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Why millennials have food companies worried

DGLimages/ThinkstockPhotos Millennials sharing a meal
Millennials prefer natural, organic foods and shun big brands.

Millennials are starting to turn the heads of the people in the boardrooms of food companies. And they should be getting your attention, too.

Their actions are telling us how we should be working as an industry, including farms and ranches.

There are now more millennials, age 18-36, than baby boomers – so everyone involved in the food industry needs to pay attention.

Millennials did not grow up with parents who scraped together nickels during the depression, so they aren’t making food buying decisions based only on cost or value. That fact alone has disrupted the way food companies approach their business and the consumers they hope to attract. Now there’s a lot more variables, beyond a simple cost-value equation.

Millennials are more interested in natural and organic products, and the ethical treatment of animals. They say they consume those products because they make them feel healthier, regardless of scientific fact -- and millennials are willing to pay more for those products.

“This is no longer about supplying a generation with cheap food,” says Hormel Foods vice president Tom Day. “They expect us to do things differently than what we’ve done in the past.”

“If I have a consumer who has two dollars in his pocket, I can’t afford to not listen to that consumer, especially if he wants to pay $19 a pound for organic pork tenderloin,” says Hormel’s Tom Day.

And firms like Hormel, a Fortune 500 company, are listening. Their future depends on it.

Spies and security

Today’s conversations around food company board rooms may include more than just stock prices. Now they may be chatting about farm biosecurity, open pens, antibiotics, GMO feed, drones (used by activists for spying), natural and organic traits, or animal handling measures.

Hormel may be more sensitive to this than most. In January 2016 the activist group Mercy for Animals released undercover footage of pigs being abused at a Hormel pork supplier. In response, Hormel suspended buying from the supplier.

I believe a vast majority of farmers and ranchers treat animals right. They work diligently to create training for employees and work with veterinarians or third party auditors to make sure standards are enforced. It’s the right thing to do, and it also makes good economic sense.

Still, one bad apple can ruin the reputation of an entire industry. On the other hand, do-gooders often go too far in their quest to uncover those bad apples.

“We have seen several instances where people come on to farms and ranches, unauthorized, breaking into facilities, and in some cases stealing livestock,” says Day. “It violates biosecurity but also represents a real threat to our food supply.”

Group housing debate

Should hogs be raised in individual stalls or group housing? This is a big debate. Not so much among farmers, mind you; It’s a debate among food companies and their customers.

There is no doubt public pressure, from consumer to retailer, is moving the needle toward sows raised in open pens, even if science said otherwise.

“Whether you think one is better than the other, there have been customers who have been successful at pressuring companies to switch to group housing,” says Day. “The list of food companies is a mile wide.” Hormel is one of them. So the company is working with producers to adopt group housing, at a cost of $200 - $300 per hog. Hormel says it is paying suppliers more per animal to make sure these changes take place.

Those changes are coming from consumer pressure. But other changes are happening simply because companies want to succeed with millennials. In 2013 Hormel bought Skippy, the world’s second most popular peanut butter. They also then purchased Justin’s nut butter, a five-year old organic nut butter company.

In 2015 Hormel spent $775 million to buy Applegate Farms, the country’s largest natural, humanely-raised, organic meat company. Their farmer-suppliers never use antibiotics or GMO-feed. They follow strict protocols where animals have a given amount of space, and there is no tail docking.

Consumer disruption

Yes, some families cannot afford natural or organic food; they shop on price. But there is a new group of consumers coming forward with a different train of thought, and they are disrupting the status quo.

“They believe the food system is archaic and are challenging us at every step to find a better way to raise animals and crops,” says Day.

If you position your business to tap into millennial needs, there’s a lot of upside potential.

“If I have a consumer who has two dollars in his pocket, I can’t afford to not listen to that consumer, especially if he wants to pay $19 a pound for organic pork tenderloin,” says Day. “They are telling us they are willing to pay for it.”

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

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