Eight emerging risks to watch for food, agriculture, and beverage companies

New and emerging risks are shaping the food, agriculture, and beverage industry. In today’s market, understanding key risk factors, and how to mitigate them, is essential. Here are eight emerging risks to know.

1. Artificial intelligence

Interest and deployment of artificial intelligence tools and pilots skyrocketed in 2023 following the launch of ChatGPT, a generative AI tool. Since then, investments in AI technology have increased exponentially as companies test new and innovative use cases. While many AI systems focus on processing data, handling customer service, or hiring and screening job applicants, AI is also being used throughout the food and beverage industry to optimize supply chains and enhance food safety, customer service and support, quality control, and sustainability.

Some of the risks resulting from the use of AI include:

IP rights and data privacy: Companies should be aware of unclear ownership of AI-generated content used in many tools (such as ChatGPT and Gemini) and potential infringement on IP rights if used commercially. There are also concerns about the privacy and safety of customer data if used/shared with AI tools for data processing or analysis. Additionally, AI tools can be manipulated by bad actors to provide malicious outputs or provide new avenues for cyberattacks.

Inaccuracy and errors: The conversational nature of generative AI tools can make results seem confident, persuasive, and precise, although models can provide inaccurate responses or different answers to the same prompts.

Algorithmic bias: An oft-cited concern is that engineers who design AI tools may make incorrect or biased decisions or use flawed data to train AI machine learning systems. These flaws may perpetuate racial, geographic, or socioeconomic discrimination in results, exposing companies to claims of discrimination against employees or customers, depending on usage.

Considering the risks posed by using AI, businesses should carefully review the pros and cons of AI technology and establish risk management techniques, such as technical safeguards to protect data and bias audits, before implementing or expanding the use of such solutions within their operations.

2. Sustainability

In 2024, agriculture, including emissions from livestock, fertilizer use, and other processes, accounted for nearly one-third (opens a new window) of global carbon emissions, according to research organization CGIAR. Therefore, the messaging and impact of statements concerning sustainability are under increasing scrutiny by investors, consumers, and regulators. These concerns have led to a shifted focus from traditional food production to investments in renewable projects that utilize sustainable energy sources and reduce food waste.

In response, many agriculture companies are adopting regenerative practices like no-till farming and cover cropping; leveraging digital platforms to collect environmental, social, and governance data; and partnering with startups to overcome adoption barriers. Financial incentives such as carbon credits and government subsidies are helping offset the costs of transitioning to sustainable methods. However, challenges remain as compliance with evolving regulations becomes increasingly complex.

Adopting sustainable practices also introduces new risks. One major concern is the high upfront cost of transitioning to new methods, which can strain financial resources. Additionally, sustainable practices may lead to short-term yield variability, making it harder to manage production and revenue predictability.

Agricultural companies transitioning to sustainable practices can use a variety of risk management tools to navigate financial and operational uncertainties. These include crop diversification and rotation to reduce exposure to market and environmental volatility, and agricultural insurance products like crop and whole farm revenue insurance to protect against unpredictable events such as droughts or pest outbreaks.

3. Climate-related risks

Climate change and environmental risks are increasingly impacting the food and agriculture sector, with threats ranging from extreme weather events and shifting growing seasons to soil degradation and water scarcity. These risks can disrupt supply chains, reduce crop yields, and increase operational costs.

To mitigate these risks, agricultural companies may consider adopting a range of strategies. Climate-smart practices such as crop diversification, regenerative agriculture, and precision farming help improve resilience and reduce environmental impact. Investments in water-efficient irrigation systems, renewable energy, and soil health monitoring also support long-term sustainability.

Agricultural companies have several insurance options to protect against severe weather risks, including multiperil crop insurance for a broad spectrum of weather-related damage, whole-farm revenue protection for diversified operations, and increasingly popular parametric insurance, which delivers quick payouts based on weather triggers. Additional products such as crop-hail, livestock risk protection, and farm property insurance with weather endorsements help safeguard assets and income, ensuring greater resilience amid climate challenges.

4. Product formulation & banned ingredients

The “Make America Healthy Again” movement, led by the current presidential administration, has introduced new regulations targeting synthetic dyes and additives. With the Food and Drug Administration (FDA) announcing in April 2025 the phaseout of petroleum-based synthetic dyes, such as Red No. 40, Yellows No. 5 and No. 6, and Orange B, by the end of 2026, food and beverage companies face increased operational and financial challenges. Reformulating classic recipes to use natural dyes not only is more costly but also presents complications in terms of sourcing, color consistency, and supply chain stability. These changes, while promoting healthier consumer choices, require companies to rethink their product development and ingredient sourcing strategies.

Noncompliance with these regulations may not result in direct financial penalties, but companies face significant indirect risks. Products containing banned dyes could be classified as adulterated and become subject to recalls, while failure to properly disclose ingredients could lead to litigation for false advertising or deceptive labeling. In addition, the FDA’s ongoing efforts to define “ultraprocessed foods” — which currently constitute about 70% of U.S. packaged goods — signal further changes ahead. A federally recognized definition could influence labeling, public health guidance, and competitive dynamics as brands vie for “non-ultra-processed” status.

To navigate this shifting regulatory environment, food and beverage companies are adopting comprehensive risk management strategies. These include investing in research and development for stable natural dye alternatives, diversifying suppliers, enhancing compliance programs, and developing proactive
communication plans to maintain consumer trust. Insurance products such as product recall insurance, errors and omissions coverage, supply chain insurance, and business interruption insurance can also provide essential financial protection against the fallout from recalls, labeling disputes, or supply disruptions, supporting resilience during this period of regulatory transformation.

5. Global supply chain

Global supply chain risks for food and beverage companies are intensifying due to a combination of climate change, geopolitical instability, commodity price volatility, and regulatory pressures. Disruptions such as extreme weather events, trade conflicts, and cyberattacks are increasingly common, threatening the availability and cost of raw materials, transportation, and labor. Companies also face growing expectations around sustainability and transparency, which add complexity to sourcing and compliance. These risks can lead to business interruption, reputational damage, and financial losses, especially in a sector where margins are tight and consumer trust is critical.

To mitigate these risks and better navigate the volatility of global supply chains, companies may consider adopting a mix of insurance and noninsurance strategies. Insurance products such as supply chain disruption coverage, parametric insurance for weather events, and product recall insurance provide financial protection against specific threats. In addition to optimizing their insurance programs, leading companies are investing in diversified sourcing, nearshoring, and digital supply chain visibility tools. They’re also strengthening business continuity plans, conducting regular risk assessments, and collaborating closely with suppliers to ensure resilience.

6. Chemicals of concern

Chemicals of concern — particularly per- and polyfluoroalkyl substances (PFAS), atrazine, and chlorpyrifos — remain a significant risk form companies in the food, beverage, and agriculture sectors. These substances are increasingly linked to health and environmental impacts, including cancer, endocrine disruption, and contamination of water and soil. However, recent federal actions have created mixed messaging around chemical safety.

For example, while the EPA has reaffirmed enforceable drinking water standards for PFAS like PFOA and PFOS, it is also extending compliance deadlines and reconsidering regulations for other PFAS compounds. Similarly, the agency has delayed decisions on organophosphate pesticides despite petitions from public health advocates. This regulatory inconsistency creates confusion for producers, manufacturers, and consumers, complicating compliance and risk planning.

To mitigate these risks, companies may consider a multilayered risk management approach. Strategies include conducting supply chain audits to identify potential sources of contamination, transitioning to PFAS-free packaging and safer chemical alternatives, and implementing testing and monitoring programs. Transparent communication with consumers and regulators about mitigation efforts is also needed to maintain trust and compliance.

Insurance products can offer financial protection against chemical-related risks. Product contamination insurance covers losses from accidental or malicious contamination, including recall costs, lost profits, and crisis response services. Product liability insurance can protect against alleged illness or injury caused by chemical exposure, although these policies should be reviewed closely for any exclusionary language applicable to chemicals or pollutants. Companies may also consider environmental liability insurance to address cleanup costs and toxic tort claims related to chemicals like PFAS.

7. Zoonotic disease

Zoonotic diseases — caused by pathogens transmitted between animals and humans — account for approximately 75% of all emerging infectious diseases globally. Agricultural producers are particularly vulnerable due to frequent contact with livestock, wildlife, and animal-derived products, often with limited awareness of the risks or preventive measures. Factors such as climate change, biodiversity loss, deforestation, and increased demand for animal protein continue to elevate the risk of zoonotic outbreaks, especially in environments like traditional food markets and live animal handling facilities.

Zoonotic outbreaks can disrupt supply chains, threaten worker health, and damage brand reputation. To mitigate these risks, organizations are adopting one health approaches that integrate human, animal, and environmental health strategies. These include improving hygiene and biosecurity protocols, enhancing surveillance systems, and investing in training and protective equipment for workers. Insurance policies such as contamination insurance, business interruption coverage, and pandemic-related liability insurance may also help protect against financial losses stemming from zoonotic disease events. Existing protocols and contingency plans developed for COVID-19 or past zoonotic disease outbreaks like swine or avian flu should be examined and updated as needed to contemplate newer zoonotic diseases and in anticipation of continued outbreaks in the future.

8. Autonomous vehicles

Autonomous vehicles (AVs) are being adopted across a wide range of industries to improve efficiency, reduce operational costs, and support sustainability goals. In the food and beverage sector, AVs are used for longhaul transportation, warehouse automation, and last-mile delivery. The agricultural sector is also leveraging autonomous technology through self-driving tractors and precision crop sprayers that can navigate fields, optimize resource applications, and alleviate labor shortages. These solutions are particularly useful in environments where routes are predictable and tasks are repetitive, making them ideal for early-stage AV deployment.

While AVs offer significant benefits, their use introduces new risks. On public roads, liability remains a complex issue, particularly when collisions or crashes occur in autonomous mode. In agricultural settings, autonomous equipment may cause unintended property damage, such as misapplying chemicals or collisions with infrastructure, especially when systems misinterpret terrain or environmental conditions. Across sectors, cybersecurity vulnerabilities, sensor limitations, and unpredictable human interactions continue to challenge safe and reliable AV operation. In the U.S., regulatory efforts remain fragmented, with state-level policies leading the way while federal frameworks lag. A unified national approach — focused on safety standards, liability clarity, and deployment thresholds — will be essential to ensuring responsible AV growth and maintaining public trust.

To address these risks, manufacturers and operators are investing in advanced sensor calibration, real-time monitoring systems, and geofencing to limit AV operation to controlled environments. In agriculture, integrating AI with satellite imagery and field mapping helps reduce errors and improve precision. The insurance industry is also responding by crafting specialized policies for autonomous systems, addressing concerns like software malfunctions, property damage, and cyber risks. These products reflect the shared responsibility between
manufacturers, operators, and technology providers.

Our Technical Intelligence & Emerging Risk (TIER) Practice complements the work of our service teams by helping food and beverage companies identify and anticipate new and evolving exposures. By analyzing existing case law, tracking industry trends, and examining policy language in depth, we proactively identify potential opportunities for coverage enhancements and solutions to adapt to changing exposures and laws.

For more information and insights on these and other emerging risks, contact a member of Lockton's Food, Agriculture, and Beverage team.