By Mohammed AlKhateb, Consumer Packaged Goods Industry Director – IMEA, Schneider Electric
Today, across the developing world, multiple aspects related to our existence are gaining a prefix: Smart. This development is evident across economic sectors, be it in real estate (smart buildings) or financial markets (smart banking). In the F&B industry too, there is a conscious shift to “smart food”, which can be defined as food that is good and sustainable for consumers, producers, and the ecology. In the Middle East and Africa (MEA), where food scarcity has been long-standing existential challenge, this shift is paramount.
However, owing to systemic challenges such as low agricultural productivity and arid/semi-arid climate, the road to “smart food” is riddled with challenges right from upstream. As a result, the downstream value chain in the food system, is also characterized with efficiency gaps. While economies with good purchasing power are meeting their food requirements through imports, this route is now being viewed as unsustainable following the pandemic-induced supply-chain disruptions. So, in the MEA region, the concept of “smart food” has taken on multiple priorities, especially as the region makes significant strides in supercharging the global food agenda through a renewed focus on F&B sustainability on the sidelines of major recent and ongoing events such as Gulfood and upcoming events such as COP28. Sustainable food systems are central to a global nutrition mission, being championed by the World Health Organization (WHO). Enhancing localized production, increasing manufacturing efficiencies, reducing wastage, and ensuring “dispatchability” to remote, rural areas are paramount to delivering against a mandate of smart and sustainable food.
Smart and sustainable food production
Over a quarter of the world’s population lives in the MEA region, therefore the demand economics are considerably strong and the growing population will only add to this. In order for supply to meet demand, localized food production must be ramped up sustainably.
Agriculture is a key sector for income generation, employment and food security in the region. While the potential is promising, currently there is significant room for change and improvement.
For example, according to World Bank reports contribution of agricultural, forestry and fishing to the GDP shows significant variation between countries. For example, agriculture, forestry and fishing contributes to 11% of the GDP in Egypt with 21% share of employment coming from these activities. This compares starkly with countries like Oman with a 2% contribution to GDP with 4% employment; KSA at 2% of GDP and 2% of employment share and UAE currently at 1% of GDP and 1% of employment.
Countries however are making significant efforts to address this situation. In the United Arab Emirates, where 80 per cent of food is imported, the governments are investing heavily in agritech. Abu Dhabi announced a $100m investment in four agritech companies, the first in a larger $272 million agritech support program.
In 2020, Saudi Arabia spent $665 million to facilitate food imports and boost crop production through the use of hydroponics, which uses 90 percent less water than traditional farming methods.
Egypt, the regions’ agricultural powerhouse, started a pilot of a new mobile-based irrigation system as part of a nationwide strategy to use modern irrigation methods.
In recent years, the rising income level and innovative agriculture techniques have complemented this objective – the regional F&B industry went on to register a record turnover of $442 billion in 2020. Going forward, sustained efforts are required at the grassroots level to continue to increase agricultural efficiencies and address systemic challenges such as unreliable rainfall. The answer in my opinion lies in greater digital adoption.
Institutionalizing digital adoption for powering sustainable transformation
Digital adoption is not just about incorporating new technologies; it’s about creating a culture where every industrial function is viewed through the lens of technology. So, it’s essentially a profound transformation in how we operate, collaborate, make decisions, and measure outcomes.
To that end, the adoption of IoT-based solutions, drones, and other “AgriTech” warrants attention. Using a combination of IoT sensors, smart irrigation systems and automation devices, all working in tandem, practitioners can bridge efficiency gaps. For example, weather condition-based irrigation, gleaned from soil moisture data and temperatures, can ensure optimal agricultural yield while saving water. Likewise, IoT-led integration of people, processes and technologies can unlock value in F&B industries as well. This has become particularly significant in the food industry, primarily due to its implications on health, well-being, and socioeconomic development.
Also as highlighted by GSMA’s latest Mobile Economy Middle East and North Africa (MENA) report, IoT connections in the region will more than double in the period to 2025, with licensed cellular IoT connections expected to reach more than 70 million by 2025. The application of IoT, Artificial Intelligence (AI) and other transformative technologies will play an important role in key verticals such as agriculture.
Adopters of IoT solutions have been able to achieve nuanced visibility across the food production process, leading to actions that rectify inefficient processes, faulty systems, and wastages. The adoption of robotic process automation (RPA) for example has optimized laborious tasks, thereby adding to the safety and productivity of the staff. Insight-led remedial actions have led to optimal energy consumption — again adding to savings.
In a few case studies using Schneider’s EcoStruxure, we have registered significant savings in operational costs and energy usage, which have a direct bearing on both financial and environmental sustainability. Most importantly, we have developed new use cases of IoT platforms in driving higher efficiency and sustainability across the food value chain, from upstream to downstream. Such possibilities are a revelation in MEA, where a lack of “dispatchability” remains a key roadblock to achieving food security in remote, rural areas.
Achieving sustainability across the food value chain needs visibility
About 90% of all disclosed carbon emissions in the F&B industry are attributed to supply chains. So, the industry’s sustainability hinges on optimizing every function along this track. That can only be made possible with digitalization. IoT adoption takes precedence at this particular juncture when stakeholders, hoping to increase “dispatchability”, are expanding the food systems. The end-to-end traceability is what becomes critical, especially when cold-chains are part of the system.
While cold-chain capabilities can potentially address food shortage and scarcity in remote areas by extending product shelf life, any inefficiencies can result in health hazards. IoT-enabled transparency, accountability, and insight-led F&B operations will not only ensure food safety but also enable the delivery of the right product at the right time to any location within the operational purview. Real-time insights also translate to greater readiness and resilience against market disruptions. It is such agility that the regional F&B industry should aspire for.
End-to-end traceability helps comply with safety and sustainability regulations, which are increasingly being mandated in the region. Such demonstrable sustainability outcomes allow stakeholders to attract investors, who now tend to be largely geared toward impact investing.
Digitalization of the F&B industry spells opportunities in MEA
Aggregate demand aside, the growth also extends to the increased awareness of health and eco-conscious consumerism in the region. While there is a visible uptake of unconventional channels such as e-commerce for food disbursement, consumers also expect more transparency in the labelling of organic and halal certifications.
Digitalization can bring more integrity into these segments by dissuading fraudulent certifications. In doing so, industry stakeholders can tap into new opportunities such as the plant-based F&B, which is expected to grow at a CAGR of 8.35% till 2028, according to Triton Market Research. The demand is already pronounced in economies like South Africa, Turkey, the UAE, and KSA, where consumers — particularly the younger generation — are adopting a holistic approach to diet.
If the pandemic taught us one thing, it is that we can never be more ready. That certainly means that there is a strong business case for sustainability transformations in the industry today. If pursued methodically and at scale, F&B industries can contribute to MEA’s net-zero goals while ensuring “smart food” for billions of people.
