Rabobank: Artificial intelligence transforming consumer food sector but regulation lagging
15 Jan 2024 | Rabobank
Julia Buech, a senior consumer foods analyst at RaboResearch Food & Agribusiness, unravels the many ways in which food companies are harnessing AI to elevate their businesses. She pinpoints potential problems with the new technology — from cost barriers to “AI washing,” which could spur an “AI-free” counterculture. Buech also discusses the incoming EU AI Act.
Hello everyone, my name is Josh Chapaul and I'm the editorial team leader at CNS Media, the publisher of Food Ingreents First.
I'm delighted to be joined today by Julia Butch, who is a senior consumer foods analyst with Rabo Research, Food and Agribusiness.
Welcome to you, Julia.
So you.
Julia is here to speak to us today about artificial intelligence and how it could revolutionize the consumer food sector in light of a recent rubber research report.
So Julia, could you start by highlighting some of the most effective ways in which AI is currently being used by food companies?
Yes, thank you, Josh.
Yeah, everybody is obviously talking about AI at the moment.
It's very much an exciting and promising topic.
Let's be clear, it's still early days when it comes to consumer foods, but yes, there is a lot happening there.
So the core areas food companies are focusing on or targeting are operational efficiency, customer experience, and also new product development.
Like, for example, companies are exploring AI to help us demand forecasting and more accurate inventory management.
That's a key area.
Then, of course, the sudden rise of generative AI, means that food companies are able to, yeah, engage with consumers in really novel ways or advanced ways.
So we see, for example, retailers offering hyper-personalized shopping advice to customers based on individual budgets, taste, and cuisine preferences.
And another really key area of focus is product innovation.
So companies are exploring AI to innovate, for example, around flavors, tastes, and ingredients.
We see that many of the bigger food and drink companies have partnered up or are in the process of partnering up with AI startups in these fields of taste and ingredients in order to drive, innovation forward.
Hm.
That's very interesting.
And could you provide any examples of particular companies that have really sort of taken advantage of AI in recent times?
Yeah, there are several, depending on the different areas.
Carrefour, the retailer, the French big French retailer, is a key example of a company that's really leveraging generative AI, for example, in engaging consumers in, new experiences by, yeah, personalizing shopping advice, and also, yeah.
Hm, OK, and if if we look to the longer term, to what extent and in what ways could AI really transform the consumer food section beyond like recognition?
Yeah, that's a, that's a good question.
Longer term, we really expect AI to play an important part in the transition to a more sustainable food system.
Like, as we all know, the time is simply running out to do things the traditional way, the way it's always been done.
So, there's no doubt about that.
So, yeah, today's food system is under huge pressure due to the growing, population and also climate change, of course.
So, there's hope, but there are also signs, that AI, that AI can offer new solutions here.
So this involves, for example, operational efficiency.
Just think about waste reduction, for example, which has huge social and also environmental implications.
Also in product innovation, we already see food companies looking to AI to, yeah, help push boundaries in the fields of sustainability and health.
This is still in the early stages, but yeah, it will certainly grow and become more serious as these technologies evolve, evolve.
So that can be, for example, in the areas of more advanced alternative proteins, plant-based proteins, and also functional nutrition, at the edge of food and medicine.
Mm.
OK, and your, your report also warns of the potential pitfalls of AI.
Two that stood out to me were the potential for AI washing and also the concerns around smaller companies being, having a sort of, a market barrier through the, the, the costs entailed through AI.
Could you talk us through these issues?
Yes, good points.
AI washing, AI washing, named after greenwashing.
So, that's a risk, for example, in product innovation.
It occurs when companies claim that the offerings involve AI tech, but in reality, the connection to AI is minimal, or Not really core to the product's functionality.
So the purpose, the reason why companies are doing this or could be doing this, is to make products appear more cutting edge, than they actually are.
And this can really obviously damage a company's reputation, so it's just something to be aware of, among all this hype around, AI at the moment.
However, on the other end of the, on the other end of the spectrum, watch out for AI free, to also become an interesting marketing strategy or marketing point of differentiation, yeah, among all the AI hype.
So it's going to Become an interesting field to keep an eye on, like what do you find more attractive, more attractive, AI developed or AI free, let's say.
That that's an interesting point.
And why would consumers be attracted to the idea of AI-free products?
Pretty much to keep it real.
There's, there's so much distrust out there, with regards to AI and AI potentially being a threat, to humanity.
And, yeah, we, we wouldn't go that far or we don't see the risk, of that in, in the food sector.
We do see the potential, but yeah, thinking about the consumer, obviously, you will.
Naturally find a lot of consumers being attracted to the real thing because that's what they know and that's what they trust, yeah, OK, and if we go back to my points earlier about the the cost exclusion barriers for, for smaller companies, , how concerned are you about this in terms of like creating a, a bigger power divide between big and smaller companies?
Yeah, that's, one of the key risks, for sure.
So, of course, the costs of implementing AI tech can really be quite a daunting reality for many companies, especially now in the early stages where the return on investment is really not quite clear yet.
So, yeah, just think about costs related to AI hardware and software and, hiring or training of AI experts.
So, obviously, large companies have more resources and capital to invest in AI infrastructure.
So, yeah, this makes them the likely initial winners, when it comes to AI.
And it's not just about size though, yeah, companies can be large and powerful, but they can also be small and specialized, so really, into tech, and generally speaking, we definitely expect this deepening gap between tech leaders and tech laggards, and yeah, that's probably not a good thing.
OK, and with these various concerns, how and should authorities go about regulating AI?
And how concerned are you by the perceived lack of regulation at the moment in, in wider society?
Yeah, good question.
Yeah, it definitely seems to be a bit of a lawless jungle out there at the moment when it comes to AI.
That's a widespread sentiment, and indeed regulation, seems to be, yeah, lagging behind.
However, regulation is underway.
The EU is bringing out the first major law to regulate AI, so this is something that the rest of the world will be watching closely.
We're talking here about the EUAI Act.
This law, aims to regulate the use of AI, basically to hold companies more accountable for what they're actually doing.
So this act takes a risk-based approach, different requirements for different risk categories.
So basically, the higher the risk, the stricter the rules and the higher the fines in case, companies don't comply.
So all companies that develop but also provide or use AI systems in the EU will in future have to comply with the new law once it comes into force, which, again, will take a little bit of time.
But, yeah, so companies do need to prepare now.
Basically they will have to link their data strategies and risk managements more closely than before and the idea is really to move towards a more secure and trustworthy AI environment that in the end, should hopefully benefit everybody.
Hm.
That's super interesting, Julia.
Thank you for joining us today.
Thank you very much.
