In a departure from popular retail philosophy, Devangshu Dutta calls for a new model of food supply based on multiplicity and diversity. Modern retail must, he says, take into account the changing environment and be sensitive to evolving consumer preferences and to the failures and obsolescence of traditional mass retail models adopted by western developed markets.

1. © 2008 Third Eyesight All Rights Reserved
Building the Safety Net
Moving Towards Sustainable Food Security
Devangshu Dutta
© 2008 All Rights Reserved

2. 1
Building the Safety Net
Moving Towards Sustainable Food Security
© 2008 All Rights Reserved
‘Increasingly, the
agricultural supply chain is
dependent on non-
renewable petroleum and
its products, rather than by
the natural energy of the
sun being converted into
food by the plants.’
ood price inflation it is still hogging the headlines. It is, after all, an
emotive topic. We are terribly concerned not just as food and grocery
professionals, but also as consumers and the general public. After all, food
and grocery typically account for half of our monthly spend, give or take a few
percentage points.
Most students of management, economics, and human
behaviour are aware of Abraham Maslow’s classification of
human needs into a hierarchy construct. Other economists
and psychologists prefer to use other models. Whichever
model you consider, the need to eat and the need for security
are invariably at the bottom or base level which must be
fulfilled the earliest.
The interesting fact is that well after you would imagine these
basic concerns have been taken care of, they are actually
never far from the surface. This is true not just of the poorest
of the poor, but of the wealthy and the well-off as well—whether individuals,
communities, or nations. Is it any wonder that “food security”—the
combination of these two—is such a charged subject, especially in these times?
However, a significant set of questions is not really touched in the question of
costs and in the question about the continuing security of food supplies: how
the food supply chain is structured, how it is driving consumption, what impact
that might have on food prices and several broader cost implications.
Industrializing agriculture—farming petroleum
Thousands of years ago, when hunter-gatherer human beings stumbled upon
agriculture, it was a breakthrough similar to the discovery of controlled fire.
Hunter-gatherers were dependent on the natural availability of food, while
agriculture created the opportunity to have some control over food supplies
and reduce the natural feast-famine cycle.
Thereafter, farming, processing and storage techniques kept evolving
incrementally to ensure that more food could be produced for each unit of land
and effort, and stored for longer – all moving towards ensuring “food security”.
This led to the age of empire-building, where monarchs grew their wealth
(essentially food territory) with the help of military-imperial complexes, and the
greater wealth in turn supported the military-imperial complex.
This remained the trend for a few thousand years, until the age of
industrialisation and the age of petroleum. Through the industrialisation and
the world wars, the military-imperial complex gave way to a military-industrial
complex, which essentially became the military-industrial-petroleum
agricultural complex. Suddenly, there were not just machines to plant, reap,
F

3. 2
Building the Safety Net
Moving Towards Sustainable Food Security
© 2008 All Rights Reserved
‘Energy efficiency is actually
going down rather than up
— we are using more
calories of fuel source to
produce each calorie of
food energy.’
thresh, sort, clean and process, but also petroleum-based and synthetic
substances; to dramatically increase output and to keep the produce fresher for
longer.
As farms industrialised, the parameters that began to be applied were the same
as in any factory—how to produce more while spending less—and every year
the target was to grow more for less. Underlying this was the principle of
“efficiency from larger scale”. The same philosophy played out further down in
the supply chain – from processing aimed at extending the shelf-life of the
product as it was (chilling, cleaning, sorting) to processing and packing in order
to change the nature of the product itself and gain additional value (such as
turning tomatoes into puree and potatoes into chips).
Standardisation became a vital link in industrialisation—if you can standardise
produce, you can cut down human handling —while you may lose product
variety (including flavour and colour) you gain
through lower production costs. By reducing
unpredictability, you can also concentrate on
building the scale of business, because it becomes
more repetitive.
The interesting side-effect of this is that, gradually,
we are converting ourselves (and people in many
industrialised economies already have) into
petroleum-burning machines rather than those running on solar energy,
because increasingly, the agricultural supply chain is dependent on non-
renewable petroleum and its products, rather than by the natural energy of the
sun being converted into food by the plants.
The important thing to keep in mind is that, in this switch-over, energy
efficiency is actually going down rather than up — we are using more calories of
fuel source to produce each calorie of food energy. So it is worth asking the
question: can lower costs actually be costing us more?
The demand-side story
The growth of industrial agriculture has not happened alone, but has been
accompanied by the growth of modern or “organised” retail. On the one hand,
large retailers such as Wal-Mart, Carrefour, Tesco, Metro and others, have been
widely credited for achieving cost-efficiencies from scale, and then passing on
these efficiencies to the consumer in the form of lower prices (and, apparently,
higher standards of living). That is a good thing and definitely of benefit to the
population at large, especially in inflationary times such as these. Surely, it is
good to push for lower costs rather than keeping prices high as a result of
inefficient sourcing, wasteful and expensive handling, and non-value-adding
costs in the supply chain.

4. 3
Building the Safety Net
Moving Towards Sustainable Food Security
© 2008 All Rights Reserved
‘Carbon footprint, food
miles and locavores (people
who only consume food
that is produced within 100
miles of where they live)
are terms that companies
are increasingly becoming
familiar with.’
On the other hand, these organisations are driven to standardise their own
product offerings, reduce the number of supplier touch-points and increase the
volume per supply source.
There is not just a reduction in diversity of suppliers, but also a reduction in the
number of product variants. (I’m not referring to the number of “types” of
potato chips or packaged meals, but to the actual core food product—the
natural species or sub-species that are the basic source.) Of course, agriculture
itself is a process of consciously selecting and encouraging species that are
more useful to us humans, but industrial agriculture takes it to a completely
different level.
The industrial-agricultural-retail economic model can be paraphrased as
follows:
• Businesses (especially those that are publicly held) need to show growth in
profits each year
• Growth in profits can come from higher sales at the same cost base or
lower costs
• Lower costs can be delivered by reducing the variation of products
• Higher sales can come from either having consumers buy more of the same
product (which in food does tend to taper off after a while), or by turning
the basic product into a “value-added” product (e.g. potatoes into wafers,
mash, fries; corn into syrup and food additives, and so on).
The need for a different model
We don’t have to look too far into the future to realise
that this is not a sustainable model. (Or, as someone
pithily said: “Only fools and economists believe in
infinitely compounding growth.”) So far, this model has
impacted less than a fifth of the world’s human
population, but now the growth markets of choice for
industrial agriculture companies are China and India. If
these two countries move through the exactly same
path as have the western economies in terms of
agriculture and food processing, given the population base itself the impact
may be 5-7 times (or more) on the demand for petroleum as well as the fall-out
on the ecosystem.

5. 4
Building the Safety Net
Moving Towards Sustainable Food Security
© 2008 All Rights Reserved
You may ask: why should retailers and their suppliers worry about this?
Firstly, pure cost considerations – clearly, the costs of petroleum are ranging at
the highest levels ever, and explosive demand through industrialised agriculture
will only serve to push them up. How far can you push the food bill every
month, before people start buying less? What impact would that have on large
retail supply chains and farmers whose processes are increasingly built around
products of industrial agriculture?
Secondly, what consumers are already beginning to express in western markets
will possibly happen in India in the next few years as well: concern about where
and how the product has been produced, what has been the fall-out on the
environment and on the overall health of people involved with that supply
chain as well as the health of consumers. Carbon footprint, food miles and
locavores (people who only consume food that is produced within 100 miles of
where they live) are terms that companies are increasingly becoming familiar
with.
And an alternative set of questions is also being raised. Is it ok to burn non-
sustainable fossil fuel if you get “carbon credits” by planting trees somewhere
else—have all the carbon costs been accounted for from the start to the finish
of the production process? Is it better to reduce the food miles and have food
produced locally in a high-cost economy’s industrial agricultural model, or to
have naturally grown foods from a more primitive farm in Africa or Asia where
the environmental impact is only the “carbon debit” of the air-freight? And
even if the produce is carbon-friendly; what about the nitrogen footprint (from
the fixation of nitrogen into fertilisers) and the methane footprint (from large
scale animal farming)?
The power of the small and the many
And finally the question of maintaining diversity must be top-of-mind. For all its
so-called inefficiency, diversity is actually a great shock-absorber. Imagine a
bean bag or a piece of foam —what gives them their cushioning ability is the
space and air between the little balls, or the material.
Now imagine a cropland that is attacked by a pest—if there is diversity in the
plant population, there is a good chance that certain varieties will survive even
if others don’t; unlike a cropland with limited variety which may be totally
wiped out (and possibly the farmer with it). Further imagine a supply chain that
has multiple suppliers with the same or similar product versus one where the
supply base is highly concentrated. Which ecosystem do you think will survive
better during times of trouble, even if some of the suppliers – a part of the
ecosystem – do not?

6. 5
Building the Safety Net
Moving Towards Sustainable Food Security
© 2008 All Rights Reserved
(One doesn’t have to think too far: the example of the former Soviet Union with
its mega manufacturing plants supplying the whole country is a case in point.)
To really find long-term solutions for food security issues, retailers, suppliers,
economists and governments need to acknowledge that sustainable safety lies
in numbers and diversity. A dispersed economic system with a lot of variety has
resilience built in. And the solutions may actually be very close at hand, in the
updating of traditional techniques. It is high time to start figuring out how India
(and China) can take the lead in creating an alternative and more sustainable
model for food security for large populations, rather than blindly push
development models borrowed from the 19th and 20th century western
economic history.
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