Guest Post: Shubh Mann, VP of Sales
Urbanization, the shift of populations from rural areas to cities, has been growing around the world. It is expected that the urban population of the world will nearly double between 2007 and 2050, leading to roughly an additional three billion people living in cities1. Most of these shifts are occurring in developing countries where infrastructure conditions vary, but the demand for imported perishables is growing.
So, what does this have to do with supply chains?
People tend to change their preferences in food and culture as they urbanize. Rural communities are more likely to buy local food products and shop at smaller local markets for most of their day-to-day needs2. Increased disposable income and a larger middle class usually accompany the shift to cities. In these situations, people tend to eat out more at restaurants and buy more exotic fruits and vegetables at larger national or multi-national grocery stores. The supply chains that support these consumers need to constantly adapt by enabling grocery retailers to import products from around the globe. In the case of perishables, the task is vastly more complex.
One recent example of this was the increased demand for Chilean cherries in China3. As the middle class in China has grown in recent years, so has the desire for more ‘luxury’ items. The spike in demand created a need for a very agile supply chain including the charter of several aircraft to deliver the delicate fruit4. In fact, China’s overall food import has increased significantly in the last few years5. The e-commerce shopping profile of Chinese consumers also shows that customers are now expecting omni-channel capability to extend to fresh food6.
Similar changes in buying patterns can be expected, albeit to a lesser extent, in the areas with the highest expected growth in urban populations – India, Africa, Latin America, and Asia7. Nigeria, in particular, is projected to grow at 60% and at the same time is one of the fastest growing urban populations. As these populations grow, so does the demand for fresh ingredients into those areas. In response, infrastructure improvements and sophisticated shippers are developing strategies for different commodities depending on their origin and destination.
Developed countries are also adjusting to the growing demand for produce from around the globe, which pose slightly different challenges for suppliers. Grocery retailers in more mature markets need to find new sources for in-demand items and differentiated products to suit changing consumer preferences. The focus of North American consumers in recent years on organic, non-GMO, and ‘super-food’ type products is an example of these demand changes8. Further, consumers are increasingly buying convenience foods or ready-made meals; and demanding that these meals are made of fresh, exotic ingredients. Retailers in the business of supplying these meals also need reliable sources of fresh ingredients9.
As urbanization evolves, retailer and suppliers will be relying more on their supply chain providers to provide the sophisticated capabilities to keep their ingredients and products fresh and moving around the world.