On Aon Podcast: Building Resilience in the Food, Agriculture and Beverage Industry

March 19, 2025 15 mins

On Aon Podcast: Building Resilience in the Food, Agriculture and Beverage Industry

In this episode of the On Aon podcast, Ciara Jackson and Marinus Van Driel discuss established and emerging risks to the industry, including prices, tariffs, weather and AI.

Key Takeaways

Experts discuss key concerns from clients, peers, and competitors in the Food, Agriculture and Beverage industry.
The industry is using AI and data science to upskill the workforces to build resilience.
Industry organizations are considering methods of risk transfer to mitigate increased volatility.

Intro:
Welcome to the On Aon podcast, where we dive into some of the most pressing topics that businesses and organizations around the world are facing. Today, we're looking at the food, agriculture and beverage industry.

Ciara Jackson
Hello, my name is Ciara Jackson and I lead our global food agribusiness and beverage industry vertical here at Aon. In today's On Aon episode, we are talking about the food agriculture and beverage industry. And while resilience is an important topic for all industries, this industry faces some unique and specific challenges. And I'm delighted to be joined by my good friend, colleague and partner in crime today, Marinus, who is going to provide some additional insights. So perhaps you might take a moment to introduce yourself.

Marinus Van Driel
It's an absolute pleasure to be here, Ciara. Thank you so much for the introduction there. Like you shared, my name is Marinus Van Driel. I am a partner in our Workforce Transformation Advisory and Analytics team. And what we do is we focus on bringing the best of our data and our advisory capabilities to our clients to address some of their largest talent challenges. You're exactly right. The food, agriculture, and beverage industry really is changing fast.

And there's some really, really exciting changes that are happening with digital transformation. They're also facing some issues like talent shortages and certainly some large scale regulatory changes that are occurring as well. And I'm looking forward to exploring this with you today.

Ciara Jackson
Yes, I'm excited for our conversation, Marinus. And perhaps I might kick off the discussion with the question that we're asked most by our clients. What are you hearing most in your client conversations? And what is everybody else doing? And what are our peers and competitors thinking about? And as you can imagine, we have very diverse conversations with clients all around the world. But if I was to think about it and summarize it into five key risk topics, those are mergers and acquisitions, capital optimization, climate and sustainability, operational resilience and workforce resilience. And within those five key headings, there are multiple points of interconnectivity, AI being a great example. But maybe if I take each of them quickly one by one just to set the scene, M&A first.

In the food ag and BEV bev industry globally, there's inherent growth in M&A as a result of population growth, if nothing else, the world population is forecast to be 10 billion by 2050. There was over 150 billion dollars’ worth of transactions done in 2024 and the expectation that this is going to increase in 2025. So huge opportunity for our clients.

The second topic is capital optimization. So this industry is typically quite a tight margin industry and over the last couple of years has been absolutely hit really, really hard by multiple forms of very severe volatility. Everything from commodity prices, ingredients, energy costs, the cost of people, marinas, the cost of the workforce. And that is putting huge pressure on P &Ls and BOS bottom lines but also on balance sheet resilience. So as a result of that our clients are trying to understand how they can optimiseoptimize use of both their own capital and the capital that's available in the market to fund all of their risk costs but also to de-risk the cost of their people costs.

The third topic we talked about is climate and sustainability. A recent Aon report tells us that natural disasters last year cost $368 billion. Just think about that for a minute, a massive number. But only $145 billion of that was insured. So that leads us to a protection gap of about 60%. And climate change fundamentally is introducing increased levels of economic loss and increased levels of volatility to the industry in an environment where they are challenged, where the industry is challenged to increase productivity and production, do it in a sustainable way and be compliant with the raft of regulation that's out there.

The fourth topic that I, our theme or key risk that I mentioned is operational resilience. That is a risk that has been around for a very long time and will continue to be critical. So in this industry, what's really important is getting your product to your customer on time to the next stage of of the supply chain and increasingly, possibly post COVID actually as a result of it, I guess, an increased focus on severe and catastrophic events, clients are trying to understand what could significantly disrupt their business and impact their ability to fulfill their supply chain requirements. And that's everything from a cyber breach, supply chain breakdown, logistics, political risk, counterfeiting, of people working on the factory floor or the leadership position in the business. So it's very complex, it's very interconnected and we also hear a lot about the idea of double disruption. So what if two of these mega catastrophe events happen at once? How can we help our clients be prepared to navigate those events?

The final point I will end on is workforce resilience or talent. Every industry will tell you that they're challenged in attracting, retaining and developing talent. I think that also holds true for the food industry who are challenged to compete with other industries sometimes on a compensation basis. The industry has been hit by 10 % medical inflation as are other industries and probably the biggest fundamental change that's coming and you touched on it already, Marinus, is around the impact that AI and technology will have on the workforce of today but also on the workforce of tomorrow.

And I guess that leads me quite neatly to throw it over to you and ask you, well, what are you seeing in the talent space? How is the industry adapting to this increasing and changing demand for digital and AI skills?

Marinus Van Driel
Glad to share, but firstly, I remark that's a lot of very, very large scale and intricate risk topics that you mentioned, CiaraKara. And I imagine that requires a very holistic risk strategy. And then also, as you mentioned, a people strategy. So let's dive into this topic of the talent that's needed for today and tomorrow and what organizations are doing about it.

One element I omitted from my introduction is that I did spend quite a bit of time in the industry, leading the global talent management practice for a large consumer. Consumer goods companies specialized in food and beverages. And in my time in that seat, what I've seen is a lot of digital transformation occurring in the industry. It truly is reshaping the entire industry. And I've also seen a huge demand for specialized talent.

And in my experience, what I saw being done in the industry are essentially three different things. The first one is a big focus on upscaling the workforce. The next one is focused on AI powered recruiting and hiring. And then the last one is a little bit more macro level in nature of rebranding the industry. So let me dive into each one of those real quick.

So in regards to upskilling the workforce, many organizations are launching AI and data science training programs to equip employees with the skills to work alongside automation rather than being replaced by technology. So we're seeing a lot of human technology interactions coming to the fore and organizations focusing on people enabling that to happen in a good and a seamless way.

In regards to AI power and hiring, more companies are using AI driven recruitment tools to go and look and source talent, but also are using AI tools and talent assessments to hire for skills rather than looking for a traditional industry experience. And then the last one is focusing on rebranding the industry and what I've seen as a pervasive trend is that companies are positioning themselves as digital first organizations. And they're really focusing on how they can emphasize the impact of AI and automation in terms of transforming everything in their businesses from their supply chain logistics all the way down to precision agriculture. So really, I see this full scale AI transformation taking flight in the food agribusiness and beverage industry pretty much every level.

Ciara Jackson
So wow, that's fascinating insight you've just shared, Marinus, and thank you. And you actually touched on something that's fundamental in this industry as well, which is reputation for a multiplicity of reasons and aligned to all the risks that we are talking about today. Clients are always very cognizant of the impact of an event on their business that could cause them both financial harm, but more importantly, reputational harm. And when it comes to hiring in the marketplace, the company's reputation is worth its weight in gold, particularly when trying to tap into the younger cohorts. So what initiatives are being implemented that you've seen that sort of enhance the industry's appeal to that younger and more diverse talent pool?

Marinus Van Driel
So the first trend that I've seen is that the industry as a whole is repositioning itself. Companies are actively promoting technology, sustainability, and innovation as core parts of their brand to help bring new talent in. Additionally, organizations are strengthening their inclusion efforts. For instance, leadership development programs and internal mentorship initiatives are pervasive across the industry and they're helping to create many more diverse pathways into the industry. One example of that too is that organizations are building talent pipelines. Many companies are partnering with universities and even at the high school level with STEM programs to introduce young people into careers in the food, agribusiness and beverage industry and doing so very early so folks can see what a pathway could look like in the industry for themselves. And then lastly, like I mentioned earlier, is that this industry really provides incredible career growth opportunities. And what organizations are doing now is that they're emphasizing career growth for prospective employees whether it be through internships and apprenticeships, all the way through leadership training programs that are provided. And also organizations are structuring very focused and clear career pathways for young folks coming in. So if you start in one part of the business, you know where you can go next. And also, you know what the art of the possible is in terms of your career.

So, Ciara, we spoke earlier about costs and as organizations are thinking about their talent challenges and repositioning themselves, there certainly are some cost implications associated with that. So, a question for you that I have is, what are the biggest drivers of cost increases in the industry? And also, how are navigating those challenges?

Ciara Jackson
It's a great question and it's one that has huge complexity in the answer, Marinus. If you look at it on a business level first, as I touched on earlier, we have seen incredible volatility in commodity prices, commodities like coffee, dairy, cocoa. We've seen volatility in ingredient prices, in energy prices, in packaging prices. And volatility in this industry is by no means a new concept.

The challenge is the quantum of the volatility that we've seen over the last couple of years has been double digit and in some cases triple digit, which if you're a sub 10 % margin business makes it very, very difficult to navigate. And then there's a more macro environment that is also creating and causing cost challenges for our clients. And if you look at examples around proposed tariff implementations, for example, there is a huge cost to implement regulations around tariffs.

I believe it cost the UK and the region of five or six billion dollars to implement border controls as a result of Brexit. And if you look at the scale of what's being proposed at the moment, there's huge complexity and huge cost coming with that. And there are knock on consequences to changing labeling, changing supply chain, potentially changing sourcing. So geopolitical activity of all sorts, and there's lots of it happening at the moment, can also massively influence the cost base. [The third leg?]leg of the stool is the consumer share of wallets. So you've got a series of economies around the world where there are cost of living challenges or there are very distinct consumer cohorts and consumers have a huge influence in this industry so they will influence what the manufacturers are making essentially and that a large part of that is dictated by their ability to spend essentially. The fourth element to cost that I would mention is time horizon. So traditionally businesses are run on a quarter by quarter basis or on an annual basis. Some of the newer risks that we're seeing challenge our clients, they manifest over a much longer time period. So our clients are challenged by trying to understand how can they understand the quantum of that risk over a period of time, how can they quantify it, and secondly, how do they smooth the volatility associated with that risk over time.

So really, really tough time to be trying to run a business in this industry, I think. However, it is not all doom and gloom. There is a lot that we can do and we are doing at the moment to help our clients navigate this risk environment. The first one is around using our data, our insights, our technologies, our toolbox of solutions to help our clients model, analyze and predict how the risk is going to manifest over time. fFor example, in our insurance base of capabilities, we've got a suite of analyzers looking at particular risks like property, like casualty, like D&NO, like cyber. If we look at what I mentioned about medical cost inflation earlier, we have our healthcare analyzers. So all of these different tools and actuarial and modeling capabilities, and we have many, help us paint a financial picture of the risk and its frequency and severity over time. Then we typically work with clients and look at their basket of risks. So clients will have their traditional risks like their property portfolio, their casualty exposure, their health and benefits costs, their wealth costs and overlay some of these newer and emerging risks like cyber, like climate, like intellectual property, the impact of AI and digitization to try and create a view of the risk exposure for the organization.

Then what we can do with that is say, okay, we now have data. How much of that can be transferred? How much of it would a client choose to transfer? And again, we can help them identify the optimum balance between retention and transfer. What you're left with fundamentally then is residual risk. And we're seeing a lot of innovation in this space around risk financing. So lots of our clients have captive insurance companies and those that have captives are looking to diversify how they're using them. Lots of clients, for example, are using them for employee benefits or for incubating emerging risk. And we're often being asked, you know, how can we take our existing captive and do more with it? And for clients who don't have captives, they're getting increasingly curious about the value and the benefit of a captive. We're also seeing huge interest in new risk or newer risk financing tools. So solutions that we've talked about for quite a while are now becoming really relevant and much more affordable. So I'm talking about things like parametric insurance, like structured solutions, like insurance linked securities. Those are all on the table for our clients in a way that's interesting for them and affordable for them. That may not have been the case a couple of years ago.

And the last piece of the puzzle, if you like, is around capital and access to capital. So the core of what we do is we connect capital to risk., and once we're able to quantify the exposure we can in theory attract the capital. So as we currently stand or how the industry is currently structured we can already access $4 trillion worth of insurance capital, which is a very significant number. However, when you compare it to the $250 trillion global capital pool, we have immense potential to tap into that capital and to de-risk some of these emerging risks we're talking to clients about.

Ciara Jackson
Fascinating perspective and at the top of our conversation, Marinus, when we were talking about the interconnected nature of some of these risks, it has really struck me, reflecting on our conversation just today, how truly interconnected everything is. I mean, we've touched on everything across risk capital and human capital, from cyber to supply chain to artificial intelligence to regulation to cost to future talent pipelines .to mergers and acquisitions and every time we talk about one of those as a single topic there are probably five or six different themes that immediately flow out of it and are massively connected. So thank you very much for joining us today, Marinus.

That's our show for today. Thank you all for listening. In the next months we will have more episodes on risk capital topics. Until next time.

Outro:
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