Ruben Meyer, Global Head of Practice, Food & Agribusiness, speaks with Rob Koremans, CEO at Nutreco and Sebastian Marten VP Enzymes & Eubiotics at DSM about the industry and consumer challenges impacting the global animal feeds market today.

With the global population growing at an ever-increasing rate, the food and agribusiness market is now facing substantial change leading to major challenges. There is the requirement to find a more efficient and environmentally sensitive approach to create a sustainable supply chain for future generations.

Economic development has induced pressure on the livestock sector for more efficient production with limited resources; it also supports the income and food security of almost 1.3 billion people. The major global population expansion, and in particular, a growing middle-class aspirational consumer is increasing the demand for meat significantly. The industry needs to meet the challenges of producing the rising demand for protein. Thus, animal farming sector is capitalizing upon food security concerns, accounting for nearly 40% of the global agricultural production value.

The impact of this reality on animal feed is huge. The market is going through a massive period of growth and is expected to grow at a CAGR of 6.5% to reach $21.4 billion by 2022. Growing demand for healthy and safe animal food, ban on antibiotics, rising awareness among the producers and animal welfare are the key factors fuelling the market growth.

Some of the major players in the global market – Novozymes, BASF SE, DSM, Nutreco, Cargill, DuPont, Alltech, Kemin, Adisseo – are working internally and sometimes in partnerships to improve their efficiency and their way to address the market. In our world of talent acquisition – as a specialist search consultancy operating in the global Food and Agribusiness industry – this has led to a huge demand for diversified and forward thinking individuals able to bring added value to the organisations they join.

Catering to new needs

The shift towards foods that are high in omega-3 fatty acids, proteins, vitamin D and minerals changed the way consumers view and buy seafood, meat and poultry products, as well as interest in the food supply chain itself.

Indeed, the growing use of synthetic chemical fertilizers and pesticides in food production has been linked to serious health conditions. Genetically-modified organisms (GMOs) have also come under fire. Despite the evidence supporting this form of gene editing, opponents seem to find fear more compelling than what the data actually shows.

This in turn has helped to drive demand for organic foods – a market that alone is forecast to register a CAGR of 15 per cent by 2023. Then there is the matter of sustainable practice – an increasingly powerful factor that is shaping the way in which animal feed is produced.

Increasing vegan population is hindering the sales of meat and meat-based protein. Vegetarian population is mounting terrifically each year, yet it stands out as a minute minority section. And its tendency to overcome the majority meat-eating population seems impossible. However, the animal nutrition market is all set to exploit and capitalize upon the rising vegan population owing to the demands for dairy-based products such as cheese, milk, and butter for a vegetarian diet.

Influencing buyer behaviour

In 2018, Cargill released the findings of a study they had conducted into consumer interest and awareness of the use of feed additives and supplements in animal production. They found that their customers want animals to be raised “using the same types of natural health supplements they would use.” These would include plant extracts,
probiotics and essential oils.

Chuck Warta, president of Cargill Premix and Nutrition, commented: “It is important for Cargill to understand what is driving the market and what is influencing customer decisions.” He added: “In the end, we are better positioned to deliver what our customers need if we have a pulse on consumer preferences.”

Research conducted by Nielsen reveals that 68 per cent of consumers are prepared to pay more for foods that are ‘natural’, ‘organic’ or dairy free. It found that “a brand’s focus on transparency is a major factor in the decision-making process.” Change in practices is no longer a nice to have, it is a business imperative.

Today’s consumers increasingly care about issues of animal welfare, nutrition and the impact that they have on the environment. All of these factors combined have the effect of driving change within the animal feed industry itself. The animal feed market is fragmented with multiple players dominating the landscape, but producers no longer see the making of adjustments to their production processes as an ‘inconvenience’. Rather, they are an opportunity to step up to the plate and lead the charge for positive change within the industry.

In doing so, they better engage their customers, increase brand loyalty and win more fans which ultimately will positively impact the bottom line of the organisation itself; thereby, increasing the number of opportunities for the C-suite to investigate new ways to optimise animal nutrition and welfare while increasing global production in a sustainable way.

Regions like APAC and South America are having the biggest impacts where the market in feed are relatively underdeveloped. It offers businesses and executives opportunities to tap into these markets but supply chains and market barriers prove to be still very challenging.

Transmission fears

Concerns over the nutritional value and the sustainable practices involved in producing these feeds aside, the risk over possible contamination through the use of adding routine antibiotics to animal feed is another factor that is driving growth within the animal nutrition sector.

Scientific opinion appears divided on this issue. In a discussion piece in the British Medical Journal (BMJ), scientists deliberated the extent of this risk. For those who see the use of antibiotics as a risk, there is the suggestion of an overuse in livestock and poultry to boost growth which could lead to a risk for humans. They argue there is evidence to suggest that “antibiotics in feed can spur the spread of resistance by promoting new genetic mutations.” They cite the case of Denmark who, at the start of the decade, reduced its antimicrobial use in livestock production by 60 per cent yet boosted pork production by 50 per cent.

Whether there is an element of risk or not, there is consumer concern. Producers are aware of this and the challenge for them is how to both mitigate the potential for contamination from field to fork, and do so in a transparent manner so as to retain and gain consumer trust. And that is the key word here – trust.

Convergence between health & nutrition

Antibiotic growth promoters (AGPs) were banned in the European Community in the year 2006. Implementing alternative feeding strategies that foster efficiency without loss of safety has become a hot area in modern animal nutrition, especially in young animals that are most sensitive to health disorders.

Carmichael Fisher spoke with Rob Koremans – former Executive of Teva, now CEO of Nutreco – who commented: “Ultimately, the consumer has a right to know what they buy to consume. With centerplate food products it is especially critical to offer the entire value chain transparency and traceability from cradle-to-grave. That process begins with feed ingredients, feed additives and feed manufacturing. It is our responsibility to demonstrate integrity at the beginning of the value-chain so that the end consumer has absolute clarity around issues such as food quality, safety and sustainability. This is important, it’s not a fad; this is what gives our industry its social license to operate. Accountability is key!”

As per the nutrients segmentation, amino acids hold the apex spot and is progressing with an application CAGR of 5.5% – 6.5% going through 2025. Amino acids are requisite for several biological operations such as protein synthesis, carriage, and the storage of other nutrients. Eubiotics in other products segment is estimated to witnessing remarkable growth in the next five years. The swine segment is likely to acquire the highest market share in the next five years. Oral administration method has promising markets and is expected to witness high growth. North America remains the major market for the animal nutrition owing to huge demand for nutritional products and rising pet population within this market.

It also means that feed efficiency plays a major impact in feed additives presently. Businesses like Devenish Nutrition are doing a lot of work partnering with regional clients to develop their feed conversion rates.

Speaking with Carmichael Fisher, Sebastian Marten, VP Enzymes & Eubiotics at DSM commented: “The need to increase global protein production in a sustainable way, means within planetary boundaries, is higher than ever before. The protein demand will increase much faster than the growth of the worlds’ population. On the other side, society requires that the industry re-thinks fundamentally the entire animal production system. This includes shifting towards animal diets which are optimizing animal nutrition and welfare and limiting the impact on the environment and on the health and wellbeing of people. To achieve this, health and nutrition questions will move much closer together in the future. Both Enzymes and Eubiotics play a crucial role in improving the entire production system. They improve feed digestibility, increased the performance and health of the animals and reduce the environmental impact of animal production. Highest effectiveness can be achieved by developing fully integrated, species-specific solutions combining the best feedstock with optimum vitamin nutrition and enzymes and eubiotics customized to the needs of the animal. DSM is putting a significant amount of effort into breakthrough science to develop those species-specific solutions.”

It is an incredible challenge, but the very act of getting the ball rolling will shift some of the obstacles that lie in the way. With the world’s population growing at a rate of knots and expected to rise from 7.4bn today to 9.2bn by 2040, the time to act and drive through change is now. Tomorrow will be too late.

By Ruben Meyer, Head of Practice

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Ruben Meyer

Head of Practice

Ruben heads both the Food & Agribusiness and Building Materials practices at Carmichael Fisher. An experienced consultant, he has a strong track record of delivery across EMEA, US and Asia.