Case study

Sourcing cage-free eggs for a global food service company

Food service

At a glance

Objectives

• Customise cage-free egg-sourcing solutions based on the client's unique context in the food services industry and enable the client to fulfil its cage-free commitment across Asian markets by the end of 2025.
  

Results

• The client achieves its milestones and deadline in the implementation of its cage-free egg policy.
• The client is able to unlock significant cost savings through cost-effective suppliers and using Impact Incentives.

Introduction

Background

The company is a major player in the global food service industry, providing catering and food solutions to various clients, including corporations, educational institutions, and healthcare facilities. With a strong focus on sustainability, the company has pledged to use only cage-free eggs in all its operations worldwide by the end of 2025.

Challenges

• Varied client willingness to pay: One of the main challenges was the differing levels of willingness among clients to pay the premium associated with cage-free eggs. Some clients, especially those with strong corporate social responsibility (CSR) policies, were willing to absorb the higher costs. Price-sensitive clients were reluctant to pay more for cage-free eggs. This variation created a complex pricing and sourcing dilemma for the company. 
  • Clients with high willingness: These clients were typically larger corporations or institutions with a strong emphasis on sustainability. They were prepared to pay a premium for cage-free eggs, aligning with their own CSR goals.
  • Clients with low willingness: These clients, often operating under tight budgets, prioritised cost over ethical sourcing. They were less inclined to incur additional expenses for cage-free eggs.

• Regional supply chain variability: The availability of cage-free eggs varied significantly by region within a country, complicating the company's sourcing efforts. In some cities, such as Jakarta, Shanghai, and Bangkok, cage-free eggs were readily available due to higher consumer demand and better-developed supply chains. However, in other parts, particularly in tier 2 cities and remote locations such as factories and oil rigs, the supply of cage-free eggs was limited. 
  • Developed Markets: In regions with mature markets, the company could source sufficient quantities of physical cage-free eggs to meet client demands. 
  • Emerging Markets: In regions where cage-free egg production was less established, sourcing physical cage-free eggs was challenging due to limited supply and logistical issues.

• Logistical and operational challenges: Managing a supply chain for perishable goods like eggs involves significant logistical complexities. Ensuring the consistent quality and safety of cage-free eggs during transportation and storage requires robust systems and processes.  
• Supplier readiness and capacity: Not all suppliers were ready or capable of meeting the company's cage-free egg requirements. Transitioning to cage-free egg production involves significant changes in farming practices and infrastructure investments. This limited the pool of available suppliers, particularly in regions where the cage-free movement was less established. 

How GFP helped — Hybrid Sourcing Strategy

Physical Cage-free Eggs

Wherever possible, the company sources physical cage-free eggs to meet its commitment.

• Cities and developed regions: In these regions, the company successfully sources physical cage-free eggs from local suppliers. These markets have sufficient supply and strong client support for ethical sourcing. 
• Client segmentation: The company segments its clients based on their willingness to pay, offering cage-free eggs as a premium option to clients willing to pay more while continuing to provide standard eggs to others. 
  

Impact Incentives

To address the supply gaps and manage cost disparities, the company uses Cage-free Impact Incentives a system based on Book and Claim credits. This system allows them to purchase credits supporting the production of cage-free eggs elsewhere, thus meeting their commitment in regions where physical sourcing was not feasible.

• Emerging markets: In regions with limited availability of cage-free eggs, the company relies on Impact Incentives. This enables them to fulfil their global commitment while working towards improving local supply chains.
• Cost management: Impact Incentives help balance the cost implications of the commitment, particularly for price-sensitive clients. 

Future outlook

Supply chain development:
Through sourcing physical cage-free eggs and using Impact Incentives (credits), the company is supporting local producers and investing in developing a more mature cage-free ecosystem in the region, to eventually transition from credits to 100% physical cage-free eggs in its operations.

Consumer and client education:
Educating clients and consumers about the importance of ethical sourcing and the challenges involved can help build understanding and support for the hybrid strategy. Transparency in reporting progress and challenges can also mitigate perceptions of greenwashing.

Benefits of Impact Incentives

Flexibility
The hybrid approach provides the flexibility to meet the cage-free commitment globally despite regional supply chain limitations.

Support for cage-free production in Asia
Purchasing Impact Incentives contributes to the overall increase and development of cage-free egg production in Asia.

Client satisfaction
By offering options tailored to clients' willingness to pay, the company maintains strong client relationships and satisfaction.

Conclusion

The case of the food service company's commitment to sourcing only cage-free eggs highlights the complexities of global supply chains and the challenges of implementing ethical sourcing commitments. By adopting a hybrid strategy of sourcing physical cage-free eggs where possible and using Impact Incentives (cage-free egg credits) to bridge gaps, the company can achieve its commitment while working towards long-term improvements in supply chain infrastructure. This case underscores the importance of flexibility, transparency, and continuous improvement in achieving sustainability goals.

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