IBM Global Business Services White Paper

An appetite for change
How an interconnected approach to food supply management can help food growers, producers, sellers and consumers — and planet Earth

Guy Blissett, IBM Institute for Business Value, Consumer Products Lead

Executive summary
In many ways today’s food supply chain is a marvel—a highly fragmented and complex, and ever-evolving ecosystem that delivers an astounding volume and quality of product—sufficient food in all its various forms to feed roughly 6 billion of the Earth’s 6.8 billion inhabitants. However, in this same value chain where fresh produce is shipped around the globe hours after being picked, globally linked financial markets dynamically set prices for agricultural commodities, and crops are increasingly re-engineered at the genetic level, major stresses are appearing. At a planetary level concerns are rising about food security and sustainability; How can we feed the additional 2 billion people that will inhabit the planet by 2050, while at a participant level concerns linger and grow about recalls contaminations, waste, spoilage and distribution inefficiencies that create shortages and embed incremental costs? Planetary concerns center on the increased demands that 2 billion new inhabitants will place on the food supply, and changes in consumption that accompany increases in income. Based on existing trends we will likely need to increase the food supply 70-100 percent by 2050. Exacerbating these concerns are newer issues such as climate change and drought; high and volatile energy prices; plateauing crop yields; arable land limitations; and diversion of crops for biofuels. As a consequence, we are seeing significant price volatility, shortages, government interventions and a growing realization that the current model is not sustainable. Indeed, agriculture is already the largest human use of water, comprising an estimated 69 percent of total. At a participant level many of the issues are not new, just persistent. Consumers continue to crave additional information about product source and contents, while harboring lingering safety concerns. Retailers continue to wrestle with stubborn levels of out of stocks and razor-thin low margins. Consumer products (CP) companies continue to struggle with accurately sensing end demand, and synchronizing their plans and forecasts with retailers. Farmers and growers struggle with increasingly pernicious weather, rising input costs, uncertain demand and volatile market prices.

Page 2

Other persistent problems—such as food spoilage and waste, product contaminations and recalls; and often convoluted farm subsidies and trade policies—further complicate an already challenging landscape. Clearly, a smarter approach to managing our food value chain is needed. And while technology alone cannot solve the crisis, its application to create a value chain that is increasingly instrumented, interconnected and intelligent is essential.

In this whitepaper, we will summarize the current structure of the food value chain, assess its current state, and identify the capabilities and attributes necessary for a smarter food value chain.

Structure of the current food value chain
The food value chain — comprising literally tens of thousands of participants of varying size and sophistication spread across the globe — is a daunting enterprise to summarize. For our purposes, we have grouped and summarized participants into the following value chain (see Figure A). While this figure represents a gross simplification of the web of participants and their interactions it does enable a structured assessment of the existing and emerging stresses, and provides a framework for considering solutions.

Figure A. The Food Value Chain...a highly simplified representation

Page 3

In addition to its complexity, the food value chain can also be viewed as a study in contrasts. At each step the participants and their activities vary across the spectrum in terms of dimensions such as scale, breadth, scope, sophistication and integration (see figure B).

It is notable that some organizations act as highly focused specialists developing unique capabilities and expertise in a specific competency (e.g., raising broiler chickens in their thousands), while others operate across multiple competencies reaping benefits of vertical integration (e.g., global beverage and snack company integrated all the way upstream to potato farmers and suppliers of sugar alternatives). Assorted cooperatives, trade associations, and market organizations also play a role aggregating product, collecting information, representing industry interests and sharing knowledge.

Commodity and specialty products providers / primary producers This complex and fragmented group and can be clustered around the following competencies: • Agriculture: Growers of legumes, pulses, wheat, rice, fruits, vegetables, corn, and other crops. They range in size from the small family farms to titans such as Archer Daniels Midland (ADM), Bunge, and Cargill. • Beef, chicken and pork farmers: including cow/calf operations, stocker and backgrounding operations, feedlots, ranchers, and Concentrated Animal Feeding Operations (CAFO).

Figure B. Food Value Chain particpants and their activities...a study in contrasts

Page 4

• Dairy farms and cooperatives: producing cheese, milk and milk protein and other derivative products. • Fisherman and fish farms: that catch and/or farm fish, shrimp and shellfish Component converters, processors, abattoirs, packers and repackers While operations at this step are sometimes highly automated and tightly integrated with those of the farmers and growers, they are just as likely to be performed manually and dispersed across a web of small players. a) Converters of raw / bulk crops, livestock and other foods into components —slaughtering, deboning, peeling, cleaning, sorting, slicing, freezing, and otherwise storing, b) Processors that change the composition of the product through cooking, mixing, grinding, and/ or other chemical, mechanical, thermal operations Secondary and tertiary suppliers Chemical, pharmaceutical, industrial and specialty companies that manufacture and market the antibiotics, pesticides, fertilizers, seeds, and genetic material increasingly a component of today’s food value chain. Examples include Monsanto, BASF, DSM, Potash Corp.

Brokers, distributors, exporters, importers, traders This portion of the supply chain encompasses a massively diverse group of large and small players that typically add little to no value to the physical product itself, in fact in many cases they never even “touch” the physical product. Their role is to facilitate movement, aggregation and trade. In Japan, megaplayers such as Itochu, Mitsubishi and Mitsui are active in each of these areas.

Food and Foodservice Wholesale distributors These entities bridge the gap between CP companies and retailers, enabling CP companies to efficiently sell and distribute products to diverse and numerous retail outlets, and delivering incremental services to the customers . In many markets multiple tiers of wholesaler and distributor may exist between the primary manufacturer (i.e., the CP companies) and the retailer or restaurant. Food retailers and restaurants

Consumer products companies Ranging from global players that own and manage portfolios of familiar products and brands (e.g., Danone, Unilever, Nestlé, Arla, Heinz, and Kraft), to local and regional players focused on a single brand or category (e.g., Kikkoman, Weetabix, Utz, and Bush Brothers) to the increasingly important private label manufacturers who make products for retailers under their own labels. As competition increases, critical inputs become scarce and/or expensive, and the geographic scope of operations expands, CP companies are playing an increasingly active role upstream assisting and integrating with suppliers and connecting with end consumers to understand their needs and preferences.

Food retailers used to consist almost exclusively of traditional grocery stores, kiosks, and restaurants but now food is sold through every type of outlet imaginable, including online. Examples range from global powerhouses such as Carrefour, Trust-Mart, Tesco, Pantaloon and Walmart to individually owned, single store locations. Restaurants also range from global fast food chains such as McDonalds, Jollibee, Taco Bell and KFC to single unit, individually owned restaurants. These organizations run the gamut in sales volume and degree of technological sophistication.

Page 5

Food consumers At the end of 2008 there were approximately 6.8 billion food consumers on the planet, and by 2050, two billion more will join them. Although consumers the world over crave safe, healthy, abundant food choices at relatively low cost, they are extremely difficult to please and characterize. They want more information about the source and contents of products and are connected, concerned and empowered to get that information and share it.

Given the complexity of the food value chain effective collaboration on issues and stresses is essential. Progress has been made toward developing and adopting standards that facilitate collaboration, however significant challenges remain especially in the upstream end of the chain. Globalization, specialization and fragmentation of the food value chain are exacerbating longstanding issues as products get handled by more entities spread across a wider geography.

The global trade in food, myriad regulations and inspection standards, and the complexity of the processed food we eat are all complicating efforts to improve food safety. In the U.S. for example imports account for nearly 60 percent of the fruits and vegetables consumed, and 75 percent of the seafood. However, only one percent of those foods are inspected before they enter the country. Food safety issues present problems for

A sample of cross chain and individual

more than just consumers. Food growers and consumer product manufacturers are facing a crisis of confidence from their customers while they struggle to institute appropriate safety measures in the face of rising costs. Government agencies that regulate food safety are also increasingly under fire as they try to answer the public’s demand for greater accountability with limited staff and resources. Agricultural entities Agricultural entities face an onslaught of unique stresses. Competing in the increasingly competitive global market, these organizations must often contend with extreme price volatility, due in part to biofuel production fluctuations; widespread tariffs and import quotas; and sometimes perverse production incentives such as those currently in place for European milk and sugar, and U.S. corn.

Stresses on the current system
The current food value chain does many things very well, from producing prodigious volumes of food at a relatively low direct-end price to the consumer, to innovating around processes, products, pricing and packaging. However numerous factors are stressing the chain at both the participant and planetary level. Participant Stresses Participant stresses — typically business related — impact or occur at the participant level, rather than a planetary level. Some business stresses — such as contaminations and recalls — cut across the entire chain and even overlap with planetary concerns. Others — such as high failure rates for new product introductions — are more localized in their impact.

participant level stresses follows: Contaminations and recalls This issue took center stage in 2008 and 2009 with a series of highly publicized recalls around the globe of products as diverse as spinach, milk, peanuts, ground beef, and jalapenos sickened thousands. Awareness of the food safety issue and its cross channel impact has been growing and consumers the world over are increasingly concerned about the safety of the food they eat and farmers feeling the financial impact of recalls. A sample of contaminations and recalls since 2005 is shown in figure C.

Page 6

Figure C. Product contaminations and recalls...a major stress on the Value Chain

Additionally, costs are on the rise in many areas of the industry. High energy costs are forcing production costs up because oil, natural gas and their derivatives are essential components to modern agriculture, both to fuel machinery and as ingredients in fertilizers and pesticides. Additionally, many agricultural entities are under increasing pressure to pay a premium for the water they use to grow crops or raise livestock. Europe already has such a water pricing system in place and other agricultural producers are bracing themselves for this potentially devastating cost increase.

The future will likely bring more, not fewer pressures for these organizations, including: • Rising demand for sustainable practices • Growing concern about water usage, waste and runoff • Increased need for agility due to climate changes Consumer Products companies The primary business of CP companies is to delight customers and consumers. Today they struggle with an increasingly concentrated and demanding customer base who are just as likely to be competitors. Another stress comes in the form of a rapidly growing number of increasingly affluent consumers, who are themselves concerned, connected and empowered to gather and share information. IBM calls this dynamic group Omni Consumers.

Many CP companies are already responding to these changes but recognize they have yet to find workable, comprehensive solutions. Connections with consumers are tenuous and distrust of companies, products and brands remains high. At the same time acceptance of private label products is growing. Additionally, pressure is mounting for CP companies to reliably measure the impact of their operations and those of their suppliers. Walmart recently announced creation of a sustainability index that may soon set a benchmark for the industry. Walmart leaders say they are creating the index due to the planet’s increasing global population, decreasing natural resources and in response to consumer demand.

Page 7

Lastly, CP companies are caught between a financial rock and a hard place with consumers unwilling to pay more for their food and rising input costs. Indeed cocoa, tea and other commodities have hit record highs within the past 12-18 months. Wholesalers/distributors Wholesalers and distributors are under pressure from both upstream and downstream value chain partners to evolve their role and offer enhanced services. As grocers and restaurant chains handle more of their own distribution and turn to increasingly capable megadistributors and third-party logistics providers, food distributors are under attack like never before. They’re also being squeezed by unprecedented cost pressures, product proliferation and distribution complexity. In many emerging markets the multiple tiers of distributor further complicate the coordination and collaboration so necessary for efficient operations. Retailers and restaurants As the number of channels through which food is sold has proliferated so have the challenges. Retailers now prepare foods, own brands and sell meals. Prepared food is sold through gas stations, hardware stores, coffee shops and kiosks. The proliferation of quick service restaurants (QSR) globally has exploded requirements for food service and food is delivered to your home, office or other location. At the same time traditional channels remain, such as the Dabbawallas

in India, who hand deliver 170,000 homemade meals to office workers each day. As previously mentioned, retailers are under increased pressure to be more responsive to notoriously fickle customer demands. In a difficult economy and an oversaturated marketplace, attempting to increase customer responsiveness and remain profitable in the face of intense competition can be a daunting task. Consumers A recent, steady, stream of food recalls and safety warnings have left many consumers fearful of the food they consume and distrustful of companies, products and brands. Consumers are increasingly vocal in their demands for safer food and increased transparency about the origin and contents of food. Consumer demands are also growing for functional foods that deliver added health and/or nutritional benefits. To that end, many consumer products manufacturers are focusing on successfully launching new items to satisfy the increased preference of consumers for health and wellness. In the last five years, there has been 38 percent increase in marketing food and beverages as “better for you.” Satisfying this concerned, connected and empowered consumer is an ever evolving stress on the value chain.

Planetary concerns At the heart of planetary concerns are the additional two billion people expected to inhabit the planet by 2050, up from 6.8 Billion at the end of 2008. These consumers are increasingly likely to live in a city, and as their income rises their consumption of meat and dairy products will also likely rise. These factors will place tremendous pressures on a food value chain already straining to feed the world. The global food value chain is a study in contradictions. Large segments of the population are subjected to hunger and scarcity alongside populations enjoying enormous excess. Tragically, at the same time, vast amounts of food is spoiled or wasted at every stage of the production process; some experts estimate up to 50 percent may be lost between farm and dinner table. At the same time geographic regions are increasingly subjected to alternating periods of excessive rainfall, and then drought. While the local food movement is gaining increased traction, the majority of food is produced far from where it is ultimately consumed, being shipped thousands of miles before arriving in your local store or restaurant.

Page 8

Although for many consumers it may still be hard to appreciate the planetary implications of the food they eat. Increasingly the impact of the global food value chain is being measured, communicated and appreciated. From the land and water required to raise cattle or grow grain to the energy required to create, transport and distribute food products and the amount of food that is wasted or spoiled along the way visibility to these costs is increasing. From a planetary perspective, the problems are many and serious. How can food growers and producers continue to meet consumers’ demands efficiently amidst price volatility, shortages, climate changes and government interventions? How can consumers ensure the food they eat is safe, ethically produced, healthy and affordable? And how can the players in the historically-siloed food value chain integrate their thinking and their processes with each other to create a smart, sustainable system that will benefit the Earth and its inhabitants for many generations to come?

In the next few paragraphs we will focus in on a couple of the major planetary stressors on the global food value chain: Population Although many experts believe that we currently produce enough food to feed the planet’s inhabitants, the world’s population is growing. At the end of 2008, the world’s population reached 6.8 billion. By 2020, that number is expected to rise to nearly 8 billion and by 2050 the world’s population may well exceed 9 billion. This unprecedented population growth will likely drive deep changes for every member of the global food value chain who will be forced to do continually more with less. Estimates are that the incremental population, coupled with changing consumption (see next section) will require a 70 percent increase in global food production. The acreage needed for such an increase in production is estimated at approximately 300 million acres, an area roughly three times the size of California. For a growing number of countries the issue of food security is taking on a whole new level of relevance and driving some major shifts in ownership of agricultural resources.

Consumption Exacerbating the impacts of population growth are changing consumption patterns. In 2008 for the first time humans ate more farmed fish than wild fish, from tilapia, to salmon, to cod. Other patterns are also changing. It is well documented that as incomes rise, so does consumption of meat, fish and dairy. Between 1990 and 2005 China’s population increased by approximately 161 million (14 percent) and over the same time period per capita pork consumption nearly doubled, going from 19.7 Kg to 37.9 Kg. The resulting increase in Chinese annual pork consumption of 27.1 M tonnes represents roughly 360 million additional pigs, which require 155,000 km2 of farmland, an area roughly the size of England and Wales. With global demand for meat and poultry expected to rise 25 percent by 2015, many difficult questions loom. How can food producers meet the rising demand? Are existing methods for fattening livestock sustainable, safe and ethical? How can consumers balance their need for affordable food against their desire for responsible products? Where will we find the necessary land? Finding answers for these and related questions is crucial for developing food production processes that are optimal for all members of the global food value chain, and for planet Earth. Especially since these foods require large land areas, massive quantities of water,

Page 9

prodigious amounts of energy and generate significant volumes of waste. An additional concern is that overconsumption of these foods and changes in lifestyle are a contributor to the global obesity and health crisis. H20 Until quite recently water — arguably the single most important input to the food value chain — was a frequently underaddressed issue in many food chain discussions, its continued availability at little to no cost considered a given. However there is a growing appreciation that agriculture is the single largest human use of water and that current policies and practices are very likely unsustainable. The underlying issues are myriad but include degradation of aquifers, rivers and lakes to support crop irrigation, risk of runoff from the lagoons of animal waste created by concentrated animal feeding operations (CAFO), continued high levels of food waste and spoilage in the supply chain, deforestation that degrades water retention as developing world farmers seek new, productive acreage, and consumer thirst for bottled water, soft drinks and beer.

Water-related issues will likely increase in number and complexity as populations rise, urban areas expand, and climate change, drought and farming practices affect crop yields and available arable land. In 1950 there was 1.2 acres of arable land per person, by 2010 it is forecast to be just 0.52 acres. One manifestation is a burgeoning global trade in virtual water, as countries with limited water acquire overseas farmland to bolster domestic food security (e.g., Saudi Arabia, Abu Dhabi and Qatar acquiring farmland in Sudan, Egypt, Ukraine, and Pakistan). Governments will likely play an increasingly active role in finding a balance across industrial, agricultural, environmental and municipal water uses.

Kilocalorie / BTU Energy – and more specifically oil and natural gas – is perhaps the second most important input to today’s food value chain. Sixty years ago, food producers could create a calorie of food with less than half a calorie of fossil fuel. Today, a single calorie of modern supermarket food may require up to 10 calories of fossil fuel to produce. One study conducted in 2000 estimated that ten percent of the energy used annually in the U.S. was consumed by the food industry.

Figure D. Water...an essential component in food production and distribution

Page 10

Increased demand for biofuels such as ethanol has generated a unique set of problems with the world’s food supply. Biofuels gained popularity as a way to potentially wean countries from their reliance on oil and combat rising fuel costs. But today, an estimated 25 percent of U.S. corn is now converted to ethanol and goes to fuel vehicles rather than people or animals. In the meantime, high oil prices contribute to higher food prices by raising the cost of food-production-related items such as fertilizer and transportation. CO2 / °Fahrenheit / °Celsius A growing chorus of reasoned and informed voices are raising the alarm about the global impacts of climate change on agriculture. At a time when the energy conversion ratio for many of our foods continues to trend towards inefficiency and the environmental impact of the food value chain is increasingly documented and understood, climate change represents perhaps the most important stress on the global food value chain. However the impact of climate change likely extends beyond the immediate and visible. A recent report from the United Nations Food and Agriculture Organization anticipates climate change will also increase food safety risks (increasing incidence of contamination by Salmonella, Campylobacter, E. coli and Salmonella).

Let’s build a smarter food supply
While technology alone cannot deliver a solution to the myriad stresses impacting the food value chain, its application to create a smarter food value chain— one that is increasingly instrumented, interconnected and intelligent—is essential. Why will a smarter food value chain be instrumented? Because it will use sensing and tracing technologies, such as satellites, radio frequency identification (RFID) and barcodes, heat and moisture monitors, and global positioning systems (GPS) to enhance overall supply chain visibility as meat, fish, dairy and produce moves from the farm or field to the fork, lowering waste and spoilage and reducing costs. Sensors can also enable more efficient production methods by reducing irrigation, pesticide and fertilizer requirements, boosting yields and monitoring moisture, temperature and airflow during storage to reduce spoilage. A smarter global food value chain will also be interconnected—with the disparate ranches, farms, packers, feedlots, storage bins, manufacturing and processing plants, warehouses, distribution centers, and retail stores sharing information and insights. This connectivity is increasingly important as food today

is rarely consumed where it is grown or raised, frequently exported to low cost markets for processing or packaging, then re-exported as a finished product for consumption. For example, cod caught off the coasts of Norway may be shipped to China for processing into filets, only to be shipped back to Norway as a finished product for sale to consumers. This inflates logistics costs and increases waste due to spoilage, damage or contamination. Finally, a smarter food value chain will be intelligent—capturing, leveraging and sharing standardized data and integrated information to generate insights on optimizing the value chain. Smart technology can improve the complex process that is the production, distribution, storage, selling, consumption and disposal of food. Elements include improved planning and coordination, efficient storage and dynamic routing, optimization for cost, carbon and other attributes and improved traceability. The result can be more, safer, higher quality food delivered when and where it is needed, and with reduced waste and an extended shelf life.

Page 11

Elements of a smarter food supply can be found and imagined for application at every step in the global value food chain: Commodity and specialty products providers / primary producers Given the fragmentation and historic lack of technological sophistication among many participants in this area of the supply chain there are many opportunities for greater instrumentation, intelligence and interconnectivity, including: • Farmers can use GPS and advanced sensor technology to monitor weather patterns, assess soil and crop conditions, and adjust their water, fertilizer and pesticide usage for optimal efficiency. • Farmers, growers and even fishermen in less developed regions are using mobile phones to access market, scientific, and environmental data and knowledge through services such as Farmers Friend in Uganda, 12582. com in China, mKrishi in India. In this way they can boost yields as well as their own returns by boosting price realized and reducing production costs.

• Sensors technology and actuators can be used to identify and respond to threats across the supply chain (e.g., excessive humidity or heat, or contamination). Companies like Total Grain Management offer such technologies that monitor conditions in grain silos and adjust humidity and heat to reduce spoilage and formation of potentially harmful mycotoxins. • Sensors can automatically adjust water usage based on local and regional dynamics (e.g., fluctuations in seasonal/daily industrial or residential water requirements • Systems and tools can be used to drive standardization of food related processes to mitigate risk and reduce both spoilage and waste. A powerful example of this dynamic can be seen in the increasing adoption of programs such as the Consumer Goods Forum’s Global Food Safety Initiative. • Serialization and tagging technology, coupled with the application of standardized nomenclature for participants, locations and products, enables true end to end traceability across the supply chain.

• Integrated communication systems enable those at the top of the food value chain to seamlessly share information about anticipated growth and demand with downstream, creating a stronger link between supply and demand • Application of genetic manipulation and nano-technology to animals and crops to deliver drought and pest resistance, nutrition and other functional benefits. Already 64% of the world’ soybeans and 24% of corn is genetically modified Consumer products companies Smart CP companies can • Leverage the widespread adoption of data standards such as GS1, the power middleware and other communications platforms to continuously coordinate inventories, production plans and sales forecasts with customers and suppliers to create a consistent, seamless, link between groups. • Embrace and enable the concepts and principles of Open Innovation by connecting with a diverse set of internal and external stakeholders and other interested parties to access ideas, technologies, ingredients, and other assets. In the process accelerating the new product creation process, lowering costs and boosting success rates.

Page 12

• Reduce water usage in production, packaging and products themselves by marketing concentrated versions of liquid based products (e.g., laundry and dish detergent), reusing water in production processes, • Deploy advanced monitoring tools to listen and understand the concerns of customers and consumers about products, brands and companies in areas such as traceability, social responsibility, sustainability, and apply advanced analytics to convert those observations into actionable insights such as new products, promotions and distribution strategies. • Deploy sensors (e.g., RFID tags, thermometers and psychrometers) to track location and monitor heat and humidity throughout their production, packaging and storage operations and connected intelligent actuators to automatically effect changes to processes, conditions and operations to boost efficiency, service and safety. • Dynamically optimize their supply chain operations against both traditional metrics (e.g., $ cost, customer service, asset utilization) and new metrics (e.g., fuel, H20, and C02).

Wholesalers and distributors Smart wholesales and distributions are deploying RFID, 2D barcodes, and other identification technologies to track products as they move through the chain. Such technologies enable companies to continuously coordinate inventories, production plans and sales forecasts with retail or restaurant customers and CP company suppliers for uninterrupted planning and communication. Additionally, smart wholesalers and distributors can optimize supply chain software to minimize distribution costs (e.g., storage, transportation) for multiple positive outcomes, including increased profit and a decreased carbon footprint.

Retailers and restaurants In this frequently oversaturated marketplace, many retailers and restaurateurs are finding they must take a multi-pronged approach to retaining customers and attracting new ones. Strategies include: • Maintaining a seamless connection with consumers that transcends their location, allowing them to dynamically and continuously search, review, purchase and take acceptance of products and services leveraging devices such as mobile phones, in store kiosks, and hand held devices, identification and preference information garnered from web searches, loyalty cards and purchase history, supporting technologies such as video surveillance, GPS and web monitoring, and advanced text, data and video analytics. • Improving the in-store experience. This can be accomplished by providing more value added services to consumers through in-store offerings such kiosks, shopping cart PCs, or self checkout features as well as outof-store offerings such as Website interactions or services.

Page 13

• Adjusting forecasts, orders and inventories based on weather, seasonal, calendar, competitive, price, availability and other conditions • Ensuring in-stock positions to reduce lost sales, experimenting with new formats and channels (See the IBM report on multi-channel) http://www-935.ibm.com/services/us/index.wss/ibvstudy/imc/ a1016279?cntxt=a1000063 • Continued challenges coordinating promotions, new product introductions and day-to-day business with CP suppliers - See the press release on data sharing: http://www-935.ibm.com/services/us/index.wss/summary/imc/ a1031441?cntxt=a1000063 • Developing the capabilities needed to support rapidly growing private label business (e.g., retailers increasingly need brand management, shopper insights, marketing capabilities)

Consumers Usually, considered the end of the global food value chain, consumers are still driving many changes upstream. “Smart” consumers use technology in myriad ways to become even smarter, including: • Using online and mobile coupons • Selectively shopping online based on availability, price and convenience • Researching products and companies online — both through structured and controlled content such as company Websites and through unstructured and uncontrolled content such as social networking sites, online communities and blogs • Sharing information, insights and opinions in real time with other consumers and directly with manufacturers and other stakeholders such as NGO • Investigating products and their impacts

Sequencing the cocoa genome IBM Research, the U.S. Department of Agriculture and Mars, Incorporated are teaming up and through their collaboration, they hope to sequence the genome that makes cocoa, the key ingredient of chocolate. Researchers plan to use IBM’s computational biology technology and expertise to develop a detailed genetic map, identifying the specific genetic traits that produce higher cocoa plant yields and resist drought or pests. But like any sweet treat, the results of this research will be better when shared. Mars will make the genome information available for free through the Public Intellectual Property Resource for Agriculture (PIPRA), which supports agricultural innovation for both humanitarian and small-scale commercial purposes.

Page 14

Conclusion
The stresses on the food value chain are pervasive, profound and persistent and while solutions are not easy, technology is no longer the barrier it once was. A smarter food value chain is not just possible, but imperative. By leveraging the collective and synergistic power of intelligence, instrumentation and interconnectivity we can make that imperative a reality. Why IBM? Technology is shaping how food grows, how it tastes and how it gets to your plate. A smarter global food system would help eliminate waste, improve quality and ensure safety. IBM has the technology solutions and expertise to make it happen. To find out how we can help your organization build a smarter food supply chain, contact your IBM representative or visit: http://www.ibm.com/ibm/ideasfromibm/ us/smartplanet/topics/food/20081208/ index.shtml

For further information Getting Real About the High Price of Cheap Food (Time Magazine, August 21, 2009) http://www.time.com/time/health/ article/0,8599,1917458-1,00.html Cargill’s Inside View Helps It Buck Downturn (The Wall Street Journal, January 14, 2009) http://online.wsj.com/article/ SB123189501407679581.html Health Ills Abound as Farm Runoff Fouls Wells (The New York Times, September 17, 2009) http://www. nytimes.com/2009/09/18/us/18dairy. html?scp=2&sq=runoff&st=cse

Page 15

®

© Copyright IBM Corporation 2009 IBM Global Business Services Route 100 Somers, NY 10589 U.S.A. Produced in the United States of America December 2009 All Rights Reserved IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol (® or ™), these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at ibm. com/legal/copytrade.shtml Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates.

CPW0-3002-USEN-00