘ugly vegetables’, and said, “We’re going to address this problem, by selling this product.” And as soon as we saw it, we’re like, “Wow, that’s bold, but it’s brilliant, and it’s exactly what we do.” And so we repackaged our programme, called it Imperfect Picks. And really went out hard, chasing growers and suppliers, and said, “There’s a lot of stuff that we know is being chucked out, we won’t be able to get you full price for it, but we think there’s a lot of demand for this kind of product.” And it was an enormous success. From the moment we launched it, people absolutely loved it. I think in the demographics that we serve, there is definitely a desire, our consumers want to live according to their values and can afford to live according to their values, more than just, “I want to get something cheap.”

Tristan Harris: The biggest issue with food waste is not actually the disappointment of wasting good food, it’s that there is all of the inputs that are required to produce that food, are still required. So we’re producing a bucket load of carbon and pumping that in the atmosphere, just to produce food that’s thrown back into the ground. Now that is unacceptable. And by finding a way to create a market for that food, customers loved that and engaged with it very heavily. And the benefit for them was that they got to pay half price.

Nick Wailes: You’ve had this amazing response from customers. It also makes the competition catch on pretty quick as well. Does that, for you, show a really significant shift in the way that customers are thinking about sustainability and the impact of their purchasing when they come into your shops?

Tristan Harris: Absolutely. I think we’re all going too slow. But I think everybody is becoming more and more aware of their personal responsibility, given that there is a failure at the government level, at the global government level, to do enough to address some of the very significant challenges we’re facing. And people are more and more recognising that they’re going to have to change themselves because if we all just wait, we’re going to be in so much trouble, it’s going to hurt everyone a lot more by waiting. And I think the beauty of that is, the more people that change before the governments get their act together, the easier it is for them to get their act together. So, it’s much easier to say. “Let’s put a rule in place that kind of reflects what everyone’s already doing, or the majority of people are already doing,” that way we just bring the laggards across.

Nick Wailes: It’s always good to have the consumer ahead of you asking for it. But I think for you guys, that can create some complexity, right? I imagine you get a lot of emails and a lot of comments about packaging. but it’s quite hard for a consumer to know what the best type of outcome is.

Tristan Harris: Yeah, it is. And we do, you’re right, we get a tonne of emails about packaging. And almost no emails about, “What’s the carbon footprint of the product that I’m eating?” Packaging is one of those funny things, if you took all the packaging away, food waste would go through the roof. And packaging is actually incredibly necessary in our current food system, to ensure that we don’t waste a lot of food. And if we wasted a lot of food, we’d be pumping a lot more carbon into the atmosphere. Well in our view, our sustainability pipeline is focused much more on what we’re going to do about addressing carbon footprint, than what we’re going to do about addressing packaging. But it’s not the one that has the loudest share of voice, at the moment, with consumers. People hate plastic. For good reason. But, in our view, it can be a little bit of a distraction from the main game of addressing carbon.

Nick Wailes: Talk to me about educating customers around those type of things. How do you do that? How do you tell them the story about where the food comes from?

Tristan Harris: I think a really great way to do it, is to do something very smart, like what Intermarché did and what we did, I think very well, in Australia is create a campaign, which says, “Hey, look at this, we’ve been doing something silly, and here’s a solution, which makes a lot of sense.” And you offer up that solution. If you’re offering up the solution, at the same time as highlighting the problem, then it’s a much easier sort of message to get across to people. If you just sort of put up your hand and say, “Hey, here’s a problem,” it’s not compelling viewing, it doesn’t get shared around as much, it doesn’t get as much engagement from the customer. By working really hard to create solutions, and then creating a campaign around a solution, which is already addressing the problem, that’s a very strong way to get consumer acceptance.

Nick Wailes: A couple of years ago, you moved away from single-use plastic bags. That must’ve been one of the moments where you really had to change the conversation you had with customers. How did you handle that, and how did it work out?

Tristan Harris: So, about seven years ago, we really wanted to do it. And we were really concerned about the impact that it would have if we just took bags away. And so rather than forcing customers into the position, we went out and said, “What we’ll do is we’ll offer, if you don’t use a bag, for whatever reason, if you buy one product, if you buy 50 products, if you don’t use plastic bags, we’ll donate five cents to Clean Up Australia.” And that was much more expensive for us, than the bag. But then, we also made sure that we had a tonne of our old fruit boxes and stuff like that, sitting there near the registers for people to be able to say, “Okay, I don’t need a bag because I’ll just grab this box.” And that was great, and we reduced our bag usage by a long way.

We came out as the first major retailer in Australia to come out and say, “All right, we’re getting rid of plastic bags altogether.” Well, we were the first ones to actually do it, and we just replaced them with paper bags. And again, that was a matter of just providing the solution. Everyone kind of knew the problem, but nobody really wanted to touch the solution. A plastic bag, a HTP plastic bag, or whatever they’re made of those days, was costing us about, I think, about a third of a cent. And when we first did paper bags, they were costing us about 18 cents. And we go through a lot of bags, there’s lots of customers and it’s millions of bags a year. So, millions of bags times 20 cents, makes for a huge problem. And that’s why the industry had chosen not to do it, up until that stage.

We were getting to fever-pitch about people on plastic bags and, and we had been trying very hard, up until that point, to get rid of them. And then this was just our opportunity to switch the whole game. And our total bag usage dropped by 90-odd per cent when we did it. So, it wasn’t as expensive as we were worried that it would have been. But definitely, by providing the solution to the customer at our cost, not theirs, our customers again, loved that. Whereas some of the other retailers just took the bags away and said, “Now you got to buy bags for 10 cents,”. And, and there was a lot of people that were very displeased when that happened.

Nick Wailes: So that’s getting out ahead of the issue and taking your opportunities when the time comes. My impression is that an increasing number of consumers are concerned about the environment and sustainability directions. It’s shaping their choices when they’re making purchasing decisions or who they shop with. How much do you take that into account when you’re making decisions?

Tristan Harris: Absolutely. Our customer set is a pretty specific set of customers. There was some research done by Dr. Ross Honeywill, and he did a big study across three different countries and showed that there is basically two types of consumers. One is what they call NEOs, new economic order, another one is Traditionals. And Traditionals care about price-quality status. They’re very basic drivers and it’s the vast majority of the population. NEOs focus on all sorts of things that are important to them and to what they value. So again, things like sustainability. Things like design, things like unique interactions and experiences, and they are our target customer. And so we spend a lot of our time trying to design what we’re going to make our stores about, the products we’re going to sell, the experiences that you have in the store, and the branding and market position that we want to put into market.

We spend our time thinking about what’s going to work for those people. And less and less, as a result, we spend less and less of our time trying to promote price credentials. Everybody likes to pay as little as they have to pay, but we spend less of our time thinking about how do we promote our price credentials, and much more about what does that customer, our target customer, what do they actually want? And they actually want things that are authentic and real. And when there’s a problem, they want it actually solved, they don’t want some greenwashing. But if you then deliver that to them, they will reward you handsomely with their loyalty. And they won’t be as price-sensitive, because they know that those things actually do cost money.

Nick Wailes: That’s really interesting. You’re in a position where you’ve carved out a group of customers that allows you to think about sustainability and to build that into your business. We’ve been mainly talking about the shopping experience and what customers see you having. But I’m really interested in other parts of your business and really the supply chain because it seems to me that the challenges of the supply chain is where sustainability really sits. From your point of view, what are the challenges of making your supply chain more sustainable or being able to carry that sustainability all the way through your business?

Tristan Harris: The first thing I want to do is disagree with you, that the food business is not all about the supply chain. I think the supermarket industry has made it all about the supply chain. And that’s because what they are doing is focusing on keeping their costs down so that they compete with somebody else that does exactly the same thing as them. So, the only way to compete with that is to make sure that your supply chain is better than their supply chain so that you can put it on shelf, at a lower price. I think what is lost in that, is the customer. A certain set of the customers, some customers, that’s exactly what they do want, they want you to do that, so that they get good quality food at the lowest possible price.

Our set of customers don’t necessarily want that. But you’re right. The supply chain does need to provide for, whatever it is that we intend to put on shelf. The challenges that we have in supply chain, is that, by and large, our suppliers are not as sophisticated. So, if I’m going out to find unique products and genuine products, made by artisan producers and that kind of thing, these are not massive high scale manufacturing businesses, almost by definition. That means that often there’s a lot more of them. So I can’t go to Unilever and say, “I’ll take 500 different SKUs from you.” I need to go to Mary and say,” I’ll take the three types of jam that you make.” And so I’m dealing with a larger number of much smaller and less sophisticated suppliers, by and large. And therefore, I have a challenge in trying to go and say, “Okay, guys, we want to map the carbon footprint of the entire organisation, and that includes the upstream carbon footprint, which is you guys. Come back to us.”

Now, if I go to Unilever, I can guarantee that the likes of Unilever, and P&G, and Mars, and those guys, they’re already thinking about this, and they’ve got big teams of people that are probably already starting to do that work. And Mary, who’s producing three varieties of jam, is not thinking about that. And although they might be in a much better position from the get-go, because they might be, as an individual, more concerned about it, and less concerned about the profitability, more concerned about making sure that they’re doing the right thing. So the difficulty is in trying to upskill a supply base, that’s not necessarily as sophisticated. So, that’s my specific challenge in the area. The other challenge then is, who bears the cost? Does the supplier bear the cost? Does the retailer bear the cost? Does the consumer bear the cost? And the pricing of externalities is the big issue in carbon, and it doesn’t go away when it comes to the food industry.

I think food production, agriculture globally, and food production together accounts for something like 15 or 20 per cent of total carbon emissions. So, it’s a big challenge that needs to be addressed. I think what we will see in the next couple of years, is interesting and clever business models, which allow those externalities to be priced in, and allow consumers to either opt-in or to opt-out; or at least understand all the businesses that are in the supply chain, to understand where those costs are, and what needs to be done in order to address them.

Nick Wailes: You’ve been quite active in promoting something called regenerative agriculture. How do you see that playing out in your industry?

Tristan Harris: Regenerative agriculture is phenomenal. There’s a couple of world-class farmers in Australia, that are taking some learnings from overseas and then adapting to Australian conditions. And effectively regenerative agriculture says that we need to work with nature, instead of against it. So the industrial agriculture that we’ve all become used to, is taking the soil, as just a dead matrix in which we will add nitrogen phosphorus, and water. And we’ll try and grow these plants, but we’ll control it, a hundred per cent. And, and then of course, when we get outbreaks of disease, we’ll put a whole lot of various chemicals on top and keep disrupting the natural cycles that occur. Regenerative agriculture says, “No, that’s not the way to go. What we need to do is, we’ve got these co-evolved systems, the soil system, the water system, et cetera. And if we run those together, they’re self-reinforcing, and that makes for a very, very active, alive soil, which actually draws carbon into it.”

And so there is the possibility that agriculture can go from being sort of 16 per cent of the carbon output of the world, down to, potentially even zero. If done very well, we’re going to be able to produce some foods that are carbon positive. We’re going to suck carbon out of the atmosphere to produce our food. Now, if we can get to that stage, and there’s products where you get a carbon credit, every time you buy the food, that’s where we’re on a real winner. That’s like the Imperfect Pick scenario, where everyone wins, the farmer wins, the consumer wins, the environment wins. That’s the aim.

And so we look at that and go, “Wow, perfect solution.” We need to now get out to a lot of farmers and it will start, as it already has, with smaller farmers who are more interested in the outcome of all the stakeholders, than they are just the shareholder. Because, the bigger industrial farms often have shareholders, not family farmers. And so, I think we’ll see this bottom up approach to regenerative agriculture and then some of the big guys will jump on it, because they’ll realise that, that some of the farming methods will drive much greater returns into their outfit. So we wanted to create more pull through, first of all, key the consumers up on it a bit, let them learn a little bit about what regenerative agriculture is about, and promote its benefits, and have them demanding these products coming through.

And it doesn’t even need to be at a price premium, a lot of this stuff, some of it, at first, will need to be price premium, but a lot of this stuff is going to be, actually, just as cheap to produce, because you’re removing a whole lot of inputs, chemical fertilisers, et cetera. And so we should be able to get down to the point where the food costs the same, and so people will demand that it’s grown from regenerative agriculture and that demand will create supply. At the moment, there’s not enough supply, and not enough demand, but we’re trying to bridge that gap in both directions.

Nick Wailes: Have you got an example of a specific product that’s regenerative agriculture, and how have you worked with that supplier to bring them into your stores?

Tristan Harris: There’s a muesli product called Brookfarm. They bought an old dairy farm, up out outside of Byron Bay, planted a lot of macadamias, as a lot of people in that area did, and they found that bush rats were consuming something like 8 per cent of their crop. So the rats climb up in the tree and nibble through the shell of the nut, eat the nut, and drop the shell and move on. And so they were baiting for rats and that was costing them plenty and just couldn’t get on top of it.

And then, they had small areas of subtropical rainforest left on the farm, and they started on this process of regeneration and they’ve built up very large areas of regenerated subtropical rainforest. And they introduced owls onto the farm. And now the owls control the rats, and now they lose less than 1 per cent of the total crop to rats. And don’t spend anything on rat bait. And so not only have you got less poisoning of all sorts of other animals, and increasing the biodiversity on the farm, you’ve also got lower input costs and a higher yield. And that’s exactly the kind of thing, that is other solutions that we need to be looking for. Because now, you’ve got all this subtropical rainforest pulling carbon out of the air, at the same time as providing for a much better commercial solution on a farm.

Nick Wailes: That’s a great example. The other thing that’s going on, you’ve got these changes in consumer behaviour demanding more. That’s great. But the other big driver in your industry is changing technology. How is technology changing your business?

Tristan Harris: Yeah, we’re experimenting in two ways. One is on using computer vision and AI to understand customer behaviour. We look forward, we see what Amazon has done over in the States, with their Just Walk Out technology, so not needing a register. When you can do that, you can be a lot more definitive around what is selling, and where it’s selling from, and stuff like that. And so you can start to shape your supply chain to provide a much better, a much more accurate level of product. You’ll have more tools at your disposal, to be able to determine what you need to do, to sell out product before it becomes a problem.

And again, computer vision and AI together can start to map product movement in a store, in a way that humans never could. And it’ll take a long time to get there, but the potential of doing an instantaneous stocktake, just by hitting a button and your camera measuring the width, depth, and height of product on shelf, and know exactly that I’ve got 5.68 kilogrammes of potato sitting on the stack, that stuff is possible. And then demand prediction is the other area that we’re investing quite a lot in AI. Currently, my buyers do a gut feel analysis kind of thing. On the fly of, they look at their numbers from the day before and they understand where they were the week before. So I’ve sold, 16 kilos yesterday of this specific product, in this specific store. Tomorrow is Friday, not Thursday, so we sell a bit more on a Friday. It’s raining, so I’ll sell a little bit less, et cetera, et cetera. So you take all of these factors and they make it an intuitive call about how much are we going to sell. And then they, buy to stock the store it that. A computer is much better at doing that than a human is.

Nick Wailes: Tristan, the future of food, what do you think is around the corner?

Tristan Harris: In food, we’re going to see a reversion to what food was. I think the future of food is going to look more like the past of food, which I’m quite excited about. I think we’re going to see a better understanding of nutrition, and what drives nutrition. We’re going to understand more and more, that the less manufactured a product is, and the less artificial ingredients we put in them, the healthier we’re going to be.

I think we’re probably going to see more and more personalization of nutrition as well, and when you put those two things together, people will be able to shop, more specifically around the things that they’re going to be able to eat, that satisfy them completely and taste fantastic, and keep them healthy. And I think that’s going to be an outstanding outcome for our health system, if nothing else, but the health of our bodies. And so, we often talk about if your grandmother didn’t have it in a cupboard, then you probably shouldn’t have it in yours. And I think we’ll see more and more of that over time. And we’ll look to do things that assist and take us down that path. And we’d hope that that becomes something of a leadership position in the industry.

Nick Wailes: Thanks, Tristan, for joining us. It’s been a great conversation.

Narration: Tristan’s shared some fascinating insights on how the food industry is changing. He and the team at Harris Farm have embraced the shift toward ethical consumption, and carved out a niche in the fiercely competitive retail landscape.

It’s not without its challenges, but there’s plenty of food for thought in Tristan’s approach.

Next up, Nitika Garg, Associate Professor at UNSW Business School. We asked Nitika about the tension that exists between consumer emotion and purchasing behaviour.

She says greater transparency, consumer education, and industry stakeholders with a bias for action is what’s needed to ensure ethical consumption is not a trade off between a person’s principles versus cost.

Here’s what Nitika had to say.

Nitika Garg: We’re not rational creatures as human beings and we’re not rational as consumers, so what got me interested way back when I did my PhD, and that has continued, is how do emotions influence us? And in the last two decades, we have amassed a lot of information on how emotions and not just positive negative but specific emotions, like sadness, anger, pride, gratitude, can have very different effects on consumers and their behaviour. So, when it comes to, let’s say, “Do I want to donate to a cause,” or, “Do I want to buy this sustainable product,” or, “Do I want to eat more chocolate,” which was one of my studies, emotions can actually make a difference.

So my focus in my research is not only to understand these effects but then how can different stakeholders, like consumers, marketers, policy makers, understand this to better the outcomes for the consumer and therefore the society.

There are several things that can drive ethical consumption. So from being more pro social, more aware of environmental concerns so having those pro environmental motivations, or even information, which leads to this next issue of whether everyone has equal access to information and knowledge, especially in the domain of sustainable or ethical food practices. And the answer is, I don’t think so, right? There are two sides to this question. One is, does everyone have equal access to information, and the answer is probably not, but the second is, even if they did, would they have equal capacity or ability to process that information, and again the answer is probably no.

So, with education, obviously people’s ability to process information, people’s ability to search for information goes up, and so we definitely need that to happen. And the other side is that the policy makers, the industry, has to make this information more accessible so that even at the individual level these differences will always exist. Society is never going to be equal, but let’s try and give everyone the opportunity to get this information and work off it.

Cost is a huge barrier when it comes to engaging ethical sustainable consumption, because, as of today, ethical products, more sustainable products, are more expensive. Now, whether that is a little margin or a hugely great margin, it depends. So, if you take, even a simple example of eggs, right? Eggs, they started with these free range eggs, and at least those of us who were paying attention to this... I, for one, want to have free range eggs, right? I’m not going to support animal cruelty or that industry.

But then as a consumer you find out that, you know what, it might say free range but there are still 10,000 hens per hectare, so you’re like, “What? That’s not really free range. What are you doing?” So I think there are two parts. One, the system is stacked against the consumer right now. You are asking the consumer to make a trade off between their ethics and principles versus cost. That is obviously there. So, why should I have to make a trade off? So if I am struggling to put food on the table as in diet in a family, don’t give me that choice. Don’t put it on my shoulders that I either have to compromise my principles. Even if I wanted to engage in ethical consumption, I have to pay so much more for it that I can’t afford it because there are much cheaper alternatives. So don’t give that trade off. So it is a systemic issue which we have to fix.

Now, food industry or even the government, I don’t think anyone is doing enough to address this. But because the consumers are becoming slowly more aware and are demanding this, we are seeing a pull system where the demand is driving innovations and the demand is driving supply. So, because there is a demand, they are trying to find solutions for it.

Narration: So, given the barriers consumers face when choosing to shop ethically, what are retailers doing to help people make more informed choices? And where does the responsibility lie when it comes to regulation?

Nitika Garg: So, to motivate consumers to shop ethically, there are multiple things that the retailers are doing, or the manufacturers are. So, going back to that egg industry which has probably been around for the longest time, I think, in terms of different product categories in the marketplace. There is a lot more information. Now if you go to stores, and they put how many hens are there per hectare. So, not every cage free egg is cage free, so we know that now, so as consumers are building up that knowledge base they are being more discerning. They are becoming connoisseurs of sorts in a category, and that’s what’s pushing the industry to come up with innovation.

Policy is coming along but I think, for a lot of us who are aware of pro-environmental and ethical consumption, it’s probably not at the pace at which we would like it to be. Partly because policy always has to balance the greater good. What is going to happen for the maximum number of consumers in this society? And so, right now if you see there’s so much more focus still on communicating just the nutritional value of processed foods, for example. So, putting the stars on the front in Australia, or giving different... light green, light red, light yellow, light in some other countries. One of the biggest challenges for policy makers is regulations around ethical consumption, because again we know marketers intentionally or unintentionally tend to misuse consumer concern.

So, what they’ll do is, “This is natural.” And now, if I’m not very careful, I interpret natural as organic or as ethical, and so there is now a lot of research now on this, that consumers do misinterpret. Because we have limited processing resources, we have limited time. I don’t have the time, I’m just going to take your word for it. If it’s found out that marketers are not doing that properly, it can break the consumer trust, so policy makers are also involved, although they’re always one step behind. They first figure out that it’s been misused and then they figure out how to remedy it. Organic, for example, there was so much controversy over it because different countries had different regulations around what does it mean to be organic.

And some had no regulation at all, so marketers just started saying natural and organic without it being actually sensibly, chemically organic. That’s the problem with ethical and sustainable consumption, that so much of the onus is on the consumer, whether it is to sift who’s actually doing it right, is it really ethical, is it really sustainable, or whether it is making that call that, “I am trading off my principles for money.” What if I don’t have enough money to make that trade off? Then I have that guilt. So I think the onus needs to shift from consumers to policy makers and the industries. They have to give the right options, as well, to consumers.

Narration: Thank you for joining us for The Business of Food.

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Until next time, thank you for listening.

For more information please read BusinessThink's Food for thought: how regenerative agriculture is changing Australia’s food industry.

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<h1>The Business of Food</h1>

<figure><img src="?w=1320" /><figcaption></figcaption></figure>
 Have you ever questioned how the food in your local supermarket got there? Consumers are increasingly thinking about the origins of their food, and it's shaping their choices around who they shop with. However, shopping with a conscience comes with a cost, which can lead to a difficult trade-off for customers who want to shop sustainably.
In this episode, we’re exploring <a href="https://www.unsw.edu.au/business/our-schools/agsm/about-us/the-business-of-podcast/the-business-of-food" data-new-window="true" target="_blank" rel="noopener noreferrer">The Business of Food</a>, and how the food industry is responding to the sustainable food movement. We’ll unpack the challenges and opportunities facing both retailers and consumers, and ask how technology will improve the way we shop. 
For a first-hand perspective of today’s business landscape, <a href="https://www.unsw.edu.au/staff/nick-wailes" data-new-window="true" target="_blank" rel="noopener noreferrer">Professor Nick Wailes</a>, Senior Deputy Dean and Director at AGSM is joined in conversation by Tristan Harris, Co-CEO of Harris Farm Markets. We’ll learn how Harris Farm is tackling important issues like food wastage with their ‘Imperfect picks’ Fruit & Veg boxes, and how the supermarket led the move away from single-use plastic bags in Australia.
We also hear from <a href="https://www.unsw.edu.au/staff/nitika-garg" data-new-window="true" target="_blank" rel="noopener noreferrer">Nitika Garg</a>, Associate Professor of Marketing at UNSW Business School, an expert on consumer behaviour trends and the emotions that drive them. Nitika speaks about the tension that exists between consumer emotion and purchasing behaviour. 
Speakers:
<ul>
 <li><a href="https://www.unsw.edu.au/staff/nick-wailes" data-new-window="true" target="_blank" rel="noopener noreferrer">Professor Nick Wailes</a>, Senior Deputy Dean and Director at AGSM</li>
 <li>Tristan Harris, Co-CEO of Harris Farm Markets</li>
 <li><a href="https://www.unsw.edu.au/staff/nitika-garg" data-new-window="true" target="_blank" rel="noopener noreferrer">Nitika Garg</a>, Associate Professor, Marketing at UNSW Business School</li>
</ul>
Transcript:
Narration: Have you ever been in a supermarket and wondered how the food actually got there? If so, you’re not alone – consumers are increasingly questioning the origins of their food, and it’s shaping their choices around who they shop with.
New research shows that while 87 per cent of shoppers are more likely to purchase products that are sustainably produced, only 41 per cent are willing to pay a premium for ethically sourced goods. So does consumer intent match the reality, or are we forced to trade-off ethics for cost when wanting to shop sustainably?
Welcome to The Business of Food, part of the Business Of’ podcast series brought to you by the Australian Graduate School of Management at the UNSW Business School.
In this episode, we’ll explore how the food industry is responding to the sustainable food movement. We’ll unpack the challenges and opportunities facing both retailers and consumers, and ask how technology will improve the way we shop.
Professor Nick Wailes, Senior Deputy Dean and Director at AGSM is joined in conversation by Tristan Harris, Co-CEO of Harris Farm Markets.
We’ll learn how Harris Farm is tackling important issues like food wastage with their ‘Imperfect picks’ Fruit & Veg boxes, and how the supermarket led the move away from single-use packaging in Australia.
We’ll also hear from Nitika Garg, Associate Professor of Marketing at UNSW Business School, an expert on consumer behaviour trends and the emotions that drive them.
So grab yourself a snack and enjoy listening.
Nick Wailes: Welcome, Tristan Harris, CEO of Harris Farm Markets. Great to have you here. Tristan, just to start off, you could tell us a little bit about the business and what a day in the life of a CEO in the business of food is like.
Tristan Harris: Sure. Well, the business Harris Farm Markets was started in 1971 by my dad, David Harris, and ably assisted by my mum, Kathy Harris. And they had planned on a different kind of business, but then circumstances all changed and they ended up buying a fruit shop. And from that fruit shop, they grew it through the eighties, and then went through some really tough times, and it got shrunk right back down to a single store. And then, so we’ve started regrowing from about ‘91, through to the present day. So that’s been sort of two cycles, one 20 year cycle, one 30 year cycle. And the business is now up to 27 stores, we’ve just opened in Queensland and we’re in a bit of a spurt, we had a change of strategy, through from about 2013, through to the current period. And that’s been a period of changing out our stores and realigning where we sold product and what product was sold. And now, we’re really starting to ramp up our growth plans again.
Day in the life of a food CEO? I’m in quite an unusual position, in that I share my role with two of my brothers. So, we’ve got a three-way co-CEO ship, which is quite an unusual leadership model. But it means that each of us can spend a little bit more time looking externally, engaging externally, and looking for inspiration and ideas externally. And we can also spend more time operationally, getting down and getting our hands dirty and getting in the detail; which, if there were just one of us, we would not have literally the physical time to be able to do. So, I spend a lot of my time in buying and marketing areas of the business and touch into IT and the wholesale sides of the business, in a more significant way than I do for the parts of the business that my brothers run, such as the retail operations or the people and culture, or the online business or finance.
Nick Wailes: It’s almost a perfect model having three genetically linked CEOs so you can be at three places at once.
Tristan Harris: Yeah. I’m sure most people who have got siblings, would say, “I could never work with my brother/sister.” And I would also say, “I could never work with my two brothers,” but I do. We get it done. But it can be challenging, but it can also be very, very effective and very rewarding.
Nick Wailes: Today, we’re going to talk about sustainability and how that’s influencing the business of food. I’m really interested in one of your initiatives, this Imperfect Picks initiative. Maybe you can just talk us through where that came from and how it’s been for your organisation, and what you learned from it.
Tristan Harris: Yeah, sure. So, the retail industry is very good at what we call R and D, which is not research and design, but rip off and duplicate. And everybody does it in retail. And an old saying is there’s nothing new in retail.
We had always sold fruit that met this kind of criteria. Some older listeners might remember, we used to have a table in each store with buckets on it. And each bucket had about a kilo of fruit in it. And we sold it by the bucket. So, two bucks for a bucket of apples, for example. And this was fruit that was not quite making the grade for supermarkets, and so people would find an outlet for it at some of the markets, an outlet for it in some of the foodservice. Or, if they couldn’t find enough of an outlet for it, it would get dumped. And a lot of food was getting dumped, sort of 20 per cent of what’s grown in Australia approximately, according to Horticulture Australia, is getting thrown out.
And then a supermarket over in France, Intermarché, ran a programme called Légumes Moches, I think it was, so ‘ugly vegetables’, and said, “We’re going to address this problem, by selling this product.” And as soon as we saw it, we’re like, “Wow, that’s bold, but it’s brilliant, and it’s exactly what we do.” And so we repackaged our programme, called it Imperfect Picks. And really went out hard, chasing growers and suppliers, and said, “There’s a lot of stuff that we know is being chucked out, we won’t be able to get you full price for it, but we think there’s a lot of demand for this kind of product.” And it was an enormous success. From the moment we launched it, people absolutely loved it. I think in the demographics that we serve, there is definitely a desire, our consumers want to live according to their values and can afford to live according to their values, more than just, “I want to get something cheap.”
Tristan Harris: The biggest issue with food waste is not actually the disappointment of wasting good food, it’s that there is all of the inputs that are required to produce that food, are still required. So we’re producing a bucket load of carbon and pumping that in the atmosphere, just to produce food that’s thrown back into the ground. Now that is unacceptable. And by finding a way to create a market for that food, customers loved that and engaged with it very heavily. And the benefit for them was that they got to pay half price.
Nick Wailes: You’ve had this amazing response from customers. It also makes the competition catch on pretty quick as well. Does that, for you, show a really significant shift in the way that customers are thinking about sustainability and the impact of their purchasing when they come into your shops?
Tristan Harris: Absolutely. I think we’re all going too slow. But I think everybody is becoming more and more aware of their personal responsibility, given that there is a failure at the government level, at the global government level, to do enough to address some of the very significant challenges we’re facing. And people are more and more recognising that they’re going to have to change themselves because if we all just wait, we’re going to be in so much trouble, it’s going to hurt everyone a lot more by waiting. And I think the beauty of that is, the more people that change before the governments get their act together, the easier it is for them to get their act together. So, it’s much easier to say. “Let’s put a rule in place that kind of reflects what everyone’s already doing, or the majority of people are already doing,” that way we just bring the laggards across.
Nick Wailes: It’s always good to have the consumer ahead of you asking for it. But I think for you guys, that can create some complexity, right? I imagine you get a lot of emails and a lot of comments about packaging. but it’s quite hard for a consumer to know what the best type of outcome is.
Tristan Harris: Yeah, it is. And we do, you’re right, we get a tonne of emails about packaging. And almost no emails about, “What’s the carbon footprint of the product that I’m eating?” Packaging is one of those funny things, if you took all the packaging away, food waste would go through the roof. And packaging is actually incredibly necessary in our current food system, to ensure that we don’t waste a lot of food. And if we wasted a lot of food, we’d be pumping a lot more carbon into the atmosphere. Well in our view, our sustainability pipeline is focused much more on what we’re going to do about addressing carbon footprint, than what we’re going to do about addressing packaging. But it’s not the one that has the loudest share of voice, at the moment, with consumers. People hate plastic. For good reason. But, in our view, it can be a little bit of a distraction from the main game of addressing carbon.
Nick Wailes: Talk to me about educating customers around those type of things. How do you do that? How do you tell them the story about where the food comes from?
Tristan Harris: I think a really great way to do it, is to do something very smart, like what Intermarché did and what we did, I think very well, in Australia is create a campaign, which says, “Hey, look at this, we’ve been doing something silly, and here’s a solution, which makes a lot of sense.” And you offer up that solution. If you’re offering up the solution, at the same time as highlighting the problem, then it’s a much easier sort of message to get across to people. If you just sort of put up your hand and say, “Hey, here’s a problem,” it’s not compelling viewing, it doesn’t get shared around as much, it doesn’t get as much engagement from the customer. By working really hard to create solutions, and then creating a campaign around a solution, which is already addressing the problem, that’s a very strong way to get consumer acceptance.
Nick Wailes: A couple of years ago, you moved away from single-use plastic bags. That must’ve been one of the moments where you really had to change the conversation you had with customers. How did you handle that, and how did it work out?
Tristan Harris: So, about seven years ago, we really wanted to do it. And we were really concerned about the impact that it would have if we just took bags away. And so rather than forcing customers into the position, we went out and said, “What we’ll do is we’ll offer, if you don’t use a bag, for whatever reason, if you buy one product, if you buy 50 products, if you don’t use plastic bags, we’ll donate five cents to Clean Up Australia.” And that was much more expensive for us, than the bag. But then, we also made sure that we had a tonne of our old fruit boxes and stuff like that, sitting there near the registers for people to be able to say, “Okay, I don’t need a bag because I’ll just grab this box.” And that was great, and we reduced our bag usage by a long way.
We came out as the first major retailer in Australia to come out and say, “All right, we’re getting rid of plastic bags altogether.” Well, we were the first ones to actually do it, and we just replaced them with paper bags. And again, that was a matter of just providing the solution. Everyone kind of knew the problem, but nobody really wanted to touch the solution. A plastic bag, a HTP plastic bag, or whatever they’re made of those days, was costing us about, I think, about a third of a cent. And when we first did paper bags, they were costing us about 18 cents. And we go through a lot of bags, there’s lots of customers and it’s millions of bags a year. So, millions of bags times 20 cents, makes for a huge problem. And that’s why the industry had chosen not to do it, up until that stage.
We were getting to fever-pitch about people on plastic bags and, and we had been trying very hard, up until that point, to get rid of them. And then this was just our opportunity to switch the whole game. And our total bag usage dropped by 90-odd per cent when we did it. So, it wasn’t as expensive as we were worried that it would have been. But definitely, by providing the solution to the customer at our cost, not theirs, our customers again, loved that. Whereas some of the other retailers just took the bags away and said, “Now you got to buy bags for 10 cents,”. And, and there was a lot of people that were very displeased when that happened.
Nick Wailes: So that’s getting out ahead of the issue and taking your opportunities when the time comes. My impression is that an increasing number of consumers are concerned about the environment and sustainability directions. It’s shaping their choices when they’re making purchasing decisions or who they shop with. How much do you take that into account when you’re making decisions?
Tristan Harris: Absolutely. Our customer set is a pretty specific set of customers. There was some research done by Dr. Ross Honeywill, and he did a big study across three different countries and showed that there is basically two types of consumers. One is what they call NEOs, new economic order, another one is Traditionals. And Traditionals care about price-quality status. They’re very basic drivers and it’s the vast majority of the population. NEOs focus on all sorts of things that are important to them and to what they value. So again, things like sustainability. Things like design, things like unique interactions and experiences, and they are our target customer. And so we spend a lot of our time trying to design what we’re going to make our stores about, the products we’re going to sell, the experiences that you have in the store, and the branding and market position that we want to put into market.
We spend our time thinking about what’s going to work for those people. And less and less, as a result, we spend less and less of our time trying to promote price credentials. Everybody likes to pay as little as they have to pay, but we spend less of our time thinking about how do we promote our price credentials, and much more about what does that customer, our target customer, what do they actually want? And they actually want things that are authentic and real. And when there’s a problem, they want it actually solved, they don’t want some greenwashing. But if you then deliver that to them, they will reward you handsomely with their loyalty. And they won’t be as price-sensitive, because they know that those things actually do cost money.
Nick Wailes: That’s really interesting. You’re in a position where you’ve carved out a group of customers that allows you to think about sustainability and to build that into your business. We’ve been mainly talking about the shopping experience and what customers see you having. But I’m really interested in other parts of your business and really the supply chain because it seems to me that the challenges of the supply chain is where sustainability really sits. From your point of view, what are the challenges of making your supply chain more sustainable or being able to carry that sustainability all the way through your business?
Tristan Harris: The first thing I want to do is disagree with you, that the food business is not all about the supply chain. I think the supermarket industry has made it all about the supply chain. And that’s because what they are doing is focusing on keeping their costs down so that they compete with somebody else that does exactly the same thing as them. So, the only way to compete with that is to make sure that your supply chain is better than their supply chain so that you can put it on shelf, at a lower price. I think what is lost in that, is the customer. A certain set of the customers, some customers, that’s exactly what they do want, they want you to do that, so that they get good quality food at the lowest possible price.
Our set of customers don’t necessarily want that. But you’re right. The supply chain does need to provide for, whatever it is that we intend to put on shelf. The challenges that we have in supply chain, is that, by and large, our suppliers are not as sophisticated. So, if I’m going out to find unique products and genuine products, made by artisan producers and that kind of thing, these are not massive high scale manufacturing businesses, almost by definition. That means that often there’s a lot more of them. So I can’t go to Unilever and say, “I’ll take 500 different SKUs from you.” I need to go to Mary and say,” I’ll take the three types of jam that you make.” And so I’m dealing with a larger number of much smaller and less sophisticated suppliers, by and large. And therefore, I have a challenge in trying to go and say, “Okay, guys, we want to map the carbon footprint of the entire organisation, and that includes the upstream carbon footprint, which is you guys. Come back to us.”
Now, if I go to Unilever, I can guarantee that the likes of Unilever, and P&G, and Mars, and those guys, they’re already thinking about this, and they’ve got big teams of people that are probably already starting to do that work. And Mary, who’s producing three varieties of jam, is not thinking about that. And although they might be in a much better position from the get-go, because they might be, as an individual, more concerned about it, and less concerned about the profitability, more concerned about making sure that they’re doing the right thing. So the difficulty is in trying to upskill a supply base, that’s not necessarily as sophisticated. So, that’s my specific challenge in the area. The other challenge then is, who bears the cost? Does the supplier bear the cost? Does the retailer bear the cost? Does the consumer bear the cost? And the pricing of externalities is the big issue in carbon, and it doesn’t go away when it comes to the food industry.
I think food production, agriculture globally, and food production together accounts for something like 15 or 20 per cent of total carbon emissions. So, it’s a big challenge that needs to be addressed. I think what we will see in the next couple of years, is interesting and clever business models, which allow those externalities to be priced in, and allow consumers to either opt-in or to opt-out; or at least understand all the businesses that are in the supply chain, to understand where those costs are, and what needs to be done in order to address them.
Nick Wailes: You’ve been quite active in promoting something called regenerative agriculture. How do you see that playing out in your industry?
Tristan Harris: Regenerative agriculture is phenomenal. There’s a couple of world-class farmers in Australia, that are taking some learnings from overseas and then adapting to Australian conditions. And effectively regenerative agriculture says that we need to work with nature, instead of against it. So the industrial agriculture that we’ve all become used to, is taking the soil, as just a dead matrix in which we will add nitrogen phosphorus, and water. And we’ll try and grow these plants, but we’ll control it, a hundred per cent. And, and then of course, when we get outbreaks of disease, we’ll put a whole lot of various chemicals on top and keep disrupting the natural cycles that occur. Regenerative agriculture says, “No, that’s not the way to go. What we need to do is, we’ve got these co-evolved systems, the soil system, the water system, et cetera. And if we run those together, they’re self-reinforcing, and that makes for a very, very active, alive soil, which actually draws carbon into it.”
And so there is the possibility that agriculture can go from being sort of 16 per cent of the carbon output of the world, down to, potentially even zero. If done very well, we’re going to be able to produce some foods that are carbon positive. We’re going to suck carbon out of the atmosphere to produce our food. Now, if we can get to that stage, and there’s products where you get a carbon credit, every time you buy the food, that’s where we’re on a real winner. That’s like the Imperfect Pick scenario, where everyone wins, the farmer wins, the consumer wins, the environment wins. That’s the aim.
And so we look at that and go, “Wow, perfect solution.” We need to now get out to a lot of farmers and it will start, as it already has, with smaller farmers who are more interested in the outcome of all the stakeholders, than they are just the shareholder. Because, the bigger industrial farms often have shareholders, not family farmers. And so, I think we’ll see this bottom up approach to regenerative agriculture and then some of the big guys will jump on it, because they’ll realise that, that some of the farming methods will drive much greater returns into their outfit. So we wanted to create more pull through, first of all, key the consumers up on it a bit, let them learn a little bit about what regenerative agriculture is about, and promote its benefits, and have them demanding these products coming through.
And it doesn’t even need to be at a price premium, a lot of this stuff, some of it, at first, will need to be price premium, but a lot of this stuff is going to be, actually, just as cheap to produce, because you’re removing a whole lot of inputs, chemical fertilisers, et cetera. And so we should be able to get down to the point where the food costs the same, and so people will demand that it’s grown from regenerative agriculture and that demand will create supply. At the moment, there’s not enough supply, and not enough demand, but we’re trying to bridge that gap in both directions.
Nick Wailes: Have you got an example of a specific product that’s regenerative agriculture, and how have you worked with that supplier to bring them into your stores?
Tristan Harris: There’s a muesli product called Brookfarm. They bought an old dairy farm, up out outside of Byron Bay, planted a lot of macadamias, as a lot of people in that area did, and they found that bush rats were consuming something like 8 per cent of their crop. So the rats climb up in the tree and nibble through the shell of the nut, eat the nut, and drop the shell and move on. And so they were baiting for rats and that was costing them plenty and just couldn’t get on top of it.
And then, they had small areas of subtropical rainforest left on the farm, and they started on this process of regeneration and they’ve built up very large areas of regenerated subtropical rainforest. And they introduced owls onto the farm. And now the owls control the rats, and now they lose less than 1 per cent of the total crop to rats. And don’t spend anything on rat bait. And so not only have you got less poisoning of all sorts of other animals, and increasing the biodiversity on the farm, you’ve also got lower input costs and a higher yield. And that’s exactly the kind of thing, that is other solutions that we need to be looking for. Because now, you’ve got all this subtropical rainforest pulling carbon out of the air, at the same time as providing for a much better commercial solution on a farm.
Nick Wailes: That’s a great example. The other thing that’s going on, you’ve got these changes in consumer behaviour demanding more. That’s great. But the other big driver in your industry is changing technology. How is technology changing your business? 
   
Tristan Harris: Yeah, we’re experimenting in two ways. One is on using computer vision and AI to understand customer behaviour. We look forward, we see what Amazon has done over in the States, with their Just Walk Out technology, so not needing a register. When you can do that, you can be a lot more definitive around what is selling, and where it’s selling from, and stuff like that. And so you can start to shape your supply chain to provide a much better, a much more accurate level of product. You’ll have more tools at your disposal, to be able to determine what you need to do, to sell out product before it becomes a problem.
And again, computer vision and AI together can start to map product movement in a store, in a way that humans never could. And it’ll take a long time to get there, but the potential of doing an instantaneous stocktake, just by hitting a button and your camera measuring the width, depth, and height of product on shelf, and know exactly that I’ve got 5.68 kilogrammes of potato sitting on the stack, that stuff is possible. And then demand prediction is the other area that we’re investing quite a lot in AI. Currently, my buyers do a gut feel analysis kind of thing. On the fly of, they look at their numbers from the day before and they understand where they were the week before. So I’ve sold, 16 kilos yesterday of this specific product, in this specific store. Tomorrow is Friday, not Thursday, so we sell a bit more on a Friday. It’s raining, so I’ll sell a little bit less, et cetera, et cetera. So you take all of these factors and they make it an intuitive call about how much are we going to sell. And then they, buy to stock the store it that. A computer is much better at doing that than a human is.
Nick Wailes: Tristan, the future of food, what do you think is around the corner?
Tristan Harris: In food, we’re going to see a reversion to what food was. I think the future of food is going to look more like the past of food, which I’m quite excited about. I think we’re going to see a better understanding of nutrition, and what drives nutrition. We’re going to understand more and more, that the less manufactured a product is, and the less artificial ingredients we put in them, the healthier we’re going to be.
I think we’re probably going to see more and more personalization of nutrition as well, and when you put those two things together, people will be able to shop, more specifically around the things that they’re going to be able to eat, that satisfy them completely and taste fantastic, and keep them healthy. And I think that’s going to be an outstanding outcome for our health system, if nothing else, but the health of our bodies. And so, we often talk about if your grandmother didn’t have it in a cupboard, then you probably shouldn’t have it in yours. And I think we’ll see more and more of that over time. And we’ll look to do things that assist and take us down that path. And we’d hope that that becomes something of a leadership position in the industry.
Nick Wailes: Thanks, Tristan, for joining us. It’s been a great conversation.
Narration: Tristan’s shared some fascinating insights on how the food industry is changing. He and the team at Harris Farm have embraced the shift toward ethical consumption, and carved out a niche in the fiercely competitive retail landscape.
It’s not without its challenges, but there’s plenty of food for thought in Tristan’s approach.
Next up, Nitika Garg, Associate Professor at UNSW Business School. We asked Nitika about the tension that exists between consumer emotion and purchasing behaviour.
She says greater transparency, consumer education, and industry stakeholders with a bias for action is what’s needed to ensure ethical consumption is not a trade off between a person’s principles versus cost.
Here’s what Nitika had to say.
Nitika Garg: We’re not rational creatures as human beings and we’re not rational as consumers, so what got me interested way back when I did my PhD, and that has continued, is how do emotions influence us? And in the last two decades, we have amassed a lot of information on how emotions and not just positive negative but specific emotions, like sadness, anger, pride, gratitude, can have very different effects on consumers and their behaviour. So, when it comes to, let’s say, “Do I want to donate to a cause,” or, “Do I want to buy this sustainable product,” or, “Do I want to eat more chocolate,” which was one of my studies, emotions can actually make a difference.
So my focus in my research is not only to understand these effects but then how can different stakeholders, like consumers, marketers, policy makers, understand this to better the outcomes for the consumer and therefore the society.
There are several things that can drive ethical consumption. So from being more pro social, more aware of environmental concerns so having those pro environmental motivations, or even information, which leads to this next issue of whether everyone has equal access to information and knowledge, especially in the domain of sustainable or ethical food practices. And the answer is, I don’t think so, right? There are two sides to this question. One is, does everyone have equal access to information, and the answer is probably not, but the second is, even if they did, would they have equal capacity or ability to process that information, and again the answer is probably no.
So, with education, obviously people’s ability to process information, people’s ability to search for information goes up, and so we definitely need that to happen. And the other side is that the policy makers, the industry, has to make this information more accessible so that even at the individual level these differences will always exist. Society is never going to be equal, but let’s try and give everyone the opportunity to get this information and work off it.
Cost is a huge barrier when it comes to engaging ethical sustainable consumption, because, as of today, ethical products, more sustainable products, are more expensive. Now, whether that is a little margin or a hugely great margin, it depends. So, if you take, even a simple example of eggs, right? Eggs, they started with these free range eggs, and at least those of us who were paying attention to this... I, for one, want to have free range eggs, right? I’m not going to support animal cruelty or that industry.
But then as a consumer you find out that, you know what, it might say free range but there are still 10,000 hens per hectare, so you’re like, “What? That’s not really free range. What are you doing?” So I think there are two parts. One, the system is stacked against the consumer right now. You are asking the consumer to make a trade off between their ethics and principles versus cost. That is obviously there. So, why should I have to make a trade off? So if I am struggling to put food on the table as in diet in a family, don’t give me that choice. Don’t put it on my shoulders that I either have to compromise my principles. Even if I wanted to engage in ethical consumption, I have to pay so much more for it that I can’t afford it because there are much cheaper alternatives. So don’t give that trade off. So it is a systemic issue which we have to fix.
Now, food industry or even the government, I don’t think anyone is doing enough to address this. But because the consumers are becoming slowly more aware and are demanding this, we are seeing a pull system where the demand is driving innovations and the demand is driving supply. So, because there is a demand, they are trying to find solutions for it.
Narration: So, given the barriers consumers face when choosing to shop ethically, what are retailers doing to help people make more informed choices? And where does the responsibility lie when it comes to regulation?
Nitika Garg: So, to motivate consumers to shop ethically, there are multiple things that the retailers are doing, or the manufacturers are. So, going back to that egg industry which has probably been around for the longest time, I think, in terms of different product categories in the marketplace. There is a lot more information. Now if you go to stores, and they put how many hens are there per hectare. So, not every cage free egg is cage free, so we know that now, so as consumers are building up that knowledge base they are being more discerning. They are becoming connoisseurs of sorts in a category, and that’s what’s pushing the industry to come up with innovation.
Policy is coming along but I think, for a lot of us who are aware of pro-environmental and ethical consumption, it’s probably not at the pace at which we would like it to be. Partly because policy always has to balance the greater good. What is going to happen for the maximum number of consumers in this society? And so, right now if you see there’s so much more focus still on communicating just the nutritional value of processed foods, for example. So, putting the stars on the front in Australia, or giving different... light green, light red, light yellow, light in some other countries. One of the biggest challenges for policy makers is regulations around ethical consumption, because again we know marketers intentionally or unintentionally tend to misuse consumer concern.
So, what they’ll do is, “This is natural.” And now, if I’m not very careful, I interpret natural as organic or as ethical, and so there is now a lot of research now on this, that consumers do misinterpret. Because we have limited processing resources, we have limited time. I don’t have the time, I’m just going to take your word for it. If it’s found out that marketers are not doing that properly, it can break the consumer trust, so policy makers are also involved, although they’re always one step behind. They first figure out that it’s been misused and then they figure out how to remedy it. Organic, for example, there was so much controversy over it because different countries had different regulations around what does it mean to be organic.
And some had no regulation at all, so marketers just started saying natural and organic without it being actually sensibly, chemically organic. That’s the problem with ethical and sustainable consumption, that so much of the onus is on the consumer, whether it is to sift who’s actually doing it right, is it really ethical, is it really sustainable, or whether it is making that call that, “I am trading off my principles for money.” What if I don’t have enough money to make that trade off? Then I have that guilt. So I think the onus needs to shift from consumers to policy makers and the industries. They have to give the right options, as well, to consumers.
Narration: Thank you for joining us for The Business of Food.
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For more information please read BusinessThink's <a href="https://www.businessthink.unsw.edu.au/articles/ethical-sustainable-regenerative-agriculture-changing-australia-food-industry" data-new-window="true" target="_blank" rel="noopener noreferrer">Food for thought: how regenerative agriculture is changing Australia’s food industry</a>.

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