The shareholder engagement activities of Raiffeisen Capital Management’s (Raiffeisen KAG) fund management on the topic of world nutrition include dialogue with some of the largest, and for us most interesting, listed companies in this field. A total of 30 global supermarket chains were contacted and presented with an extensive catalogue containing questions on their dealings with food.
We asked them the following questions, among others:
What is your contribution towards Sustainable Development Goal (SDG) 2, which is aimed at ending hunger worldwide?
The amount of food currently produced would easily be enough to feed the entire world population, but this has failed so far due to the unjust distribution of resources. The UN SDGs make it their goal, among other things, to eliminate this injustice. The corporate sector also seeks to help find a solution to this global problem.
HelloFresh, which owes its success as a large food retailer to the sale of meal kits, has credibly endorsed the topic of food donation through its Meals with Meaning programme. The Berlin-based company donated more than 1.5 million meals to various charitable institutions in the year 2021. Any surpluses in the product manufacturing process were quickly identified and promptly given to those in need.
With regard to the supply chain: Do you have a policy on sustainable agriculture? And what checks are done before ordering from a new supplier?
Food supply chains contain countless sustainability risks. These range from human rights violations to threats to animal welfare and massive strains on the environment. As a sustainable investor, it is therefore all the more important for Raiffeisen Capital Management to pay particular attention to supply chains in the course of its dialogue with companies.
The British company Ocado has set strict standards for its suppliers in order to ensure quality along the supply chain. For instance, palm oil is only purchased from certified sustainable palm oil producers.
The target for Ocado’s own brands is to ensure that the fodder suppliers give to animals consists 100% of sustainably cultivated soya beans. Furthermore, the fodder cannot contain any genetically modified ingredients. In the case of meat production, the British company puts its faith in the Red Tractor seal, which guarantees food quality. In order to avoid long supply chains, no beef products from South America are sold in its stores.
Are there initiatives to increase the nutritional value of your products?
In industrialised countries, there is no problem with undernutrition, but the opposite is often true. A bad diet due to unhealthy food is the cause of most lifestyle diseases in first world countries. Do supermarket chains feel partly responsible for this problem? If so, what are they doing to make their products healthier?
For Jerónimo Martins, a Portuguese food retailer, the response to the question regarding responsibility is a clear “yes”.The group considers itself an important and dependable member of society, and wishes to actively participate in the global struggle against these serious issues affecting public health.In order to change people’s eating habits, the company is increasingly investing in the development of own-brand products that are less processed and also balanced from a nutritional-physiological perspective, while at the same time promoting broad access to these products.Its brochures advertise particularly healthy and nutritious products that contain less sugar, salt, and fat in addition to being free of lactose, gluten, and genetically modified ingredients.This particularly applies to food that is primarily intended to appeal to children. In all markets in which Jerónimo Martins is active, the company has made it its objective to offer a better nutritional profile in these products than comparable enterprises by 2025.
What programme do you have to reduce food waste?
Walmart (USA) und Axfood (Sweden):
About a third of food produced worldwide is wasted. That would be enough to feed around two billion people. A lot of food already goes to waste even before it has reached the end customer. What goals do globally active companies have with regard to food wastage?
The world’s most well-known food retailer, Walmart, not only aims to reduce its own waste, but also wants to include the entire value chain in its plans. This is to be achieved by promoting a circular economy in all production and supply processes.
Reducing food waste is also a top priority for Swedish company Axfood. It has set its sights on a 50% waste reduction by the year 2025 in comparison to the base year, 2015. Optimising order processes and selling perishable goods near to their sell-by date at reduced prices is the most effective route to follow.
In addition, staff at the grocery stores enter the amount of food wasted into an internal database on a daily basis. By precisely recording this data, the strategies to avoid food wastage can promptly be adapted. Axfood is a co-founder of Matmissionen, an initiative to sell food that would otherwise go to waste.
What percentage of your products is directed at consumers with low incomes? And what are the growth characteristics of this segment?
The effects of inflation are not only impacting the capital markets, but are also very tangible for customers at grocery stores. An increasing number of consumers are paying attention to prices when they shop. Companies therefore often have their own line of products so as to still be able to offer lower-income households a range of reasonably priced goods.Companies’ own brands often play a big role in these strategies.
Europe’s second-largest retailer, Carrefour, has been placing stronger emphasis on precisely this strategy for the past five years. Its alternative own-branded products are 20–30% cheaper than other domestic brands on average, thus ensuring good value for money. The share of revenue for own brands at Carrefour is now 32%; five years ago, it was still at 25%. This has strengthened Carrefour’s belief in its strategy, and it intends to keep emphasising its own brands.
Food prices, in particular the price of wheat, have risen sharply as a result of the tense geopolitical situation in Ukraine. How are you dealing with this issue? And do you believe the current price levels will remain constant or are they only temporary?
The world watched anxiously as the long-awaited shipments of wheat were allowed to leave the harbour of Odessa. UN Secretary-General António Guterres admitted to having tears in his eyes at the sight of the cargo ships, as these shipments brought relief to starving communities, especially in West Africa.
The corporate sector also has to deal with the consequences of higher wheat prices, in particular by assessing the future outlook.
The London-listed company Sainsbury considers it its duty to help its customers with the higher cost of living and not merely pass the costs on to consumers. Sainsbury is investing GBP 500 million over a two-year period until March 2023 in order to keep the food prices of its most popular products as low as possible. The company will rely on its strong relationship with suppliers should there be a risk of shortages, and is monitoring the situation in Ukraine and the impact on its supply chain very closely.
Herbert Perus, Mathias Zwiefelhofer
Fund Management/Corporate Responsibility at Raiffeisen KAG