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The Future of Agri-Food
Harnessing innovation from adjacent industries tomeet global challenges
Phil Webster, Frederik van Oene, Maki Kurosawa, Laurie Guillodo

The world faces a huge challenge to feed itself over the coming
decades. The Food and Agriculture Organization of the United
Nations (FAO) observes that a 70% increase in food production
will be needed to sustain our population by 20501. Whilst food aid
and international trade can provide a “sticking plaster” and population control can offer a more radical, if unpalatable, approach, it
is science and technology that will need to provide the ultimate
solution. Indeed, meeting food demand without damaging theenvironment has been identified by the United Kingdom’s Royal
Society of Chemistry as “the greatest technological challenge thathumanity faces2”.
But how can the agri-food industry achieve the step change inperformance that it needs to? In this article we explore some of
the key trends and challenges in the industry, and examine somepossible approaches for stimulating the required innovation, as
well as providing the necessary shortcuts to market in order tomeet ballooning demand.

Picture by Erinpackardphotography / dreamstime

Megatrends and technological innovationin the agri-food industry
The agri-food business is not an easy one to be in. It is bothenormous and complex. The value chain, as depicted in Table 1,
contains participants who vary significantly in scale and influence,
ranging from the highly consolidated and influential seed tradeand retail sectors, to fragmented primary producers and food
manufacturers.
United Nations Food and Agriculture Organization, 2011. The State of the World’s
Land and Water Resources for Food and Agriculture. Summary report, Page 9
2
The Royal Society of Chemistry, 2009. The Vital Ingredient: Chemical science andengineering for sustainable food1

The world population
continues to grow, andby 2050 a 70% increasein food production will
be required to sustain it.
Science and technology
is widely recognized
as being a key enabler
to achieving this stepchange. However, manybusinesses in the agrifood industry struggle toinvest precious resourcesin long term science andtechnology. In this article,
the authors explore
some of the key trends
and challenges in theagri-food industry, andexplain how foresight canbe used to both stimulateinnovation and provide
shortcuts to markets.

The Future of Agri-Food
Prism / 2 / 2014

Mega trends
impacting the agri-foodindustry…

The agri-food industry
Agriculture
Agricultural
Inputse.g. Seeds,
fertilizers,
genetics

Food & Drink (F&D)

Agricultural
Production
e.g. Crops, cattle,
fisheries

Very highLow

Raw material
processing
e.g. Food
handling,
1°processing

F&D
Manufacturinge.g. Finalprocessing,ready-meals

F&D Wholesale& Retaile.g. Cashand carry,supermarkets

MediumMediumMediumF&D
Servicese.g. Restaurants,
canteens, cafes

Waste, reuse
and recycling
e.g. Food banks,
waste mgt.
companies

Low

Low

= Level of consolidation

Table 1 The structure of the agri-food industry

Consumers

Source: Arthur D. Little analysis

The industry is influenced by a series of megatrends which are creating a long list of challenges, as shown in Table 2. In general thesechallenges are not easy to solve. They are both complex and highlyinterconnected, and there is little industry consensus on which is
the most important3.
The consequence of these megatrends is that the agri-food industry is becoming ever more globalized, with complicated supply chains reaching around the world, seeking to satisfy demand
from increasingly wealthy consumers for cheap, healthy and fresh
food, year-round. Companies are trying to better connect up anddown their own value chains to safeguard the security of their own
supply, create resilience to commodity price fluctuations, deal withenvironmental change, improve the traceability of raw materials
and better understand their customers.
Most significantly of all, many of these challenges are associatedwith dealing with shrinking margins across the industry – particularly
for those in the primary production and food manufacturing domains.
This is because they are strongly influenced by short-term demand
from powerful retailers and the consumers that influence them.
For example, in the United Kingdom, Government funding regimes have deliberately avoided trying to prescribe which challenges it funds through research, andhave instead allowed industry to select the challenge which it views as being ofgreatest importance, by allowing them to form their own consortia and bid for funding for “agri-innovation centers” under Defra’s “agri-tech” strategy… and creating new challenges

Demographic shift
Growing and aging population• Overall increase in plant and animal productivity and farm output• Improved access to markets in developing countries• Education and agricultural extension activities in developing countries• Products which enable healthy aging

Health & wellness demand
Consumer demand for healthy andfresh food, regulatory
requirements• Products aimed at specific consumer groups• Reduced salt, fat and sugar content in foods• Introduction of healthy food components (e.g. fiber)

Urbanization & mobility
Decreasing land availability,
Changing eating habits• Plant and animal production in urban or enclosed environments• High quality convenience foods

Climate change
Changing weather patterns anddiseases3

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Shortage of resources
Regulatory restrictions
Changing energy mix
Increasing utility costs andshrinking margins“New normal”
Demand for cheap foodGlobalisation
Volatile food price and uncertain
margins
Economic shifts
Increasing meat consumption,
Westernization of diet

• Farming systems and practices requiring low agrochemical inputs• Energy and process efficiency improvement in the food manufacturing
environment• Reducing the impact of agriculture on ecosystems• Creating resilience against extreme weather events• Improving water use efficiency in food production• Measures to improve soil health• Reducing waste and reusing waste materials• Ensuring food authenticity and avoiding food adulteration• Packaging to prolong food shelf life and reduce food spoilage• Products which prolong shelf life whilst maintaining freshness andminimizing the use of food additives• Improvements to the cold chain to prolong shelf life and reduce energy
consumption• Measures to reduce the consumption of meat

Megatrend dimension
Policy andeconomics

Social &HealthEnergy &Environmental

Table 2 Mega trends and examples of challenges in the agri-food industry
Sources: Arthur D. Little analysis, with inputs from: Joint Commissioning Group, 2013. Feeding the Future: Innovation Requirements for Primary Food Production in the UK to 2030. Arthur D. Little, May 2013.Mapping current
innovation and emerging R&D needs in the food and drink industry required for sustainable economic growth.
Report to the United Kingdom Government’s Department for Environment, Food and Rural Affairs

What many of these challenges have in common is that they canbe solved through innovation. However, tighter margins leave little
room for investment in the science and technology often needed
to underpin this. Arthur D. Little’s most recent Global Innovation
Excellence Survey found that food and beverage companies only
invest 1-2% of their turnover in research and development, compared to 5-6% on average across other industries4. Our work in
4

Arthur D. Little, 2012-13. Global Innovation Excellence Survey

The Future of Agri-Food
Prism / 2 / 2014setting innovation priorities in agri-food for the UK Government
revealed that the biggest barrier to innovation in the industry isaccess to funding5. As a result, innovation activities are often
confined to near-to-market opportunities such as making products
more attractive to consumers (e.g. through nicer packaging) or
finding ways to further reduce costs. With the exception of a handful of global fertilizer, agrochemical, genetics and food giants, few
businesses are able to take a long range view.

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Adjacent
industries

Psychology
and social
science

There are two possible ways to solve these challenges: The classical way is to take basic or fundamental science done by universities and specialized institutes, and invest in progressively developing it into tailored commercialized solutions. However, this can takea long time, and is often very expensive. It is hard to envisage thistype of approach alone being able to meet the world’s needs, given
the nature of the agri-food industry today.
A second, more promising way is to look outside the agri-foodindustry. This involves taking shortcuts by transferring technologies
which have already matured in adjacent industries, and repurposing
them to create novel solutions for agri-food. Below we look at thefeasibility of this approach and examine how businesses can go
about making it happen.

Exploiting new technologies from adjacent industries
Fortunately the challenges faced by the agri-food industry are especially suitable for technology transfer from outside the sector. By wayof illustration, some of the ideas which have emerged from adjacentindustries and entered the agri-food sector are shown in Table 3.
Interactions between animal and plant production, and consumer
diet and health, have been a rich source of ideas. This is because
Arthur D. Little, May 2013. Mapping current innovation and emerging R&D needs inthe food and drink industry required for sustainable economic growth. Report to theUnited Kingdom Government’s Department for Environment, Food and Rural Affairs

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Information
technology

Diet andhealthFood
addiction

Animalproduction Robotic

Taste
perception

So with such a daunting array of challenges, and an environment
which has historically been unsupportive of the scale and extent ofinnovation required, what can be done?

Robotics andautomation

Construction

Nanotechnology

Urban
farmingpollinators

Low energy
factories
Anti-fungal seed
pre-treatments
Active or intelligent
Pest andpackaging toherbicideprolong shelf life
resistant
seeds

Biotechnology

Space

Plant
Factory
production automation

Product
reformulation
Sugar andsalt
substitutes

3D printingof meatanalogues

Precision
agriculture

M-tradingplatforms forcommodities
UAV1 imaging of
diseased crops
Cropripening intransit
Anti-microbial
packaging
Animal andfish
antibiotics“Personalized”
nutrition
targeted at
individuals

Chemicalengineering

Advancedmanufacturing

Healthcare

Telecoms

DefenseTransport
and logistics

Table 3
Solutions fromadjacent industries –some examples
Source: Arthur D. Little analysis and project work. 1) UAV: Unmanned Aerial Vehicle. The Healthcare and Biotechnology sectors are closely related to diet and health, and are therefore shown as slightly overlapping in this diagram.
Examples are non-exhaustive

businesses are increasingly seeking to better connect up anddown their supply chains. For example, Royal DSM, a global science-based company active in health, nutrition and materials, hasmanaged to translate its enzyme technology capabilities for animal
feed products into new solutions for human health. Kagome Co
Ltd., a Japanese producer and distributor of tomato-based foods
and fruit juices, has developed tomato varieties which contain large
amounts of lycopene, a compound which may, one day, be linked
to lower cancer prevalence.

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Picture by Sascha Prudkov / dreamstimeBox 1 Precision agriculture: The influence of the spaceindustry on food production

Some more radical success stories are also apparent. Unmanned
aerial vehicles (often known as drones) which are generally associated with the defense industry have been redeployed for the surveillance and imaging of large apple orchards to look for diseased
leaves on individual trees, dramatically improving productivity. The
telecommunications industry has enabled the creation of mobile
phone-based commodity trading platforms to connect isolated
farmers in the African sub-continent to their markets. The Agra-Alliance Market Access Program, for example, reports that approaches
such as warehouse receipt systems, commodity exchanges, andmarket information systems contribute to a 10-35% improvement
in incomes for smallholder farmers by reducing post-harvest losses
and transaction costs6.
Another excellent example is precision agriculture, described inBox 1, which illustrates how the space, satellite, defense and electronics industries have converged to help arable farmers use lessagrochemicals whilst maintaining or increasing crop yields – andtherefore improved their profits.
Agra-Alliance Market Access Program. Available at: http://agra-alliance.org/whatwe-do/market-access-program/#.VBChmSgoAW8; accessed September 2014

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Precision agriculture involves observing, measuring and responding to inter and intra-field variability in fields of crops. It draws
on technologies such as satellite imagery and remote sensors to
track changes in environmental conditions such as soil moistureor nutrient levels. This allows farmers to decide exactly where
agrochemicals need to be applied – almost to the level of anindividual plant. This helps avoid wasting expensive agrochemicals on plants which do not need them, and also reduces thevolume of these agrochemicals entering the environment by, forexample, being washed off fields and into adjacent rivers during
periods of heavy rain. This intelligence, together with the useof Global Positioning Systems (GPS) on farm machinery, cancreate semi-autonomous approaches for farming. For example,
Blue River Technology Inc. uses image processing to establish
the shape and density of lettuces to create automated lettuce
thinning systems7.
CEMA (European Agriculture Machinery) - Precision farming: producing
more with less. Available at: http://www.cema-agri.org/page/precision-farming-key-technologies-concepts, accessed September 2014. Blue River Technology - Current Solutions, Precision Lettuce Thinning. Available at: http://www.
bluerivert.com/; accessed September 20147

All of the solutions described above involve applying technologies
that already exist, or are starting to mature, in a new way to deal
with complex challenges in the agri-food sector. In the example ofprecision agriculture, GPS technologies are now becoming commoditized, and in-soil sensor technology is starting to become
so cheap that sensors can be ploughed into the soil, where they
biodegrade naturally once their purpose is fulfilled. The design ofenergy efficient houses is now commonplace in many developed
countries – but comparable approaches are practically non-existent
when it comes to building food manufacturing factories whichsometimes require vast spaces to be cooled whilst processing
chilled foods.

The Future of Agri-Food
Prism / 2 / 2014

Foresighting as a key lever for success
Solving the difficult challenges described above can involve using amaturing technology from an adjacent industry to create a novel approach. However, businesses in the agri-food industry seldom havea sufficient long-range view over what challenges will be solvableby technology in the future, and – in particular – where developments in adjacent industries could provide answers.
For this reason we see foresighting as a key lever for the agri-foodindustry to unlock the potential of innovation from adjacent sectors.
As well as understanding challenges and potential solutions, foresight of adjacent industries also helps to inform sound investment
decisions into unfamiliar territory. All too often, businesses andinvestors are wooed with stories of technological advancement, only
to find that a technology is not ready for large-scale deployment. For
example, many businesses in the dietary supplements sector set
out to use marine microalgae to produce very high value nutritional
products, but found that the associated manufacturing technology
is not yet mature enough to do this at scale. Likewise, those in an
adjacent industry may be sitting on a mature or declining technology,
and struggling to think of ways to capture value from it today.
Based on experience in the industry so far, we suggest a numberof practical steps which both those in the agri-food industry andthose in adjacent industries can use to inform their innovation management processes to meet the challenges of the future – and gain
competitive advantage:

2. Conducting a “horizon scan” for technologies in adjacentindustries. This involves taking relevant challenges and seeking
the opinion of an expert group of scientists drawn from adjacentindustries to propose relevant technologies to address themover a medium to long range time horizon (e.g. 10-15 years).
Successful horizon scanning requires considerable preparation,and may involve several workshops to agree on market drivers
and competitive trends before relevant technologies can be
identified. Key questions to ask during this horizon scan include:– When is the technology likely to mature?
– Will there be an attractive market for it in the future?
– To what extent is the technology tangible and proven in adjacent settings?
– How much cost and effort would be required to adapt thetechnology?
– What activities have competitors already undertaken? Where
have others failed, and what can be done differently this time?
3. Communicating technology needs to innovators. There isan opportunity to influence those in adjacent industries which
could provide a solution, as well as stimulating ideas amongst
the innovators, or “intrapreneurs” within agri-food businesses
themselves. Broadcasting the results of foresighting work is notcommonplace in the agri-food sector – though some, such as PepsiCo, conduct foresighting activities and publish their future needs
within their annual report as part of a stance to “future proof”
the business8. Other industries do this very systematically: RoyalDutch Shell Plc publishes its Future Scenarios on a regular basis;
IBM Corporation produces an annual Global Technology Outlook,which is shared both internally and with key collaborators.

Those in the agri-food sector need to establish what their futureneeds might be, and then use them to stimulate the developmentof new ideas. They can achieve this in three steps:
1. Agreeing on what challenges to address in the future. This
involves examining megatrends and then establishing, on thebasis of these, which challenges are relevant to their businessand need to be resolved by going forwards, and which can besolved by technology. “The Trends in Megatrends”, an article inthis edition of Prism, describes an approach for achieving this.

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Some organizations have realized considerable success by anticipating future developments and responding accordingly. Trimble
Precision, described in Box 2, has been progressively acquiring
businesses from adjacent sectors to build up a new business line
in precision agriculture.
PepsiCo annual report, 2013. Introductory letter from Indra K. Nooyi,
PepsiCo Chairman and Chief Executive Officer, March 2014, pp.5-88The Future of Agri-Food
Prism / 2 / 2014

Box 2 Trimble Precision: From marine navigation
to precision agriculture
Trimble Precision started out in 1978 as a provider of positioning
and navigation GPS related products for the marine navigation
market. Between 2000 and 2013, Trimble acquired a number ofagricultural machinery companies associated with automatedcrop spraying and planting. This approach has positioned Trimble
as one of the main business-to-business providers of precision
agriculture systems to the agri-food sector9.
Trimble Precision – Company History. Available at: http://www.trimble.com/Corporate/About_History.aspx; accessed October 2014

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Those in adjacent industries need foresight over what existing
components of the product or service portfolio are due to maturein the near future. This then helps to prioritize which capabilities
need to be most aggressively marketed to new sectors as “stepout” opportunities.
Applying the principles described above can help avoid “reinventing the wheel” whilst creating the step changes that will be needed to feed another 2 billion people by 2050, in an industry where
funding and resources for science and technology are limited. Key
to this is foresight, both over what challenges need to be solved,
and what solutions are likely to emerge from adjacent industries
to meet them.

Adjacent industries also require foresight – but over which of
their existing technology capabilities are due to mature, and where
they can apply original ideas to the agri-food sector. Envisioning
the future and developing new business models and solutions canrevive even the most mature technologies, and make them powerful components of new business models.

Insights for the executive
The agri-food sector needs to realize a technological step change toincrease productivity and meet consumer demand without further
damaging the environment. It has limited resources for innovation, and needs to think creatively to achieve this. One approach is
to take maturing technologies from adjacent industries and thenre-deploy them as new products and services in the agri-foodsector.
For those in the agri-food sector, achieving foresight over what challenges need to be addressed in the future is essential. These should
be communicated as broadly as possible to those in adjacent industries, as well as to those within agri-food businesses themselves, tohelp recognize unique qualities in existing technology.

Phil Webster
is a Manager in the London office of Arthur D. Little and a member of theTechnology & Innovation Management Practice.

Frederik van Oene
is a Partner in Arthur D. Little’s Brussels office and heads the Technology &Innovation Management Practice in the Benelux.

Maki Kurosawa
is a Partner in Arthur D. Little’s Tokyo office and heads the Consumer and
Healthcare Practice in Japan.

Laurie Guillodo
is a Consultant in Arthur D. Little’s London office and a member of the Technology & Innovation Management Practice.