Yahoo Finance Climate change: How food and beverage execs are planning for 'rapidly escalating' weather events
Top execs from Chipotle, J.M. Smucker, and Beam Suntory weighed in on how their companies are adapting to climate change and volatile commodities.
Severe weather events show no signs of decelerating amid climate change, and it's causing food and beverage companies to rethink their operations.
So far this year, the US has experienced 23 natural disasters with losses totaling over $1 billion each, according to the National Oceanic and Atmospheric Administration (NOAA), which has tracked billion-dollar disasters since 1980. That figure breaks the record set in 2020.
"It has been striking that just for the first eight months of this year we’ve had 23 confirmed billion-dollar-or-higher impact events related to weather and climate impact extremes," NOAA climatologist Adam Smith told Yahoo Finance Live (video above). "The frequency of these events is rapidly escalating."
Whether it's wildfires and drought in the West or hurricanes in the Southeast, these events are creating a perfect storm for food and beverage businesses, as they face increasing costs from commodities and rebuilding damaged infrastructure.
"I think that executives, other officers that are planning out in the future, ... if they're wise, they're looking at how we're having wetter wet events, drier dry events," Smith said. "Really, the hydrologic cycle is being amplified, which means more volatility in your baseline expectation of commodities."
Here's what top executives at some of the largest food and beverage companies had to say about their sustainability goals and how they're adapting to climate challenges.
Chipotle CFO: 'We don't know' where climate challenges will be
Building a sustainable Mexican grill business means serving up burritos with fresh ingredients daily. But for Chipotle (CMG), there's growing uncertainty around securing high-quality produce, and its leadership relies on a regionally diversified range of ingredient partnerships.
"From a produce standpoint, from an ingredient standpoint, ... we don't know where the climate challenges are going to be," Chipotle CFO Jack Hartung told Yahoo Finance in July. "And sometimes, it's storms in a certain area of the country or it could be heat in a certain area of the country. And so the best thing we can do is ... we have long-term partnerships with our folks."
The fast-casual restaurant chain is also managing heightened utility costs as extreme temperatures make it harder to keep restaurants cool.
"We're seeing our utility costs up," Hartung said. "And also, when you have this kind of heat and you're putting this much pressure on your HVAC, you have breakdowns as well. So our [maintenance and repair costs are] a little higher as well."
J.M. Smucker CEO: We're investing in climate-resilient coffee
J.M. Smucker (SJM), the parent company of Folgers, Dunkin', and Cafe Bustelo, anticipates that climate change will alter its coffee production operations.
As a result, the company has launched its own sustainability goals and is investing in finding more resilient coffee trees that will help the business adapt to the changing climate.
"We have invested in initiatives to help find different coffee trees that can perform better at hotter or lower altitudes without actually introducing new genetics into that," J.M. Smucker CEO Mark Smucker told Yahoo Finance in August. "And so there's a nonprofit called World Coffee Research that we helped to fund and continue to support."
Beam Suntory CEO: Water quality 'a big priority for us'
A weekend beer or glass of whiskey is built on reliable agronomics.
"If you make beer, you need fresh, clean, abundant water," NOAA's Smith said. "Well, you might not go to the US Southwest for that because of the drought impacts in recent decades but also in future decades. The US Southwest looks like it will just continue to get worse."
Similarly, the distiller and producer of brands like Jim Beam, Maker’s Mark, and Suntory is heavily influenced by the quality of water and other ingredients used in its facilities.
"From a sustainability and environmental sustainability standpoint, we're very vocal," Beam Suntory CEO Albert Baladi told Yahoo Finance in August. "This is a big priority for us. ... These are very natural products. They rely on the quality of water. They rely on the quality of the wood. So we go to great lengths to ensure that we're protecting the environment around our distilleries."
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