By Miguel Angel Povedano, chief commercial officer at Majid Al Futtaim Retail
The magnitude, complexity, and socioeconomic impact of the Covid-19 pandemic is only now being fully understood. The ongoing black swan event is, by force, pushing industry leaders to rethink and transform their global supply chain model. While the full impact of the crisis remains unknown, failure to respond effectively, particularly with regards to the adoption of localised supply, is likely to be fatal for many struggling companies and damaging to the economic fabric of individual countries. Furthermore, we can no longer expect governments to tackle a large-scale crisis alone. Managing a situation of this severity requires the efforts of multiple players across the business ecosystem; bringing together government departments, the private sector and community organisations to collaborate and support the overall economy through these difficult times.
An Over-reliance on Globalisation
Disruption in global supply chains and traditional sourcing methods is significantly impacting economies where suppliers and distributors rely heavily on single-source markets for imports. This impact is particularly severe in the context of the food supply chain. Increasingly, businesses are looking to become innovative and adaptive to rely less on globalisation and elevate the resources already in place locally. This can lead to safeguarding industries, ensuring resilience in the long-run, and supporting the economy long into the future. Covid-19 has perhaps accelerated this process. Investing in the productivity of the local economy in this region will not only help companies to weather the current crisis, but it also will support longer-term prosperity. The move towards more localised and sustainable systems of growing, manufacturing, and distributing food is now more critical than ever.
Localising food supply reduces the distance between companies and suppliers and, in turn, makes these companies stronger and more resilient. Additional benefits of a local model include quality enhancements, greater control, lower costs, increased flexibility, community employment and better environmental sustainability. It is crucial, therefore, that businesses operating locally consider how they fit into this framework to ensure they are resilient to global supply chain disruptions; and more broadly, the opportunities that localised supply chains could present for each company. This imperative could not be more critical at a time when climate change is forcing tremendous pressure on our food security. In fact, the UAE ranks 21 in the Global Food Security Index and aims to make it within the top 10 by 2021 and to the first place by 2051. Furthermore, food imports currently stand at 90 per cent of total consumption in the country.
Innovative Ideas for the Local Market
Majid Al Futtaim has taken this call to action seriously, adopting and developing new initiatives that respond to the lessons provided by the ongoing pandemic. This response includes our newly launched hydroponic farms and our local farming commitments. We have inaugurated Dubai's first in-store hydroponic farm at our Al Wasl Carrefour Market branch, and our third in the UAE. Through this farm, we can increase the quantity of fresh, local and sustainable produce supplied to Carrefour customers, while also reducing the food miles and carbon footprint involved in food production. In consideration of the environment and sustainability, the farm also uses 90 per cent less water and less space than traditional farming techniques.
Another locally focused initiative by Majid Al Futtaim comes through our collaboration with the UAE Ministry of Climate Change and Environment (MOCCAE), in which we aim to increase the availability of locally grown produce across Carrefour stores in the UAE. A primary goal of this programme is to open new distribution channels for more than 6,000 small and medium-sized local farmers whose traditional route to market has been disrupted. As a result, we are pleased to ensure a sustainable supply of produce across the country. This collaboration with a government department is an example of the public and private sector working together to turn a challenging situation into an opportunity for shared prosperity.
Additionally, our own regional Carrefour private label range is playing an essential role in addressing gaps in the supply chain from global brands. Most products are made by local and regional producers. This enabled us to increase production quickly with these producers to meet increased demand, while controlling the price to cater to a now very cost-conscience customer. As a result, our private label sales grew four times faster than category leading brands.
Focus on Future Resilience
As companies pick up the pieces and seek to forge a new path forward, I believe we will see a new commitment to strengthening our local supply chains and thinking creatively as we seek to develop greater resilience in the years to come. As large retailers, we have a responsibility to demonstrate our commitment by signing longer-term purchasing contracts that enable local suppliers to grow. Developing strong public and private partnerships within our local regions are likely to become a new normal. Companies should understand their supply chains more deeply and seek to reduce reliance on international suppliers, especially where local alternatives may offer viable replacements.
Investing in the productivity of the local economy in this region will not only help companies to weather the current crisis, but it will support longer-term prosperity too. Together we will continue to seek the more sustainable solution, supporting the economic fabric of the country, for a bright, more resilient tomorrow.