This Isn’t Going Away

Circularity offers a pathway to innovation, creativity and dealing with these impacts. It offers a way to ensure that we can continue to grow, faster and more sustainably, through these challenges. And it provides a framework that every food and beverage business can be adopting today and which we are happy to share.

It feels like the veil that has covered our country for the last couple of months is beginning to lift. As of Friday, June 12^th our home city of Guelph, Ontario, will be joining several others in moving to Stage Two. Gatherings of 10 are permitted. Cafés, bars and restaurants can begin to reopen.

And yet, in food and beverage processing facilities across the country, the operational changes that have been required in order to keep staff safe will stay in place.  And, from what we are hearing, they will for the foreseeable future.

I mentioned the parallel with aviation in last week’s post. Pre 9/11 it was fairly normal to saunter up to the airport a few minutes before your flight and wander onto the plane saying a casual hello to the pilot. The security measures imposed immediately afterwards changed flying forever. And more importantly perhaps, they never went away.

We could be facing a similar situation with the safety and cleanliness at work measures imposed during COVID-19.

Just this week I have heard from the owners of half a dozen food and beverage companies who, on top of everything else, are trying to manage the significant inefficiencies that COVID-19 safety protocols are causing their operations.

The owner of a large bakery explained how his teams now have to stop production between two shifts and carry out a full sanitation of the plant, effectively doing the end of day run twice. They are losing a significant percentage of yield, while their water, energy and wastewater costs have gone up. Not to mention the additional waste generated by PPE.

Another owner in the beverage space shared that in order to maintain social distancing while meeting demand, he was having to increase and rotate shifts to the point where his staff were on the point of burning out.

I know that many of you are facing the same challenges.

And if we assume, like the full body scanners in airports, that they are not likely to go away anytime soon, we need to collectively figure out how to innovate and find efficiencies in other areas to compensate for them, so that we can continue to grow while taking care of our people.

There is no one-size-fits-all answer, but (as with many things) the principles of circularity provide us with a number of good places to go look.

At Provision, as many of you know, our vision is a circular food system. We are proud to be leading work in this space with a number of firms across the country, doing the first ever circularity assessments in the food and beverage space and being a key collaborating partner in the City of Guelph’s ambitious project to create the first Circular Food Economy, Our Food Future.

That said, while there is a lot of buzz around it, one of the questions I am asked most right now is “what does circularity actually mean, in the context of the food and beverage industry”?

A circular economy is one that is regenerative by design, where the value of the resources, products, parts and materials are retained in the system, rather than ending up in a hole in the ground.

It designs out waste, keeps products and materials in use and regenerates our natural systems.

Our global economy is 9% circular, so there is a long way to go, but it is also a great place to seek inspiration to offset those operational inefficiencies and costs.

Circularity is based on a series of principles. Here are five of the ones we think could be most helpful for your business right now, as well as some examples of how you might apply them.

1. Product as a Service

The idea here is to look at how you can replace ownership models with usage models, so that companies lease access to a solution rather than selling ownership of a product.

From an operational perspective, this could mean looking at ways to improve your efficiency by turning Capex into Opex. Phillips, for example, offers its products in a “lighting as a service” model, where you rent light, provided by their lightbulbs and fittings.

A few weeks ago, we talked about BreadAhead, a boutique baker out of London. Seeing the huge uptake in bread making machines, the business launched Bread Ahead School, a virtual learning platform to teach the hordes of new home bakers how to make delights such as full butter croissants or gluten free bread – a shift to product as a service.

2. Product Life Extension 

While making a product last longer might sound counter-intuitive to growing output, this is often linked to taking waste in one area of your business and repurposing it into new opportunities in another. My team and I talk a LOT about avoidable waste in food and beverage, and that is because there is a lot of it, so it really is low-hanging fruit.

Talking of fruit, we work with a firm that takes fruit and vegetable products that would not make it to retail and process them into preserves. We also work with a bottled water firm that has started a business making plastic outdoor future out of the bottle tops and plastic they couldn’t recycle. Really, the world is your oyster here. If you have a waste stream (and you do) and are prepared to adopt a circular mindset, then you can create new revenue opportunities while enabling your staff to feel better about repurposing what was once considered waste.

While we are talking about waste, and not wanting to sound like a broken record, you need to consider that every kilogram or liter of product that falls off the line or goes down the drain is lost output. It always perplexes me how owners or operations managers who are struggling to meet demand seem somehow okay with the idea that a percentage of their product is being lost each day. Seeing waste as potential output offers huge opportunities to find several percentage points in yield here and there. It is the low hanging fruit…

3. Closed Loop - Take Back

Closed loop is fairly self-explanatory. The most successful closed loop system is the Beer Store recovery system, which has recovered for reuse over a billion glass and metal containers. This week I spoke with a firm who explained that their largest cost item is the glass bottle in which their product is contained, but who hadn’t ever looked at ways of creating closed loop systems. As a result, they were buying new glass bottles for a single use, and not capturing any value out of the back end.

On the flip side, one of our clients has created a return system through their retail – customers bringing containers back receive a discount on their next purchase, driving up loyalty while at the same time driving down packaging costs and reducing waste volumes. 

Granted, there are additional challenges around the implementation of this model in a post-COVID world, but are there opportunities for you to reduce your packaging costs by recovering some of the value in the materials? 

4. Modularity 

This refers to designing products into smaller parts that can be independently used and then replaced. While it refers to products (a smartphone is the archetype of a non-modular product), it can also be applied to the way that you design processes and systems within your facility.

Can you work around some of these operational inefficiencies by applying modularity principles to your production lines?

In our experience, a little tweak here or there can produce significant and quick benefits. You don’t have to overhaul a whole process to see a difference.

With one firm that we worked with last year, the simple installation of a guardrail on a piece of machinery helped them get nearly $30K worth of extra product to market.

5. Embedding Intelligence

The final principle of circularity that we recommend you look at is how the embedding of technology into materials or products to gather data, generate insights and improve the customer experience.

Often the kind of technology that generates insights is seen as being heavy, clunky and expensive. Firms spend months or even years embedding ERP systems, or RFD tracing technology and software.

However, it doesn’t have to be that complicated.

Right now, Direct to Consumer (D2C) sales are booming. Most firms, regardless of where they are in the value chain, are looking at D2C. Some (like those we have featured in our previous posts) are going full on into this channel.

D2C allows you the opportunity to control the customer experience from start to finish. And because it is a digitally enabled platform, it is a great source of embedded intelligence.

We are helping a few of our clients to collate and process their D2C data so they can leverage a whole new level of insights into what their consumers are buying and how they are using the product. This information can be fed back to operations, so that you can make production runs more efficient, match runs to demand with real time data, improve your forecasting and gain precious efficiencies.

In addition, these data and insights can help drive and tailor messaging and marketing, price promotions and a whole host of other revenue growth activities. One of our clients was recently able to shift $10K of product that was getting close to code date in just four hours through a few targeted social media and email posts – something that would have been impossible without the data gleaned from their D2C operations.

The real impacts of the last two months may take years to become fully clear. However, some of the coping mechanisms are unlikely to go away. The arrows on the floor, the plexiglass screens and the increased cleaning are just some of those that look likely to stay.

They bring with them cost burdens, operational limitations, human and environmental impacts that all need to be mitigated by finding other sources of efficiency in other areas of your operations. While there has been a general acceptance of single use materials as we have gone through lockdown, it is not sustainable and nor will public opinion tolerate the massive amounts of waste it creates on an ongoing basis.

Circularity offers a pathway to innovation, creativity and dealing with these impacts. It offers a way to ensure that we can continue to grow, faster and more sustainably, through these challenges. And it provides a framework that every food and beverage business can be adopting today and which we are happy to share.

To go back to my aviation analogy, think of circularity as the smile from the gate agent and the free upgrade after the two-hour line up for security!

To find out more about how circularity can help your business right now, get in touch.

Cher Mereweather

President & CEO

cmereweather@provisioncoalition.com

P 519.822.2042 x1

C 519.803.6395