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Guest lecture to International Business students on global food challenge and opportunity for Australian International Food Businesses including a case study on Berri Indonesia. The future is “uncertain” and certain By 2050 9.5 billion of us will be hungry! However, by 2030 2 billion of us will be overweight and 1 billion obese. Consolidation of manufacturers will continue at faster rates and retailers albeit more challenging in global retail. Expect a significant step up from the competition in your home market when you go abroad to build your business.
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Global Food Challenge : Australian International Business
Opportunity
HBI241N Australian Global Business PerspectivesDermott DowlingWed 8 May 2013
“Imagine all the food mankind has produced over the past 8,000 years. Now consider that we need to produce that same amount again — but in just the next 40 years if we are to feed our growing and hungry world.”– Paul Polman, CEO of Unilever, and Daniel Servitje, CEO of Grupo Bimbo
Source: http://www.globalharvestinitiative.org/index.php/2012/06/notable-food-security-quotes-from-the-rio20-and-g20-conferences/ viewed on 23.4.2013
Introduction
Director @CreatovateInnovation & International Business Consultancy
FMCG Background Asia Focus
FonterraFoster’sLion (National Foods)
16 years Food & Beverage 12 years focus on Asia
Pacific
The Global Hunger Challenge
• The Green Revolution in 1960s lifted global food production by 150% over 50 years
• We need another Revolution, to feed 9.5 billion by 2050, increasing food production 75%.
• Australia feeds 50 million people each year beyond our own needs.
• “We can quadruple our exports to feed 200 million people.”
(Anthony Pratt, Global Food Forum, Melbourne, 18-April-2013)
Australia’s Hunger Challenge
Global Irony - An Obesity Epidemic
Figure 1. Global Prevalence Rates of Undernourishment and Obesity
Source: FAO for prevalence of undernourishment; G. Stevens, G. Singh, G. Danaei, et al., "National, Regional and Global Trends in Adult Overweight and Obesity Prevalences," Population Health Metrics 10 (22): 1-16 (2012).
• Conservative projections predict: 2.2 billion adults might be overweight and 1.1 billion obese by 2030 (Kelly, et al, 2005)
Obesity is not only a 1st world problem• Half of the world's overweight people live in nine
countries, including
1. United States
2. Germany,
3. China,
4. India,
5. Russia,
6. Brazil,
7. Mexico,
8. Indonesia,
9. Turkey. • Regions with the highest obesity prevalence --
exceeding 25% of the adult population -- include North Africa and the Middle East, Central and South America, and southern sub-Saharan Africa.
Source: T. Kelly, W. Yang, C. Chen, et al., (2008).
Figure 2. Projected Obesity in Selected AreasSource: FAO (March, 2013)
Soft Commodities
• International food prices only 9% below the all-time high recorded in August 2012
• Several uncertainties on both supply and demand sides still threaten international markets. (World Bank, Food Price Watch, March 2013)
• Cause growing middle class in China, Asia, Latin America, India and eastern Europe
• Taste for protein and sugar • As average earnings grow diets
change and it puts pressure on soft commodities which will increase in price (Chunn, 2012, AFR)
Increasing & Increased Volatility
Summary causes & shifts in global Food & Bev in recent years Population growth
From 7b to 9.5b by 2050 Climate Change Growth in GDP in
developing world changing diet (more protein)
Limited food productivity growth
Fixed/reducing land supply Water shortages
• 9b by 2050
Top 10 Global F&B Companies
Sources: Company websites & http://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-and-beverage-companies/20120416.htm retrieved on 23/9/12
Rank Company Est. 2012 US$bRevenue
Country of Origin
1 Nestle 1866 $98 Switzerland
2 Archer Daniels Midland Company
1923 $91 USA
3 Unilever 1930 $67(€51b) UK/Holland
4 PepsiCo 1965 $66 USA
5 Kraft 1903 $54 USA
6 Coca-Cola 1886 $48 USA
7 ABInBev 1852 AB1366 InBev
$40 USA
8 JBS 1953 $37 Brazil
9 Tyson 1935 $32 USA
10 Mars 1911 $30 USA
Australian Top 10 Grocery Brands & their ParentsTop 10 Brands Owner Origin of Owners
1. Cadbury Kraft Inc.. USA
2. Coca-Cola The Coca-Cola Company
USA
3. Bega Bega Australia
4. Smith’s PepsiCo USA
5. Kleenex Cottonelle Kimberley Clark USA
6. Birds Eye Simplot USA
7. Mainland Fonterra NZ
8. Berri Lion (Kirin) Japan
9. Sorbent SCA / PEP 50/50 JV SCA Sweden
10. Colgate Colgate-Palmolive USA
Sources: Nielsen top 100 brands report 2010 viewed on AFN website 6.5.13, Company Websites, Google
Top Global Retailers
Top Retailers Country of Origin Turnover 2012 US$b
1) Wal*Mart USA $444b
2) Carrefour France $101b
3) Metro Germany $87b
4) Tesco UK $112b
5) Lidl Germany $84b
6) Kroger US $97b
7) Costco US $99b
8) Aldi Germany $73b (2011)
17) Woolworths Australia $54b(2011)
18) Wesfarmers (Coles) Australia $52b (2011)
Sources: Company Websites http://www.insideretailing.com.au/IR/IRNews/Top-25-retailers-5718.aspx and http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Industries/Consumer%20business/Deloitte_Global_Powers_of_Retail_2013.pdf Viewed on 6/5/2013
Global retailing is not easy
• Grocery retailers– Carrefour 38– Wal-Mart 15– Tesco 13
• Grocery suppliers– Coca-Cola 200
(approx.)– Danone 120– P&G 180
Number of Countries Operates
Source: ‘Retail Doesn’t Cross Borders, HBR, Apr 12, p.109
Case Study: Berri in Indonesia1986 Doug Shears creates a partnership venture Indonesia1996 PT Berri Indosari Joint Venture est. 80(Berri)/20(Local)2011 Lion exits JV selling back their share to local partner
Early entry – local insight
Fresh/Chilled Juice Innovative marketing Capital injection during
Asian Financial Crisis 1997
Ambient & Chilled Juices Foodservice & Retail
SUCCESSES Did not adapt /
innovate fast enough Mass Volume & Value
& absolute profit in drinks
Outspent by local conglomerates & MNCs
Took their eyes off opportunity during other M&As
Lack of Capital investment in local manufacturing, marketing, & sales capability
LEARNING
Conclusion
The future is “uncertain” and certain We all need to eat and by 2050 that’s 9.5b of us! Consolidation of manufacturers (faster) and retailers
(more challenging) Internationalisation brings opportunity but has its
challenges Must glocalise It is a significant step up from the home market Expect more competition, faster innovation and new
rules and regulations to navigate
Global Food Challenge = Australia’s International Opportunity
References1. Chunn, Jeremy (2012) Hard returns from soft commodities PUBLISHED: 25 SEP 2012 16:01:00 | UPDATED: 27 NOV 2012 03:56:46;
AUSTRALIAN FINANCIAL REVIEW, http://www.afr.com/p/hard_returns_from_soft_commodities_XIKM0mM6eLppdpUT79EjiK viewed on 3.5.2013
2. FAO for prevalence of undernourishment; G. Stevens, G. Singh, G. Danaei, et al., "National, Regional and Global Trends in Adult Overweight and Obesity Prevalences," Population Health Metrics 10 (22): 1-16 (2012).
3. T. Kelly, W. Yang, C-S. Chen, K. Reynolds, and J. He, "Global Burden of Obesity in 2005 and Projections for 2030," International Journal of Obesity 32: 1431-37.
4. Marcel Corstjens and Rajiv Lal (2012) Retail Doesn’t Cross Borders: Here’s Why and What to Do About It Harvard Business Review, April, pp.: 104-111.
5. Marcel Corstjens and Rajiv Lal (2012) Retail Doesn’t Cross Borders: Harvard Business Review, April, pp.: 104-111.6. K. Dunstan (2011) The Age “Our lost heritage is enough to drive a person to drink” http
://www.theage.com.au/opinion/society-and-culture/our-lost-heritage-is-enough-to-drive-a-person-to-drink-20110922-1kn4u.html#ixzz27GS2ENT5 viewed on 23.9.12
7. The Economist (2011) We are 7 billion http://www.economist.com/blogs/dailychart/2011/10/world-population retrieved on 23/9/128. http://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-and-beverage-companies/20120416.htm retrieved on 23/9/129. http://www.globalharvestinitiative.org/index.php/2012/06/notable-food-security-quotes-from-the-rio20-and-g20-conferences/ viewed on
1.10.1210.http://www.insideretailing.com.au/IR/IRNews/Top-25-retailers-5718.aspx and
http://www.deloitte.com/view/en_AU/au/industries/consumerbusiness/e2781160f279d210VgnVCM3000001c56f00aRCRD.htm viewed on 2.10.12
11.Nielsen top 100 brands report 2010 viewed on AFN website 26.9.12, Company Websites, Google12.Pratt, Anthony (2012) Global Food Forum, Melbourne, April
http://www.theaustralian.com.au/business/in-depth/australia-the-clean-green-food-bowl-of-asia/story-fni2wt8c-1226623265405 viewed on 23.4.13
Bibliography
• Company websites: Major Retailers & Consumer Packaged Goods companies as listed
• http://siteresources.worldbank.org/EXTPOVERTY/Resources/336991-1311966520397/Food-Price-Watch-March-2013.htm viewed on 23.4.13
• http://www.theaustralian.com.au/business/in-depth/australia-the-clean-green-food-bowl-of-asia/story-fni2wt8c-1226623265405 viewed on 23.4.13
• Stevens et al., "National, Regional, and Global Trends.“ http://www.pophealthmetrics.com/content/10/1/22 viewed on 29.4.2013
