Food firms' supply success may be hiding their biggest risk

Here's the thing about a supply chain that works: nobody thinks about it. That's the tension running through a Future Food Movement roundtable, where panelists argued that food businesses have become so good at absorbing shocks that the risk they carry isn't showing up in their numbers.

Ana Cuddeford, head of investor engagement at Inside Track, put the context plainly: "We're almost living at the least extreme temperature that we're going to experience in our lifetime." She pointed to her own experience when her fridge broke down during this summer's UK heatwave. Once people feel a climate impact in their own kitchens, she said, the mentality shifts.

Success that hides the exposure

Cuddeford said results and valuations at large, listed food companies have held up. "That risk isn't really being priced in yet because they've been doing brilliantly at managing their supply risk," she said. "It's almost becoming the biggest weakness."

Kate Cawley, the network's founder and moderator, saw the same pattern at the shelf edge. Retailers and suppliers are keeping shelves full, so shoppers aren't noticing the strain underneath. "We're almost doing too good a job," she said.

Boards, according to the senior figures Inside Track works with, price risk mostly through commercial and capital-allocation lenses and far less through a nature lens. That gap is where I'd expect the surprises to come from.

Where the pressure lands

Sophie Bauer, head of food system transformation at WWF-UK, cited analysis from the Energy and Climate Intelligence Unit. The UK imports around 40% of the food it eats, and about a quarter of those imports come from regions at high risk of drought, flooding and extreme weather. With El Niño on the way, she expects this year's harvest problems to repeat.

She also warned against a narrow reading of resilience. Backing British farming is "long overdue," Bauer said, but the self-sufficiency debate tends to skip the other half of the picture. "We cannot neglect the fact that we are part of a global commodity system, and our overseas footprint does actually impact our national food security."

WWF's latest Living Planet Report recorded an average 73% decline in monitored wildlife populations since 1970. Bauer balanced that with a recovery case: Atlantic bluefin tuna, once down 80% from overfishing, has rebounded through private-sector action alongside governments and local communities. That's the kind of evidence that tends to land with commercial teams, because it shows the trend can reverse when the right levers get pulled.

Getting it in front of the board

Cawley said the same complaint comes up in every group she convenes: getting the board, and the CFO in particular, to treat supply risk as something worth spending money on.

Cuddeford's answer was insurance. Inside Track recently published a report on insurance and reinsurance, and actuaries already have clear views on what they'll stop covering and how much premiums will rise. Because cover is priced annually, that's a useful pressure point. "If I were CFO, and I know that my insurance contract gets priced on an annual basis, I would be asking my board, what scenario analysis have we been doing further down the line?"

She added a second test. Pull up the scenario analysis from five years ago and compare it with what actually happened. Most planning runs on a 12- to 24-month view, she said, and "mostly it's that 12-month basis." That's a short window for risks that build slowly.

Bauer offered two ways in. Water is the easiest nature issue to land with senior leaders, since everyone understands that food needs water to grow, process and move. The other is legal exposure. The EU Deforestation Regulation applies from the end of this year, and companies selling into the EU will need to show their ingredients aren't linked to deforestation. The UK consultation hasn't opened yet, but Northern Ireland is set to adopt the EU framework. "You can be struck with very hefty fines if you are seen as non-compliant," she said.

The harder sell is the long-term case. Bauer said the shift to regenerative or nature-positive farming takes around seven years to pay back, which sits awkwardly with budgets that rarely look beyond a year.

The funding gap is a risk in itself

This is the part of the discussion I'd watch most closely. Venture funding for agrifoodtech start-ups peaked at $56 billion in 2021 and fell to $16 billion last year, according to AgFunder data. Risks across the food system are as high as they've ever been, while the money going into possible solutions has collapsed.

Plenty of start-ups are working on alternatives to synthetic fertilizer and on ingredients whose yields are suffering from climate change. They need customers, and their backers need exits. Large food companies have been slow to buy either the products or the businesses. Generalist investors who piled in during the Covid-era boom left when hyped categories missed their timelines. A few corners held up better: ag biotech, including biological inputs and gene editing, and in Europe, climate-related companies have taken a bigger share of a smaller pool.

Cawley recalled a recent session with founders in Catalysts, a leadership group Future Food Movement convenes. Their message was blunt. "Businesses might not feel they need us now, but in the next three, four, five years' time, they very much will." And then: "actually, we're not sure we're going to be here."

Rules that create demand could change that. The deforestation requirements should give start-ups working on traceability and measurement, reporting and verification (MRV) the market pull they've lacked while their tools were treated as nice-to-haves for sustainability reports.

Watson, chief sustainability officer at Levy, part of Compass Group, offered a live example. Levy, which feeds around 20 million people a year in the UK, signed a letter of intent with seaweed packaging company Notpla when Notpla's product cost around 240% more than what Levy was using. Four years later, Levy is Notpla's biggest customer.

What alternative protein got wrong

An audience question asked what the alternative protein cohort should have done differently. My read is that the industry assumed the climate story would persuade people to change their habits for a worse product. Plenty of consumers tried plant-based meat during the pandemic, didn't like it and never bought it again. Many companies couldn't survive long enough to improve the product and bring the price down.

Hype ran ahead of all of it. Assumptions about consumer demand, and therefore the value of these businesses, were inflated. There was also a purism in much of the movement that didn't help. Suggesting hybrid products, half meat and half plant or cultivated alternative, drew a reaction close to horror, because the mission was to replace the whole animal. Yet hybrids would likely have tasted better from the start, and a 50% cut in meat consumption is still a big cut.

Health has become a stronger purchase driver than the sector expected, and the ultra-processed food debate hit harder than many anticipated. With many people now on GLP-1 drugs, every calorie has to work harder. Pairing a long-term environmental shift with an immediate demand, such as health and nutrition, looks like the better route.

Watson had made that bet early. In 2022, Levy introduced a signature burger with half the meat replaced by beans and pulses. When mainstream processors wanted to double the price because the meat had been removed, Levy went to its butchers and made the burgers itself. From 2022 to 2025, it was the only burger Levy served.

This season, Levy has gone further. At venues including Tottenham, Manchester United, the O2, Brentford and Burnley, it serves 100% wild venison burgers instead of beef, on sustainability grounds.

One risk each, heading into 2027

Cawley closed by asking each panelist for the one risk food businesses are most underestimating. Watson picked speed: environmental, health and social risks are becoming full business risks faster than most companies expect, and they need a direct route to the executive team and the board.

I raised cybersecurity. Attacks on the food supply chain have been in the news, and as more of the chain goes digital, the exposure grows with it.

Bauer worried about "crisis response after crisis response." Boards are paying attention right now, she said, and that's the moment to make the long-term business case. Fixing individual supply chains won't be enough. "Nature and climate impacts don't just stop at the farm gate."

Cuddeford had the last word, and it brought the discussion back to its starting point. Every business is chasing the same supply chains and managing the same risks, and investors are no different. "The only way we're going to really be able to shift the needle on any of this is if it is collective action. So less silos, more collaboration."