There is no doubt that the food industry is one of the world’s biggest industries. There are some interesting factors at play in this space, such as rising labour costs, which make it uncertain how profitable food companies will continue to be. This report will go into further analysis on PESTEL, specifically the elements such as environmental, political and sociological. (Refer to Appendix one as an example of a PESTEL framework of all elements). It will also provide key findings on how food distributors might be affected by current trends as this is an arising issue linked with the sociocultural element, and the changing of people’s ethical values.
The food industry plays a big part in contributing to environmental issues such as ocean plastic, global warming and deforestation. ’Food systems contribute 21% to 37% of global greenhouse gases, and are significant contributors to deforestation, biodiversity loss and declining water tables.” (the guardian,2019). In response, the food industry has had to adapt to be more environmentally friendly but it still remains a major issue.
Although sustainability is not a new concept, global attention to this topic has soared, especially after the launch of the UN Sustainability Development Goals in 2015, a global framework to guide the transition towards a more sustainable future by 2030 (Passport Euromonitor,2019).
Political elements put in place due to environmental issues affected by the food industry
A new tax which has been created ‘applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic’ (gov.uk,2020). This is encouraging companies in the industry to use less plastic. ‘The tax will provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration’ (Gov.uk,2020). This is a political element of PESTEL and a positive step lead by the government in order to reduce waste and build up and urging companies to become eco friendly in relation to their packaging of products. Plastic brands will have to change their packaging in order for it to be recyclable.
A straw legislation has been introduced by the UK so no plastic straws are allowed in the UK anymore from October 2020. This will be further environmental legislation connected with food and companies will have to alter their packaging to abide by the new straw legislation which has been put in place. From 2021, EU law will ban single-use plastic products. However, retailers and brands should be making changes now and “73% of European grocery shoppers agree that grocery retailers use too much plastic in their packaging” (Mintel, 2018).
Worldwide treaty on climate change, works on a 5-year cycle where countries must submit plans for nationally determined contributions, which revolve around things like reducing greenhouse gas emissions (UNCC, 2020). Farming and food waste are responsible for roughly 13 of global greenhouse gas emissions. “The world’s food systems produced about 16bn tonnes a year of CO2 from 2012 to 2017.” (The guardian, 2020). This evidence shows the detrimental effect that the food industry is having on the environment and the role they play in contributing to environmental issues.
The influence Sociological elements have on the Food Industry
Consumers are becoming more knowledgeable about their individual dietary requirements and in addition are building a much clearer understanding of what kinds of foods are and are not safe. On behalf of those who work in the food industry, this has contributed to customers demanding greater transparency. This isn’t inherently a negative thing, but it means that to keep consumers happy, the food industry will have to make adjustments. The sociocultural behaviour aspect of PESTEL is what triggers that behaviour of how swiftly we are all moving as consumers to select brands, choose companies and choose to buy from companies which reflect our values and what we believe ethically is right for us. Social behaviour is changing with ethical and environmental conscious decisions being prioritised.
Vegetarian and veganism are quickly entering the mainstream and was the “fastest growing food trend of 2018”. Food chains are having to meet this new demand and adapt their menus (Warc, 2019). Companies need to be aware of new trends so that their company is successful and popular with consumers.
The ways in which the food industry contribute towards Environmental issues
Pollution has a major effect on how consumers view an organisation. These days an environmentally aware’ company is likely to be more popular than one that is not. ‘With concerns over pollution and waste rising globally, and threatening public health, there are opportunities for companies to reduce their air emissions beyond business as usual, and to move towards organic agriculture’ (Passport Euromonitor,2019).Therefore, there are ways in which the food industry can reduce their contribution to global warming by making alterations and create the threat of the environmental issues into an opportunity, making the industry strong instead of weak. Increased pollution has already had effects on the fast-food market. ‘McDonald’s in the UK, for example, substituted paper alternatives for plastic straws in May 2018 in a bid to reduce plastic waste pollution’ (Mintel,2019) and in response to consumer demands for a more ‘environmentally friendly’ packaging. This makes up an important part of the ‘service’ element of the fast-food market; consumers receive the peace of mind that the product they are eating has had minimal effect on the environment. There is a massive pressure on food companies to change packaging to be recyclable and eco-friendly with it becoming both a need and a want from many consumers.
When looking at a product we must consider the anatomy of the product (Jobber and Ellis-Chadwick). The packaging used is important in creating a tangible product that aligns with the target consumers values. It is essential to have nutritional information clearly stated on the back of the packaging, therefore anyone with dietary requirements such as allergies or whether they are vegetarian are aware of the ingredient’s in the products. It is important that the paper of the packaging is sustainably sourced and recyclable. This has become a very popular trend in which people like to buy and use products which are environmentally friendly. A threat which could be changed to an opportunity in relation to packaging would be to use alternative material in packaging. ‘On July 2020, Frugalpac revealed a wine bottle made from 94% recyclable paperboard….the frugal bottle can allow wine producers to cut the carbon footprint of each bottle by up to 84% and reduce emissions from transporting bottles’ (food packaging forum,2020). This could be a massive opportunity for many food and beverage companies turning threats into opportunities and reducing emissions which are leading to other environmental issues such as climate change.
The election of Joe Biden as president of the US could reduce global heating by about 0.1C, bringing the goals of the Paris agreement “within striking distance”, if his plans are fulfilled’ (The Guardian,2020) This is a positive step forward for climate change and one that is necessary in order to minimise the impact food industries are having on the environment.
Palm oil is speeding up climate change. It contributes to deforestation and a lot of food companies use it in their products such as the brand Nestle. Palm oil can be extracted from sustainable sources which would turn a threat into an opportunity for Nestle. The Biggest Palm oil producer is Indonesia and they are reliant on palm oil for their economy, it would be a detrimental effect if there was no palm oil in that country, therefore a law cannot be put in place against palm oil as it would create more environmental issues such as poverty in Indonesia.
From an environmental standpoint, one especially troublesome food category is meat. Meat processing, especially red meat, uses enormous quantities of water and produces a large carbon footprint. Vast quantities of forest are being torn down by the meat industry to build new land for farms. The effect of this is that more and more people are transitioning to diets based on plants, and governments are increasingly taking an interest. The COVID19 pandemic did not help with this environmental issue, instead it just fuelled the fire. ‘Travel restrictions allowed illegal deforestation to flourish in Indonesia – and government plans to cut environmental protections raise fears for the future’ (Climate change news, 2020).
Swot Analysis on companies and sectors in the food industry
Iceland foods is particularly strong and they are very proactive in terms of ensuring that they recognise opportunities to their brand. They are very active and use sustainability in context. A weakness in the food sector would be Nestle as they are consistently contributing to problems, particularly with regards to water and also deforestation. ‘Nestle’s membership was suspended at the end of June as it failed to submit a report detailing how it would ensure the use of certified sustainable palm oil’(Gale General OneFile,2018).In terms of their marketers being proactive and active, in terms of using all these areas in context in the decision-making process they rarely do it, they just ignore it completely. They are a very weak company, whereby Nestle are relatively inactive. Reacting to a competitor in the market who is benefiting and seeing marketing growth, because of their stance and their promotional activity, or change of packaging is an example of a reactive company. Lidl is a reactive company, who is reacting to Iceland. Iceland very quickly put forward their strengths in this sustainability area and have utilised it to their advantage through promotion. For example, the rang tan advertisement which ‘featured the story of a baby orangutan to tell the story of rainforest destruction caused as a result of palm oil production’ (Mintel,2019). ‘It was deemed a political campaign…..however, as a result of not being permitted to show the advert on TV, it subsequently went viral online generating plenty of outrage that a message of deforestation should be banned from by the authorities’ (Mintel,2019). Iceland also continue to promote and use PR to support their sustainability ethical values as a brand. Lidl have now stepped in from seeing that Iceland is gaining in terms of their market share so now Lidl have incorporated within their promotion more sustainability elements. An opportunity of the supermarket company Aldi is ‘trialling re-usable bags for fruit and vegetables’ (Mintel,2020). As a result, marketers are changing a threat to an opportunity.
Evaluating the marketing decision process with relation to relevant theories
The Boston Consulting Group looks at existing products, services and businesses that form an organisation. An example of this could be ‘Unilever’ whereby, under this company they have many different food products. It looks at the market growth and market share. The BCG looks at the relative market shares as well as the market growth rate, in terms of how fast its growing year on year. It positions the products into different areas, using visuals such as star, question mark, cow and dog. The market growth on the vertical axis is very established in terms of low growth and in new markets they might arise due to new opportunities coming in from PESTEL. Through the environment bill and the environment target set by the government by 2030 emissions in the UK have to be reduced. This means that there is a new market opening as a result of this. As a consequence, those marketers who are being very proactive in this area, the lights of ‘Walkers’ ‘Popular crisp manufacturer Walkers has adopted a technique it says will slash CO2 emissions from its manufacturing process by 70 per cent’ (Independent,2020).Walkers are spending high amounts of cash usage on the vertical axis, a lot of cash being pumped into promotion to generate any sort of market share. Developing the brand in the minds of the consumers. Those consumers who have shifted already and their sociocultural behaviour has changed, as a result are buying products which are sustainable, Therefore ‘Walkers’ are capitalising on this market year on year, The aim of BCG is to show that marketers take full advantage of opportunities in the market by which the opportunities have been derived from the swot analysis. The aim is to ensure that the products are positioned, that they can grow market share at a much faster rate. Overall, the analysis reduces any risks, it highlights and demonstrates that there is a growing market. As well as that, it identifies opportunities for marketers to adapt and change the marketing P’s. For example, they change the promotion, or they change the packaging, they change the content of the product and this is based upon the context.
Overall, I think that the food industry plays a massive role in contributing to environmental issues. Marketers need to make decisions which are beneficial to their brand. They need to consider their demographic and understand that environmental changes have an influence on society.
The consumer has become so much more aware of the make up of a product and how environmentally friendly it has been in both production and packaging that a failure to react to this will have serious consequences. The subject of the environment is becoming stronger by the day and companies need to make compliance in this area one of their highest priorities.