ClimateAi Helps The Wonderful Company De-Risk Its Supply Chains

March 28th, 2023

The Wonderful Company (TWC), one of the largest food and beverage companies in the world that offers a diverse range of products, including high-quality fruits, nuts, flowers, water, wines, and juices, was facing new challenges including climate volatility and water shortages that were impacting its financial performance. Publicly available data and out-of-the-box climate tools weren’t meeting The Wonderful Company’s need for granular and actionable insights that integrated within its workflows and teams.

The Wonderful Company turned to ClimateAi’s ClimateLens platform and suite of tools, including seasonal and climate forecasting, as well as its water risk function, to understand key risks to its seasonal production, across its supply chain, and to future investments.

Challenge 1: Assessing farmland assets and production for climate risk, tied to financial impact

The Wonderful Company was already noticing temperature changes and water shortages across its holdings. It wanted to understand how climate change was specifically affecting its existing production and profitability. With a wide-ranging portfolio of farmland assets including wine grapes, pistachios, almonds, and pomegranates, it needed a versatile, customizable platform. It also needed a way to translate those impacts into financial and business value.

Challenge 2: Evaluating future water risks, availability, and potential shortages at local watersheds near operating sites

Additionally, The Wonderful Company was concerned with water availability for growing crops, and was also looking for support in water resource assessments and seasonal forecasts of water availability for key surface water resources. In California alone, its crops consume an estimated 150 billion gallons of water a year, two thirds of that on nuts. Most of the water comes from local reservoirs near these farms, and surface water availability for any reservoir is dependent on the physical properties of and climatic inputs to all points upstream. The high cost of water as an input (around $2000/acre-ft) was making water decisions and trade-offs difficult.

However, there were few useful, accessible water year overviews of water availability that can inform planning decisions for the upcoming year. Plus, determining alternative mitigation decisions was an often manual, arduous process.

Solutions

The company used ClimateAi’s ClimateLens-Monitor tool to evaluate current and near-term risks at its main production locations, with customizability and granularity. The forecases took in TWC’s weather station data and crop-specific agronomic data, and co-developed “hazards of interest” with the TWC team based on plant phenology, and crop yield impact curves. The forecast, with TWC data and chosen hazards, created farm-specific projections for both crop yield and quality. Combined with data from TWC financials, ranch yields, sale price, and farming costs, ClimateAi was able to calculate the potential impact on income per acre by varietal.

TWC also used ClimateAi’s Climate Analogs tool for crops currently growing in high-risk areas to find alternative locations with optimal climates, similar soils and pest/disease profiles, and secure water availability for the next 15 years.

ClimateAi’s ClimateLens-Adapt tool helped TWC to conduct a long-term outlook analysis for 20 locations across all crops in its portfolio and found several top climate risks across its holdings, tied to their potential financial cost.

Plus, TWC leveraged ClimateAi’s water budget tools to support its water resource management team with data collection and monthly forecast of resource availability. TWC chose specific watersheds of interest, and ClimateAi’s tools provided a basin-wide water stress forecast inclusive of inputs into key resources, precipitation, and temperature forecasts. The forecast of water resource availability is refreshed at least monthly and for 6 months out.

Results

• Optimizing contracting decisions to save money: Having access to reliable seasonal yield forecasts enables TWC to make smarter contracting decisions. TWC can identify potential supply shortages or surpluses and adjust their contracting decisions accordingly (i.e. to lock in better prices early). It allows them to optimize their procurement strategies, reduce costs, and manage risk more effectively, ultimately leading to improved profitability and competitiveness.
• Identifying alternative locations for expansion opportunities: With the climate analogs tool, TWC identified novel areas for crop production that hadn’t been on their radar, comparable to the ones TWC operates today, with optimal climates, similar soils and pest/disease profiles, and secure water availability for the next 15 years. It could also prioritize investment in research projects to overcome the challenges of the future. These analogs help to diversify climate risk.
• Maximizing production and minimizing operational risk mitigation: Long-term yield and value impact analysis for additional locations, crops, and varieties validated TWC’s internal forecasts and strategic decisions. In acquisition decisions, TWC could conduct greater diligence in buying and selling assets according to yield impact and profitability over the next few decades. Additionally, it could alter varieties at existing properties based on climate resilience.
• Mitigating water risk: TWC was able to understand its future water allotments in key locations and manage this water supply volatility. Anticipating current and future water risks to operating sites enables better planning and preparation around the critical resource to reduce water risk exposure and achieve significant cost-savings when purchasing the right amount of water they will need for the farmlands.

“ClimateAi has helped us build a quantifiable basis from which to start considering adaptation strategies. These measures will always cost money, but the platform is starting to help us justify the cost and give us visibility into the business and financial impacts.” — Dave Whittleston, the Director of Sustainability & Analytics at The Wonderful Company

 

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