Adapting to Climate-Induced Ingredient Shortages: Preparing Food Suppliers for the Future

Historically, societies have encountered food shortages from significant global events such as wars, droughts, and famines. For instance, sugar was rationed during both World Wars due to disruptions in shipping and shifts in agricultural focus. The early 2000s saw wheat prices surge after Russia banned exports. More recently, the COVID-19 pandemic led to a scarcity of fresh produce, rice, and dairy as people stayed home.

Today, we’re not simply facing another temporary disruption but confronting a longer-term reality. Climate change is emerging as a significant factor threatening global food supply chains by altering growing regions and reducing crop yields. For example, rising temperatures are making it harder to cultivate staple crops such as oranges and bananas, while warmer climates are predicted to shrink the coffee-growing area by as much as 50%.

Ingredients at Risk: What to Monitor

Beyond the widely recognized staples, numerous behind-the-scenes ingredients essential to many everyday foods are under threat. These include elements that add texture, preserve freshness, or enhance flavors. Climate change increasingly affects these crucial ingredients, causing supply challenges for some of the largest consumer packaged goods (CPG) manufacturers worldwide.

Here are a few ingredient crops currently posing challenges for the food and beverage industry:

Locust Bean Gum: Often used as a thickener in products like ice cream and cream cheese, locust bean gum production is primarily centered in the Mediterranean. This region faces rising temperatures and volatile weather patterns, which disrupt crop yields and create temporary supply chain bottlenecks.

Vanilla: A favorite flavor for centuries, vanilla production is largely concentrated in Madagascar, which accounts for over two-thirds of the world’s supply. The area recently suffered significant damage from a powerful cyclone, threatening this year’s harvest by up to 50%. Such weather-related disruptions are expected to become more frequent due to climate change.

Lavender: Gaining popularity in the food and wellness sectors, lavender is now facing challenges due to climate-related issues. Hotter summers contribute to an increase in cicada populations that destroy crops, along with reduced blossom sizes that impact both yield and quality.

These ingredient shortages are prompting CPG companies to actively seek solutions to safeguard their supply chains against the growing impact of climate change.

Proactive Measures: How CPGs Can Prepare

While a complete breakdown of these agricultural supply chains isn’t imminent, forward-thinking CPG companies understand the urgency of addressing these issues before they escalate. They recognize that long-term planning is crucial to adapt to a changing climate.

To address the threats climate change poses to ingredient supply chains, companies are exploring the following strategies:

Vertical Integration: By taking ownership of different stages of production, from raw materials to final products, CPGs can better manage quality and ensure a steady supply, even in regions less impacted by climate change.

Technology Investments: Advanced technologies such as AI and satellite imaging help optimize crop yields and predict climate-related challenges. PepsiCo, for instance, uses these tools to improve potato yields for its Lay’s chips. Additionally, innovative methods like plant cell cultivation offer alternative ways to produce ingredients without being constrained by traditional agricultural limitations.

Supplier Diversification: Diversifying supply chains reduces dependency on single suppliers, enabling CPGs to source ingredients from a broader range of regions, thus ensuring stability and minimizing the risk of climate-related disruptions.

Alternative Ingredients: Researching and developing substitute ingredients can help CPGs maintain production when access to primary ingredients is compromised by climate change.

Recent years have highlighted the fragility of food supply chains in the face of climate change. For CPGs to ensure their future viability, they must start building resilient ingredient supply networks today, or they risk facing production halts — an issue that’s already becoming increasingly apparent in the market.

Source: Food Industry Executive By Frank Jaksch