Eoin McDonald is managing director of GreenAgCapital, an investor in meals and agriculture.
It’s not usually that the mixed web impact of many years of financial coverage, globalisation and personal fairness are seemingly summed up in a single tweet picture.
Behold, a crustless NYC sandwich on “Well being Bread” (?) for $29. Plus tip and tax, that’s in all probability nearer to $38? (NB under is a screenshot as a result of Elon appears to be messing Twitter up once more, but the tweet can be found here).
Europeans can’t fathom such lunacy, questioning if it comes with a side order of diamonds. My WhatsApp finance teams additionally laughed and have been fast to make comparisons to my private favorite, Pret’s Hen Salad & Avocado Sandwich, which prices a extra affordable £8.79. However what’s within the worth of a sandwich, actually?
Anybody who has braved the aisles of American supermarkets and delis know the stark distinction in grocery costs between the 2 continents. A single loaf of bread (that by no means appears to age) can set you again a small fortune within the US. In the meantime, even on the indulgent coast of Portofino, Italy, high-quality pastries solely value a number of euros.
Ignoring the incredulous responses from social media — which attributed the value rise to what was as soon as “transitory” and now “cussed” inflation — it’s price reflecting on whether or not the “Well being Bread” sandwich is forewarning European customers.
As a result of Europeans would possibly quickly be uncovered to the identical exorbitant costs for contemporary meals, because the continent’s agri-food sector slowly shifts in direction of the consolidated US mannequin.
Meals for thought
Over the previous three many years, European customers have loved an unprecedented abundance of produce at reasonably priced costs, accessible year-round on grocery store cabinets.
Ever purchase Spanish strawberries and marvel how they’re so low-cost? That’s as a result of the European market — one of the vital profitable and aggressive on this planet — has been dominated by main retailers corresponding to Aldi, Tesco, and Auchan. Over the previous decade, they’ve exerted more and more vital management over the panorama, and benefited from the extremely fragmented and subsidised European farmers that depend on help from the European Widespread Agricultural Coverage (CAP).
This uneven energy dynamic has overwhelmingly benefited les supermarchés and their related consolidators, as they dictated contemporary produce pricing.
Nevertheless, the way forward for the worldwide meals provide chain goes to look very completely different from the previous. Two core tendencies — market consolidation and local weather change — are poised to carry irreversible change to the European meals trade.
Trade consolidation
À la type within the US, one of many foremost drivers of change is trade consolidation, pushed by the necessity for excessive efficiencies and economies of scale to offset greater enter, capital funding, and regulatory compliance prices.
Consequently, farming operations are being pressured to consolidate and combine throughout the worth chain. Therefore, ye olde easy farm mannequin that we’ve grown up with should now give solution to extra complicated company household companies; bigger farms with higher entry to expertise, tools, and non-family labour. (And sure, for the British, which means that Brexit has screwed them.)
Consolidation not solely permits for higher negotiating energy with suppliers and patrons, but additionally improves entry to credit score and capital. The result’s a extra streamlined and environment friendly meals manufacturing course of that may higher navigate the challenges posed by a altering local weather and provide chain disruptions.
However consolidation additionally means an elevated probability of $29 sandwiches.
Local weather change
Nelly put it properly when he mentioned that it’s getting scorching in right here. Elevated local weather volatility — within the type of elevated intervals of extended drought, extreme flooding, unseasonable warmth spikes and frost occasions — will in all probability have a big affect on meals manufacturing. The end result will likely be extra frequent shocks to the system.
Though technological advances throughout the agricultural trade proceed to mitigate the affect, they might not be sufficient to remove the extremes. Bear in mind the Napa Valley fires and the unseasonably late Bordeaux frost that horrifyingly destroyed the wine grapes that we have to get by way of the week? These kinds of extremes.
Farming expertise that might assist contains new patent-protected crop varieties which might be extra resilient to excessive climate occasions. However will this expertise be sufficient? Perhaps, however science says in all probability not.
And these applied sciences are capital-intensive. That implies that farmers unable to afford them will exit farming altogether. In flip, that results in even higher consolidation, and finally to greater costs.
The extra we want these applied sciences, the extra our lunchtime Prets are going to value us.
I Am America (And So Can You!)
They are saying that those that snicker final, snicker the loudest; and I believe we’re laughing too quickly on the loopy Manhattanites. The continued consolidation of the meals provide chain will create a winner-takes-all phenomenon with a smaller variety of suppliers controlling the broader meals trade.
Certainly, additionally it is possible that periodic disruption of worldwide meals chains will persist, if not enhance. I’d almost wager that contemporary produce will quickly be marketed as a luxurious good. Europe’s future is written on the US wall: near monopolistic integration of the meals provide chain and considerably costlier meals.
The query is, who in Europe will likely be keen to pay $29 for a sandwich? And can it, no less than, have the crusts nonetheless left on?
