Arla Foods’ sustainability drive, as powered by blockchain
Blockchain is one of a bunch of emerging technologies catching the attention of FMCG companies. Dean Best talks to Tomi Sirén, the head of digital at Arla Foods' business in Finland, about a pilot the dairy giant has launched with an eye on traceability and consumer trust.
Image courtesy of Zapp2Photo / Shutterstock.com
Blockchain is one of the hot tech topics, in part stoked by the rise of cryptocurrencies built on the technology but, more fundamentally for companies, fuelled by the potential benefits proponents believe it could bring to supply chains.
Some of the more bullish transformative projections about emerging technologies can have a whiff of hyperbole and, often, business leaders can get caught up in the hype.
"I'm a marketer. We marketers at this time of year get excited about the emerging technologies that pop up because of the trend reports, [stating] 'This is going to be the Year of Artificial Intelligence', 'The Year of Blockchain', 'The Year of Virtual Reality'," Arla Foods' Tomi Sirén says. "We can tend to forget what our long-term vision is, where we are heading company-wise and how we can actually use the emerging technology to support that vision."
However, Sirén, head of digital at Arla's business in Finland, is a believer in blockchain. In recent months, his work has included the European dairy giant's 2018 launch of a blockchain pilot in the country. In November, Arla unveiled a project – Arla Milkchain – which allows customers to track the origin and manufacture of a product from farm to dairy.
A long term vision for health and inspiration
The first item to launch on the platform was Arla Single Estate Organic Milk, produced using milk from at an organic farm in Kurikka in western Finland, 210 miles from the capital Helsinki.
Visiting the Arla Finland website, a consumer puts in the date the milk was packed (shown on the carton) and information is displayed, including, Sirén says, "when the cow was milked, how much milk was milked during the day, who the person was in charge of milking the milk for us – that was really important because we want to show it's made by people that care about the animal and about the milk you have". He adds: "Then in-farm logistics – you have the milk batch collection time and date. This is where we used QR codes for the drivers to give us the exact date."
The prospect of ‘synbiotic’ products combining both pre and probiotic elements should be considered for potential benefits.
We want to create the future of dairy, to bring health and inspiration to the world, naturally
Sirén, who has worked for Arla for three years, says the pilot supports the co-op's "long-term vision – we want to create the future of dairy, to bring health and inspiration to the world, naturally". And central to that future for Arla and for the dairy industry is, he explains, becoming more sustainable, pointing to the report from the UN's Intergovernmental Panel on Climate Change (IPCC), published in October, which offered a downbeat view of the world's current – and prospective progress – towards the goals agreed under the Paris climate accord three years ago.
The accord carried a pledge to keep global warming between 1.5°C and 2°C. The IPCC report put changes to agriculture and diet at the forefront of the "rapid and far-reaching" change needed to keep the rise to 1.5°C, calling for "limiting demand for greenhouse gas-intensive foods through shifts to healthier and more sustainable diets", including buying less meat and dairy and making purchasing more local and seasonal foods.
Carbon Net Zero 2050 and a more responsible, traceable and transparent supply chain
For Arla, even if the IPCC report suggests consumers should reduce their dairy consumption to help mitigate global warming, the co-op believes it can and should make its own operations more sustainable.
"In a post-IPCC report era, the future of dairy, of course, means more actions towards sustainable farming," Sirén says. "In this post-IPCC report era, we need to do something. We are judged every day by the actions we take or don't take. Only actions matter, the time for speaking has ended."
He tells us: "We understand that farming and dairy carries a responsibility for the climate change but also a great opportunity to contribute positively and help solve that challenge. Naturally, we want to be part of the solution. We have a global climate ambition that we call Carbon Net Zero 2050 that aims to reduce Arla's total CO2 emissions by 30% per kilo of milk by 2030 and work towards carbon net zero by 2050. We are committed to accelerating the transition to sustainable dairy production with [and] intensified focus on the farms. The carbon footprint of a kilo of Arla milk is already about half the global average."
We didn’t use the most advanced features of the technology but this is the first stage
For the co-op, the Arla Milkchain pilot is part of a quest to emphasise it is working on making its supply chain more responsible, traceable and transparent. "Technology such as blockchain is just one enabler to go to tell that story," Sirén says. "This is not a silver bullet. It's just one of the many actions that could be done to build a more sustainable business."
Sirén also acknowledges Arla could have used more long-standing technology, like SQL databases, for parts of the pilot but he argues the co-op wanted to use blockchain to engender a "digital transformation culture" internally.
"We could have used more 'traditional technology' but the added benefits for increased reliability of data better shareability of data, higher standards of security, as well as lower production costs, favoured using blockchain technology," Sirén explains. "This could be done using the technology of yesterday but how do you drive transformation culture and try to build upon it if you use the technology of yesterday? We didn’t use the most advanced features of the technology but this is the first stage."
Milkchain: the “most transparent value chain in food”
Arla, Sirén explains, wants to have the "most transparent value chain in food". He admits "our ambition was really high" but insists "if we were able to achieve it, it can be really disruptive". The co-op's Finnish arm decided blockchain could help the business move towards that goal and so the Milkchain project was born.
The mention of disruption indicates Arla believes there could be a competitive advantage in using blockchain to inform consumers about their supply chain. And, to try to maximise that advantage, Arla Finland wanted to launch the pilot quickly, even if the project wasn't perfect, Sirén explains. And he says Arla wanted to get feedback from consumers to improve the product and to make them feel involved in its development.
It’s important that consumers understand that all those nicely labelled containers on store shelves are not vetted by the FDA.
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Let the consumer say what they think, [to say whether] this is the new norm or something that has no value
"Speed can be a competitive advantage," he says. "If we had started with a pilot that would [completely] meet the long-term vision, I wouldn't be here talking to you. Instead, we had the minimum viable product, we put it out there, we communicated the long-term vision, and we said to the market 'This is what we are aiming to do. Let's work together and make it better.' Let the consumer say what they think, [to say whether] this is the new norm or something that has no value to them."
Citing data from 2018 from Finnish market research company Taloustutkimus, Arla says 67% of respondents in Finland to a study of food trends said they would like food products in the country to have full traceability.
A growing segment: consumers vote with their wallets
Asked what the sales performance of the Arla Single Estate Organic Milk has been, Sirén says "it's a new product, so we don't have sales figures", adding the milk has not yet been on the market for a year. "We got good listings and it's getting better and better. Because of it, we were able to demonstrate we will bring something new to the category. It's a value-added product and a service like this has not been in the market. To be more sustainable is in the core of every retailer's strategy. We have a joint cause to build a more transparent and traceable industry."
The milk is sold "at a premium", Sirén acknowledges, but asked if it is only higher-income consumers that are interested in such products, he says: "No, I think it's people who want to know where the food comes from, that it comes from close by. It's people who think that, by having these sustainable products...by buying this product, they're voting for a more sustainable world. The segment is not super-narrow, it is growing every day." For now, the market for such milk will be relatively niche but there will be some consumers willing to pay a higher price for products on which they can get more information about their supply.
I believe that services like this could save lives in a market that actually has really big problems concerning food safety
What's next for Milkchain? Sirén says in the short term Arla Finland will look to add more information to that available to buyers of the Single Estate Organic Milk, with consumers indicating they wanted more data on animal welfare. Sirén already has an eye on Arla rolling out the initiative to other countries where food safety is particularly paramount to consumers but says no decision has been made yet.
"This is just the beginning. I believe that services like this could save lives in a market that actually has really big problems concerning food safety," he says. "The feedback [from Arla HQ] has been really positive and the comments have been on how we can get this to travel to other countries where it matters more. I had the example of China. It could be altered or customised a bit for the Chinese market but there's a certain added value [for consumers] that solutions like this can make their life better. If a brand or a corporation can be delivering that added value and the validation that you can trust a product, that you can check it, that's pretty powerful."
Boosting brand equity with blockchain
Does Arla, one of the world's top ten dairy producers, ultimately have a goal of having all its milk supply covered by the Milkchain? Sirén says the co-op would, in theory, be pragmatic about any roll-out. "I'm happy with year-on-year growth. It's really too difficult to say, understanding the scale of the operation globally that we have but we want to be the lead market in Finland and have as much [milk] as possible. And then adapt the results and demand we have for it to other markets. Maybe the demand for it is not as big in some other markets."
However, Sirén is clear there are business benefits of Arla Milkchain – and suggests the wider food industry should investigate the possibilities of blockchain – even if it is too early to translate that into tangible figures.
"If you look at the capabilities the technology has, not only in our industry but others, like the financial industry, real estate, there's a lot of efficiencies and productivity to be gained," he argues. "If I look at what we've gained now after being in the market for nine months, it's a lot of brand equity. People, when they think Arla in this context, they think we want to try to be sustainable and promote traceability and transparency. That's really powerful brand equity.
"There are some hard numbers to be put on it if you look at how blockchain can be used on, let's say, SAP, or if you have manufacturing plans running on blockchain, which is connected your retailers. It's super-early. It's quite ambitious and difficult. For us, building that utopia, so to speak, will come bit by bit."
He adds: "You need to look beyond cryptocurrencies and understand the fundamentals of the technology and how it can disrupt different industries. We're here for the long run. We know that this is not a 100-metre sprint. To build a long-term, always-on platform for traceability and transparency, not a one-hit wonder, ticking the box of 'we are sustainable', this is a marathon."
This article originally appeared on just-food