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Sustainable Agriculture strategy

Zurich

8th June 2011

Neil la Croix

Director of Supply Chains

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• Pressure from– Water scarcity– Erratic climate patterns– Population growth increasing demand for staple foods– Competition for land against different crops (inc food and biofuels) and limited additional agricultural

land– Increased costs of agriculture driven by rising oil price impacting fertiliser price and use– Reduced investment in agriculture from aid budgets and national Governments

• Yields– Generally declining where agricultural practices are weak

• Limited inputs of fertiliser, pest control, new planting material or physical farm management– Occasional areas increasing through intensive farming

• Fertilisers, Pesticides, GMO

• Declining rural communities– Aging farmer base – Lack of youth engagement– Rural-urban migration and poor living conditions– Land tenure weaknesses hindering development

• Campaign and policy pressures– Environmental impact of fertilisers and pesticides– Labour standards and living/working conditions in agriculture (e.g. child labour, bonded labour low pay, – Animal welfare– High carbon and water footprints– Food prices and commodity speculation impact on markets– Distortive policies (e.g. biofuels or trade policies)

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Core trends in agriculture

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It matters because…

For a company that depends on farming for core ingredients on which we spend billions, sustainable agriculture is all about:

– Securing and delivering a long term supply of the ingredients we need that guarantees quality and quantity, and delivers competitive value

– Protecting and enhancing the reputation of our brands and business

– Giving us a message for our stakeholders and consumers

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Kraft Foods Coffee

Commitment:

Kraft Foods to source 100% sustainable beans for all European coffee by 2015

Membership of industry bodies and multi-stakeholder initiatives• European Coffee Federation• Sustainable Commodities Initiative• Sustainable Coffee Partnership• SAI Platform• 4C’s

Certification• Rainforest Alliance

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Impact of climate change

• WWF survey commissioned 2008

• Two of Kraft Foods five main origins (Brazil and Vietnam) classified as “high risk” of vulnerability to climate change

• One (Indonesia) classified as “medium risk”

•Address in Sustainable Coffee Strategy

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•Community management & Planning

•Maintain environment

•Education•Healthcare•Energy•Water

• Institutional strengthening:

•District, national, international

•Policy changes•Capacity building

•Skills training•Access to credit•Youth engagement

•Increase income•More efficient•Use of inputs•Reduce pressure to expand cultivation

Knowledge transferEffective extensionIndustry collaboration

PES: carbon, water, biodiversityNGO partnershipInstitutional partnership

NGO partnershipInstitutional partnership

Industry collaboration

Enablers

Activities

Productivity Additional Incomes

Community Development

Institutional Engagement

Sustainability strategy

Strategic Themes

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•Kraft Foods can not and should not attempt to tackle alone the issues associated with the sourcing of sustainably produced coffee

•Recognition of the value of bringing together players along the supply chain and coordinate efforts on most pressing issues

•Many coffee industry activities, need co-ordination and focus

•Must form partnerships:• Governments• supranational and national organisations• NGO’s• Farmers organisations

Partnerships

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Requirements at origin

• Origin government engagement

• Strong, effective, grower organisations

• Community involvement in developing solutions

• Effort : Reward equation must work for farmers

• Information transfer: technical support, irrigation, fertilisation, P&D control, new varieties

• Selection and involvement of NGO partners

• Certification bodies

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10% coffee growers certified

How to reach the other 90%?

Design schemes for SCALE

The role of certification

Provide framework and verification BUT

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• Kraft Foods identify climate change as a serious risk for coffee

• Should not be tackled in isolation but as part of overall sustainable strategy

• Effective industry organisation required• Partnerships with growers, NGOs and government

critical• Certification scale up mechanisms essential

Summary

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