Market Reports

Purpose before profit

Food service operators know getting customers through the door takes more than the secret sauce. Consumers typically consider quality, convenience, service and value as the main decision-making factors in choosing a restaurant. The recipe for success, however, is becoming even more complex. A growing number of consumers are using a new benchmark – the sustainability of a menu, business practices and supply chain – when deciding where to spend their dollars. While the trend isn’t new to the coffee sector, it’s instigating a growing number of partnerships with restaurants and hotel chains looking to get on board. Get with the program For the US restaurant sector, sustainability seems to be the topic du jour. The National Restaurant Association found environmental sustainability was a top-three trend in its What’s Hot 2015 Culinary Forecast. In fact, seven of its top 10 trends were connected to sustainability, including locally grown produce and food waste reduction/management. While advocates are mostly applauding this growing awareness, sustainability is an issue that has been on the coffee industry’s radar for several decades. Many roasters already have sophisticated programs in place, whether it’s offering fair trade certified products, reducing the company’s environmental impact or ensuring the viability of the people and products involved. With the coffee industry ahead of the game, a growing number of restaurants and hotel chains are looking to partner with these industry leaders. Fairmont Hotels and Resorts, for instance, struck a partnership with H.C. Valentine Coffee Company in late 2014 to offer guests a great cup of fair trade coffee that was in line with its corporate policy for “being green and giving back to the communities”. Brett Patterson, FRHI Hotel and Resorts’ Vice President of Food and Beverage for the Americas, says they now spend three times as much as they used to on coffee. “When I first started at the company I wouldn’t even drink it,” he says. The US micro-roasting company’s farm-to-cup brews are available in 45 of FHRI’s North American locations, a number that is likely to expand. But although the sustainability aspect was attractive, Patterson says the quality of the coffee is what really stood out. “A cup of coffee is a staple. If we can’t get a staple right, there is something wrong.” For Fair Trade USA’s Director of Coffee, Jennifer Gallegos, it’s about time the food service industry started getting on board. “We’re happy to see that the food service segment is finally recognising the consumers have this expectation,” she says. Fair Trade USA is a leading third-party certifier of fair trade products in the US. It works with food service giants such as Dunkin’ Donuts, McDonald’s, and PepsiCo on sustainable sourcing programs, including fair trade coffee. The certifier has partnerships with 800 companies that produce over US$1.5 billion worth of fair trade certified products per year, of which coffee is the largest category. In its first year in 1998, it certified 76,000 pounds of coffee. In 2013, that number jumped to 154 million pounds, which makes for a total of more than 1 billion pounds of coffee to date. Gallegos says she has noticed increased attention on sustainability efforts from the food service industry, particularly after attending a national restaurant show last May. “I’m seeing the trend absolutely 100 per cent, but I think there is hesitancy. It’s not something that is plug and play.” She explains that having a tangible impact on sustainability isn’t just about how a company recycles, but a complex process that involves from whom and where it procures its products. She points to McDonald’s, one of the companies Fair Trade USA works with on sustainable sourcing, as an example of a company that gets it right. She believes its program is laudable due to its collaboration and innovation behind how it builds programs with mutual benefits for all parties involved including producers, suppliers, NGOs and roasters. “They’re being looked at as a model for the food service segment,” she says. Other companies, such as Starbucks and Nespresso, have their own unique sustainability programs which Gallegos believes should also be commended. “I think they all have similar principles in mind, and that is recognising there is a need to protect the environment and ensure the humans behind it can continue in farming.” But while a growing number of companies are investing in sustainability programs, Gallegos says many hesitate to go public due to a fear of criticism for not doing enough. Gallegos can certainly attest to it. There is even debate among the fair trade certification industry on what makes a true fair trade product, an argument that led to Fair Trade USA’s controversial divorce from Fair Trade International in 2012. On the radar One reason the coffee industry is likely ahead on sustainability efforts is its face-to-face business with suppliers. Gallegos says the movement starting gaining mainstream awareness in the late 1990s. “There were market prices so low that there were farmers literally starving to death,” she says. She believes this forced the industry to start looking at sustainable programs and helped the fair trade movement gain speed. While there is still a long way to go in terms of widespread adoption of sustainable practices, Gallegos believes the coffee industry is leading the way. “I think that coffee is much farther along than any other product than any other out there.” Tracy Ging, Vice-President of Sustainability and Strategic Initiatives for US supplier S&D Coffee and Tea, is especially sensitive to its supply chain, and its impact on more than just coffee production. “We see the supply chain… we understand the challenges that need to be addressed.” But a new generation of consumers have also started taking notice of how food gets on their plate, and it’s starting to affect their spending decisions. The National Restaurant Association reported that almost half of consumers asked said they would dine at a restaurants offering sustainable or organic food. More than half the respondents aged 18 to 24 said they would actually seek them. “I think it’s a reflection that millennials are changing the landscape of the buying decisions that are being made,” says Gallegos. “Buyers are being influenced by what millennials want and what they expect.” She figures growing up in a world more globally connected than previous generations due to social media has given the demographic a better understanding that their food actually comes from somewhere. “We see very clearly that millennials purchase differently and that they are much more value based,” says Ging. She believes it’s an important factor that food service operators should consider when competing for someone’s morning coffee purchase. “When you look beyond the basics and competitiveness and what starts to differentiate, our research shows what a company is and what it stands for has an impact on the purchasing decision.” Purpose and profit As consumer awareness and expectations around food and beverage sourcing continues to increase, sustainability may be a harder trend for companies to ignore. According to some market research, however, the investment might just pay off. Packaged Facts, a publisher of market research in the food, beverage, consumer packaged goods, and demographic sectors, found that more restaurants are using marketing strategies revolving around health, safety and environmental concerns, which can score well with enlightened consumers. “Restaurants and companies that help lead the way on the environment will likely reap dividends in the form of the patronage of an approving mainstream public,” said Packaged Facts in a 2014 report on food and beverage menu trends and opportunities. Findings showed that in addition to young adults aged 25-34, women and higher income consumers were especially receptive to menus geared around sustainability and sourcing. But while customer approval is attractive, Gallegos believes it’s hard to attribute purchases to a company’s sustainability program. “It’s difficult to pin consumer reward and loyalty on activity,” she says. “We know consumers make a lot of claims but it’s hard to show return on investment.” This appears to be the case for Fairmont. “We’re getting quite a bit of recognition for the new coffee program,” says Patterson. “A lot of guests say they enjoy it, but if it’s bringing them through the door I’m not sure.” Likewise, Ging believes the return on investing in sustainable practices is tough to measure because a seal is too limited. “I think our methods to do so are nascent,” she says. “I think the way we look at sustainability is more binary.” She believes the reason we see this disconnect is that sustainability doesn’t really come through with any one thing such as a one-time offering. “Those things don’t add up to a sustainable commitment. It almost raises more questions about commitment and integrity of that company.” She says to see a return on a commitment to sustainability, companies need to go beyond third-party certification with messaging and program commitment. “That’s when we see brand trust goes up more.” GCR

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