Food and Beverage - IESE4 IEsE Business school Industry trends IntroduCtIon 1 J. llopis and J. gifra, “Demographic growth, internationalization and Digitization: challenges and implications

Food and Beverage Industry Trends - 2015

Demographic growth, internationalization anD Digitization:

challenges anD implications

Industry Meetings

Help create the future of your Industry

Executive Education — Industry Meetings 3

Food & Beverage

IntroductIon 4

SocIodemographIc trendS, urbanIzatIon and Food challengeS 5

InternatIonalIzatIon: the engIne oF growth 10which markets are attractive today and what are their prospects for 10 Years

From now? Food and beverage attractiveness Index 2015

china, the largest country in the world: engines of Sociodemographic growth

and an X ray of the Industry

dIgItal tranSFormatIon 20

Industry 4.0: Intelligent production processes, Innovation and technology

the Internet of things: From the Intelligent home to Intelligent Kitchen

a connected, Informed consumer: challenges for distribution

are our consumers connected? From mass data to Intelligent data

electronic and mobile commerce: multichannel Strategies

concluSIonS 29

reFerenceS 31

19th Food and beverage InduStrY meetIng 2015 32

agenda

academic leadership and co-organizer

Speakers

ContEnts

IEsE Business school4

Industry trends

IntroduCtIon

1 J. llopis and J. gifra, “Demographic growth, internationalization and Digitization: challenges and implications for the Food and Beverage industry”, iese Business school, op-274-e, 2015.

what changes should be planned in order to deal with the demographic challenge of the coming decades? what will the food and beverages of the future – so-called “foods 3.0” – be like? will we keep drinking liquid milk or will we get the same amount of dairy produce from a pill a day? what will the main innovations in agriculture, industry, distribution and the horeca channel be? will the demand for organic food keep growing and will the concern with healthy, wholesome food increase? will our doctor or the chef at the restaurant have access to our personal information file? how will the internet affect things in the food and beverage industry? will we be talking about industry 8.0 instead of 4.0? will the iphone 14 and the sensors built into our refrigerators and pantries warn us when we’re running low on pasta, rice or chicken?

the food and beverage industry will be a key sector for the evolution of the economy and society in the coming decades. For this reason it has to provide solutions to such important questions as the food of the future in a context of demographic growth; the increase in the demand for raw materials and the quest for alternatives; the challenge of innovation, technology, digitization and internationalization; and the appearance of countries and markets with growing new middle classes, among other challenges.

of all the trends and issues that this industry will deal with in the coming years, there are three in particular that are already directly affecting the sector: demographic prospects, internationalization and digitization.

indeed, the estimates of demographic growth point to a 34% increase in the world population by 2050, as well as an accelerated process of urbanization that would give rise to 70% of the world’s population

living in cities or megacities. the challenges facing the food industry are clear in terms of the increase in demand, innovation in raw materials, sources of nutrition and technological advances. what is more, the demographic growth in countries such as china, india, nigeria and indonesia, among others, open up a host of opportunities in markets that will have attractive sociodemographic conditions within the next few decades.

within this context of an increasing population and globalization, digitization plays a crucial role as an engine of change in both business and society. this process affects the way we interact with each other, do business, get information, shop and consume. as the urban population grows, so will the number of connected people, and distributors will have to be able to meet the expectations and demands of increasingly digitized and informed consumers.

the purpose of our annual report on trends1 is to summarize the most important issues that form part of the current dialogue in the food and beverage industry and that were the topic of debate at iese’s 19th Food and Beverage industry meeting, organized in collaboration with Deloitte. our goal is not to engage in an in-depth analysis of each of the trends but instead to focus on the three trends already mentioned (demographic growth, globalization and digitization) and to organize and highlight some of the most important reflections and considerations.


Food & Beverage

4 United nations (2014), World Population Prospects: The 2012 Revision – Methodology of the United Nations Population Estimates and Projections, Department of economic and social affairs, population Division.

2 United nations (2014), World Population Prospects: The 2012 Revision – Methodology of the United Nations Population Estimates and Projections, Department of economic and social affairs, population Division.3 United nations (2014), World Urbanization Prospects: The 2014 Revision – Highlights, Department of economic and social affairs, population Division.

it is calculated that, by 2050, the world population will reach 9.6 billion people.2 according to United nations estimates, this growth will be uneven and will vary greatly by region. practically all of this population spurt will take place in developing countries:

• africa will be the continent that will experience half of this growth, while europe will experience a 14% population decline.

• india will surpass china in number of inhabitants and in the youthfulness of the population, and the average age in nigeria will be lower than in the United states.

soCIodEMographIC trEnds, urBanIzatIon and Food ChallEngEs

• other countries, such as indonesia, pakistan and the philippines, will also become among the most populous.

this demographic context should be analyzed along with the accelerated process of the world population’s urbanization. today, 54% of the population lives in urban areas, and this percentage is expected to reach approximately 70% by 2050.3

FIGURE 1. URban and RURal popUlatIon oF thE woRld, 1950–2050

source: United nations, World Urbanization Prospects4


Industry trends

today, the americas constitute the most urbanized region on the planet (more than 80% of the population lives in urban areas), while approximately half of the population of africa and asia lives in rural areas (40% and 48% respectively, india and china being the countries with the largest proportion of rural populations). however, it is estimated that, by 2050, the percentage of the urban population on these two continents will reach 56% and 64% respectively. specifically, 37% of world urban growth will take place in india, china and nigeria between 2015 and 2050.

today, half of the population lives in small cities with fewer than 500,000 inhabitants. however, the proliferation of large urban nuclei will be a clear trend in the coming decades. the forecasts for urbanization and the growth of megacities illustrate the development

of cities such as tokyo, new Delhi, são paulo, Bombay, istanbul, chongqing, lagos, manila, guangdong, Kinshasa, paris, Jakarta and lima, among others, which will rank at the top of the 30 largest urban agglomerations by 2030.5

without a doubt, this process of demographic growth and urbanization raises a host of questions for the food industry. to begin with, it entails the possibility that attractive markets with potential might emerge within the next few years, with their own questions: should the focus be on china, india or nigeria? what other markets are attractive today and show sound prospects for the next decade? second, the demographic prospects pose the challenge of growth in the demand for food, as reflected in the graph below: 40% of world demand will come from china, india and the rest of asia.

source: Farming First6

5 United nations (2014), World Urbanization Prospects: The 2014 Revision – Highlights, Department of economic and social affairs, population Division. 6 http://www.farmingfirst.org/post2015-Food#2

gloBalwealth

others

eUropeanUnion

UniteD states

Japan

otherasia

inDia

china

glo

Ba

l w

ea

lth

, tr

illi

on

s (

$)

90

80

70

60

50

40

30

20

10

0

2010 2015 2020 2025 2030

FIGURE 2. Food dEmand, 2010-2030


Food & Beverage

given these forecasts, how should food production increase in order to feed this larger, more urban and perhaps wealthier population with higher disposable incomes? will the current raw materials be replaced by new sources of nutrition? Bearing in mind this global sociodemographic evolution, can the current nutritional consumption patterns be maintained or will we have to find and promote new formats?

the estimates of the United nations Food and agriculture organization (henceforth, Fao)7 indicate that world food production will have to increase by around 70% – in particular, cereal production will have to rise from today’s 2.1 billion tons to three billion tons, while meat production, for example, will have to rise from 200 million tons to 470 million tons. the graphs below illustrate the growth trends in the production of crops and meat until 2030:


7 Fao (2009), “how to Feed the world in 2050,” pp. 1–35.8 Fhttp://www.farmingfirst.org/post2015-Food#2

FIGURE 3. CRop yIEld GRowth, 2005-2030

pr

oD

Uc

tio

n (

mil

lio

n t

on

ne

s) 3400

3200

3000

2800

2600

2400

20102005 2015 2020 2025 2030

77% From yielD increases

cUrrentproDUction

(2300) 14% From increaseD cropping intensity

9% From increaseD lanD cUltivation

yielD increases cropping intensity lanD


Industry trends

Fuente: Bühler research9

FIGURE 4. mEat dEmand, 1970-2030

the Fao believes that this growth in production will be possible if:

• the investments needed in innovation and technology are carried out.

• suitable policies are applied in the fields of agricultural production, sustainability, the environment, international trade and others.

the demographic growth will also clearly entail an increase in the international food trade: “it is estimated that by 2050 developing countries’ net imports of cereals will more than double from 135 million metric tons in 2008/09 to 300 million.”10 the graph below illustrates this trend until 2030:

9 http://www.buhlergroup.com 10 Fao (2009), “how to Feed the world in 2050,” p. 3.


Food & Beverage


FIGURE 5. dEvElopInG CoUntRIEs: EvolUtIon In thE CEREal tRadE, 1970-2030

200

150

100

50

0

-50

-100

-150

-200

-250

-300

-350

mil

lio

n t

on

ne

s

199019801970 2000 2010 2020 2030

-140-168

net importers net exporters net imports (all coUntries)

11 http://www.farmingfirst.org/post2015-Food#234323

Finally, the urbanization process brings other equally important challenges, such as changes in dietary habits, changes in consumption and shopping habits due to access to new technologies and digital transformation, and environmental and sustainability challenges, among others.


Industry trends

in this context of urban and demographic growth, the challenge of internationalization becomes particularly important, since companies cannot plan their growth strategies without considering which markets, countries and cities are and will be the most attractive and have the greatest potential in the coming years.

IntErnatIonalIzatIon: thE EngInE oF growth


Food & Beverage

Which Markets Are Attractive Today and What Are Their Prospects for 10 Years From Now? Food and Beverage Attractiveness Index 2015

assessing the attractiveness of a market or a country is one of the essential jobs when planning all the decisions that are part of a good internationalization strategy. as we mentioned in our summary of food and beverage trends from 2014: “internationalization is one of the key factors for growth and an impetus for this industry,”12 and it is still one of the most important engines and its best guarantee of worldwide growth. companies continue to work steadily to internationalize, and the “vademecum on Food and Beverage markets,”13 produced jointly by iese and Deloitte, is a useful, practical tool in this context because it provides relevant information on what are and will be the most attractive markets.

the attractiveness index of countries contained in this document assesses and weighs six indicators: per capita gDp, the legal framework and security, the population, the middle classes, imports and consumer spending.

the results of the attractiveness index for 2015 reflect the leadership of the United states, china and germany, which still occupy the top three positions on the list. on the other hand, only the last two positions in the classification of the 10 most attractive countries have changed: italy and canada have risen, while russia has left the top 10 because of the decline in its gDp, middle class, imports and consumer spending.

Below is the detailed classification for 2015, with its scores and comparisons with the previous year, as well as the most important conclusions and considerations:

12 iese (2014), “the Four i-engines of the industry”, iese industry meetings, p. 15.13 iese-Deloitte,“vademecum on Food and Beverage markets 2015: selling across continents,” iese, st-374-e, may 2015.

Ranking2015

Ranking2014

Var.Ranking

2013-2014 Country Total

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

USA

China

Germany

Japan

United Kingdom

India

France

Netherlands

Italy

Canada

Russia

Belgium

Spain

Hong Kong

Norway

Switzerland

Sweden

Australia

Denmark

South Korea

United Arab Emirates

Mexico

Finland

New Zealand

Austria

Ireland

Singapore

65.64

59.01

46.92

39.82

39.45

37.70

36.63

34.31

30.76

28.33

28.26

28.01

26.96

26.40

26.26

25.20

24.57

23.52

23.09

22.98

21.93

21.67

21.18

20.94

20.58

19.40

18.77

1

2

3

4

5

6

7

8

10

11

9

12

16

14

13

15

18

17

20

19

22

21

24

26

25

28

27

0

0

0

0

0

0

0

0

1

1

-2

0

3

0

-2

-1

1

-1

1

-1

1

-1

1

2

0

2

0

►

►

►

►

►

►

►

►

▲

▲

▼

►

▲

►

▼

▼

▲

▼

▲

▼

▲

▼

▲

▲

►

▲

►

FIGURE 6. Food and bEvERaGE attRaCtIvEnEss IndEX (Fba IndEX) 2015


Industry trends

Ranking2015

Ranking2014

Var.Ranking


28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

Portugal

Saudi Arabia

Poland

Israel

Malaysia

Lithuania

Greece

Estonia

Czech Republic

Brazil

Turkey

Qatar

Indonesia

Latvia

Thailand

Slovakia

Taiwan

Croatia

Romania

Peru

Slovenia

Chile

Colombia

Kazakhstan

South Africa

Hungary

Bahrain

Belarus

18.72

18.23

18.11

16.93

16.57

16.12

15.37

15.22

14.89

14.77

14.58

14.52

14.43

14.20

14.19

13.87

13.52

13.36

13.25

13.09

13.01

12.83

12.69

12.60

12.49

11.62

11.40

11.39

30

23

32

31

29

33

37

38

48

34

39

36

41

42

35

45

n/a

50

53

46

43

44

49

40

47

52

55

57

2

-6

2

0

-3

0

3

3

12

-3

1

-3

1

1

-7

▲

▼

▲

►

▼

►

▲

▲

▲

▼

▲

▼

▲

▲

▼

▲

▲

▲

▲

▼

▼

▼

▼

▼

▼

▼

▲

▲

Ranking2015

Ranking2014

Var.Ranking


56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

Egypt

Georgia

Macedonia

Kuwait

Bulgaria

Nigeria

Vietnam

Uruguay

Philippines

Morocco

Guatemala

Azerbaijan

Dominican Republic

Costa Rica

Tunisia

Ukraine

Argentina

Jordan

Iran

Serbia

Venezuela

Algeria

Bosnia-Herzegovina

Ecuador

Kenya

Cameroon

Bolivia

Pakistan

11.34

11.15

11.09

11.02

10.87

10.85

10.76

10.27

10.18

10.06

9.35

9.23

9.01

8.99

8.94

8.87

8.66

8.42

8.24

8.06

7.94

7.44

7.24

6.25

4.63

3.09

2.81

56

51

54

62

61

74

65

59

64

66

68

63

76

73

60

67

71

75

72

70

78

69

77

79

80

81

82

58

0

-6

-4

3

1

13

3

-4

0

1

2

-4

8

4

-10

-4

-1

2

-2

-5

2

-8

-1

0

0

0

0

►

▼

▼

▲

▲

▲

▲

▼

►

▲

▲

▼

▲

▲

▼

▼

▼

▲

▼

▼

▲

▼

▼

►

►

►

►

FIGURE 6. Food and bEvERaGE attRaCtIvEnEss IndEX (Fba IndEX) 2015


Food & Beverage

the table below is a visual complement to the classification and results of the index. on the one hand, it allows the results to be read not only by country but also by region, and this is interesting from the standpoint of internationalization strategies, which can be tackled using a regional approach. on the other hand, it organizes the geographic distribution of the

countries in the index into groups of 10, respecting the original order within the classification in each region. in this way, we can visualize the importance of each continent and illustrate the importance of the different geographic regions and each country within each region and group. the countries whose position or group has changed since the previous year are marked with an arrow.

FIGURE 7. GEoGRaphIC dIstRIbUtIon oF thE CoUntRIEs In thE 2015 Fba IndEX

IndexRanking Europe Asia

1-10

11-20

21-30

31-40

41-50

51-60

America OceaniaAfrica andMiddle East

Australia

New Zealand

61-70

71-82

GermanyUnited KingdomFranceNetherlandsItaly

Russia ▼ BelgiumSpainNorwaySwitzerlandSwedenDenmark

FinlandAustriaIrelandPortugalPoland ▲

LithuaniaGreeceEstoniaCzech Republic ▲ Turkey

LatviaSlovakiaCroatiaRomania ▲ Slovenia

HungaryBelarusGeorgiaMacedoniaBulgaria

Ukraine ▼SerbiaBosnia-Herzegovina

USACanada ▲

Mexico

Brazil

PeruChileColombia

Uruguay ▼Guatemala ▲Dominican Republic ▲Costa Rica

ArgentinaVenezuelaEcuadorBolivia

United ArabEmiratesSaudi Arabia

IsraelQatar

South Africa ▼ BahrainEgypt ▲Kuwait

Nigeria ▲MoroccoTunisia ▼

JordanAlgeria ▼KenyaCameroon

ChinaJapanIndia

Hong KongSouth Korea

Singapore

Malaysia ▼ Indonesia ▲

Thailand ▼ Taiwan

Kazakhstan ▼

VietnamPhilippinesAzerbaijan

Iran


Industry trends

the most important considerations and conclusions of the 2015 attractiveness index14 are:

• north america, asia and europe are still the regions with the greatest potential for attractiveness, since they occupy all the top 10 rankings.

• the United states still ranks first (1 out of 82) in the classification, and canada has climbed one spot to rank 10th. the United states is also the leading country (1 out of 156) in the imports classification, and it is in the top 10 in the other indicators except for consumer spending (23 out of 86).

• if we read the index by regions:

- in latin america, the most attractive country is mexico (22 out of 82).

- in africa and the middle east, it is the United arab emirates (21 out of 82). however, if we analyze only sub-saharan africa, the most attractive countries are south africa (52 out of 82) and nigeria (61 out of 82). nigeria rose three spots compared with last year, mostly due to the increase in the middle class and food and beverage imports.

• in the group of positions 11 to 20, oceania joins the ranking with australia (18 out of 82), and asia reinforces its potential with hong Kong (14 out of 82) and south Korea (20 out of 82).

• europe includes 11 of the top 20 countries:

- From 1 to 10: germany (3 out of 82), the United Kingdom (5 out of 82), France (7 out of 82), the netherlands (8 out of 82) and italy (9 out of 82)

- From 11 to 20: russia (11 out of 82), norway (15 out of 82), Belgium (12 out of 82), switzerland (16 out of 82), spain (13 out of 82) and sweden (17 out of 82).

• the first countries in africa and the middle east appear between positions 21 and 30, with the United arab emirates (21 out of 82) and saudi

arabia (29 out of 82), as well as from latin america with mexico (22 out of 82) and from asia with singapore, which remained steady in our index (27 out of 82).

• of the countries ranking from 31 to 40, the czech republic (36 out of 82) stands out as a new country in the european analysis, rising 10 points in the classification. this country improved significantly in the legal security index (more than 30 spots), and its food and beverage imports also experienced growth.

• more and more latin american countries start joining the rankings after the 40th spot, including peru (47 out of 82), chile (49 out of 82) and colombia (50 out of 82).

• the weight of africa and its potential can be seen by the presence of numerous countries in the group from position 50 to 80: egypt (56 out of 82), nigeria (61 out of 82) and morocco (65 out of 82).

these comments should be complemented by the information on each country available in appendix i of the aforementioned “vademecum on Food and Beverage markets.” this appendix shows that, while some markets may not appear at the top of the rankings in its weighted analysis, they may be interesting from the vantage point of an isolated variable.

For example, singapore occupies the 27th spot out of 82 in our index but it ranks first in the index for ease of doing business and, even though it is a small country from the demographic standpoint (around seven million inhabitants), its middle class and disposable incomes are substantial. therefore, the top-ranked countries in each indicator may be markets that some companies might want to bear in mind depending on their interests and needs. on the other hand, it is also possible that, while some countries may rank high in the overall analysis and seem to have attractiveness conditions, certain measures must be taken from the perspective of export insurance, protection and investment, intellectual property, etc.

14 iese-Deloitte,“vademecum on Food and Beverage markets 2015: selling across continents,” iese, st-374-e, may 2015.


Food & Beverage

China, the Largest Country in the World: Engines of Sociodemographic Growth and an X Ray of the Industry

in order to illustrate the potential of some of the markets listed, below we present a more detailed analysis of china (the mainland), bearing in mind, however, that the reading and interpretation of each country will always depend on the point of departure and the particular features of each company depending on its product, its consumer and the prices, among a host of other factors that must be taken into account beforehand.

here we offer a socioeconomic interpretation from the standpoint of the food and beverage industry in the

asian giant. china ranks second in the attractiveness index, which assesses and measures up to six indicators, as mentioned above: per capita gDp, the legal framework and security, the population and middle classes, imports and consumer spending. china’s position will vary in each of the indicators analyzed and weighted, and it is interesting to study each country individually as well as to make a comparison with the countries that rank higher and lower in the classification for each indicator.

china’s main indicators are illustrated in the table below:

Ranking/86 Ranking/156C per Capita US$ millions

Overall Food and Beverage Consumer Expenditure Food and Beverage Imports

76

77

78

6

7

8

USA

China

Germany

Tunisia

China

Indonesia

Netherlands

China

Italy

65.64

59.01

46.92

575

558

510

48,873

48,487

39,686

Ranking/82 Score

1

2

3

Ranking/85 Ranking/185Number of Households

(thousands)US$ Ranking/189

Total Population Middle Class GDP per Capita Legal Framework

Ranking/186 Millions

1

2

3

79

80

81

89

90

91

China

India

USA

China

India

USA

Bulgaria

China

Montenegro

Antiguaand Barbuda

China

Serbia

1,367.52

1,259.70

3,18.52

232,358

148,566

66,073

7,648

7,572

7,466

1

2

3

FIGURE 8. ChIna: Fba IndEX oUtlooK


Industry trends

in china, the largest country in the world, with 1.37 billion inhabitants, 73% of the population is in the 15 to 65 age bracket, and today the asian giant is experiencing an unprecedented process of urban growth and infrastructure development. shanghai, with

the accelerated urbanization process is taking place in parallel with strong digitization and huge growth in the middle class: of all the households, 45.3% (201,745 households) have a disposable family income of less than $15,000 per year, while households with a disposable income of more than $15,000 and less than $100,000 per year represent 52.2% (232,358 households), up 10.2% compared with 2013.16

23 million inhabitants, is its largest city, followed by Beijing with 19.5 million, chongqing with 12.9 million and others such as tianjin with 10.9 million. the sociodemographic x-ray of china is complemented by the following figures:

examining china through its main cities is a reasonable way of dealing with the complexity of the disparate languages, cultures and food habits in a country that is as large of all of europe and in which 47% of the population is still rural compared with its 53% urban population.

15 see: http://databank.bancomundial.org/data/databases.aspx16 J. gifra et al., st-374-e, “vademecum on Food and Beverage markets 2015: selling across continents,” iese, may 2015.

ChInA In 2025

Male Female

80M 60M 80M60M40M20M40M 20M 0M 0M

80+75-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

Age Group

ChInA In 2014

Male Female

65M 65M52M 52M39M 39M26M 26M13M 13M0M 0M

100+95-9990-9485-8980-8475-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

Age Group

Fuente: world Bank15

FIGURE 9. ChIna: dEmoGRaphICs pERspECtIvEs


Food & Beverage

FIGURE 11. BEVERAGE IMPORT TREnDS

2013

2012

2011

2010

Hot Drinks and Spices

Water, Juices and Non-Alcoholic Drinks

High-Alcohol Drinks

Wine

Beer

2%

2%

2%

2%

1%

1%

1%

1%

2%

3%

2%

3%

3%

3%

4%

3%

0.5%

0.3%

0.2%

0.2%

FIGURE 10. FOOD IMPORT TREnDS

2013

2012

2011

2010

Bakery and Cereals

Fruit and Vegetables

Dairy Products and Eggs

Fish Products

Fats and Oils

Meat Products

Sugar, Confitery Products

15%

14%

9%

10%

14%

14%

14%

14%

10%

7%

7%

7%

12%

12%

15%

16%

23%

29%

31%

33%

12%

9%

9%

8%

5%

5%

6%

4%

Food and beverage imports in 2014 totaled $48.487 billion, and the products and categories that it imported between 2010 and 2013 are shown in the tables below:

the partners and home countries of china’s imports are reflected in the geographic chart below, where asia,

europe, oceania and africa are its most important areas of influence:

7% 16%

17% 31%

14%5%

9%

Documents to import: 5 Median time (days) to import: 3

FIGURE 12. IMPORTS/MAIn PARTnERS AnD ORIGInS 2014


Industry trends

what does it export and to where?china primarily exports fresh products such as fruit,

FIGURE 14. BEVERAGE EXPORT TREnDS

2013

2012

2011

2010

Hot Drinks and Spices

Water, Juices and Non-Alcoholic Drinks

High-Alcohol Drinks

Wine

Beer

5%

5%

5%

5%

3%

4%

1%

4%

1%

1%

4%

1%

0.1% 0.3%

0.2% 0.3%

0.1% 0.3%

0.1% 0.3%

FIGURE 13. FOOD EXPORT TREnDS

2013

2012

2011

2010

Bakery and Cereals

Fruit and Vegetables

Dairy Products and Eggs

Fish Products

Fats and Oils

Meat Products

Sugar, Confitery Products

4%

4%

4%

5%

37%

36%

38%

39%

1%

1%

1%

1%

1%

38%

1%

35%

38%

1%

36%

1%

6%

7%

6%

6%

3%

3%

3%

3%

vegetables and fish. in terms of beverages, its leading exports are infusions, juices and other nonalcoholic drinks.

its leading export destinations are the countries around it and southeast asia, followed by the european Union and north america.

6% 2%

20% 42%

10%2%

18%

Documents to export: 8 Median time (days) to export: 2

FIGURE 15. EXPORTS/MAIn PARTnERS AnD DESTInATIOnS 2014


Food & Beverage

consumer spending has been on the upswing in the past four years, as illustrated by the graph below showing its evolution:

in summary, this is a small sampling that can serve to illustrate the importance of analyzing potential markets in order to take advantage of the sociodemographic, macroeconomic and sectoral opportunities of a country,

in this case china, without ignoring the many other issues that must be taken into consideration in the internationalization process, which will vary according to the particular features of each company and product.

2013-2014: 7.6% 2010-2014: 40.3%

600500400300

2010366

2011438

2012479

2013516

2014558

E p

er C

apit

a

FIGURE 16. FOOD AnD BEVERAGE COnSUMER EXPEnDITURE TREnDS, 2010-2014


Industry trends

the recent process of demographic growth and urbanization discussed above is closely related to the development and performance of ict and the worldwide process of digital transformation, which, as noted above, affects all industries, food and beverages in particular.

there are three key factors in understanding digital transformation. the first are connections, which are permanent, mobile in format and not only between people but also with things. the second is interactions – that is, the sum of reciprocal actions between two or more agents. the third is the information and data generated in this process of connections and interactions. the sum of these three factors (connections, interactions and information) is what iese professors Javier zamora, sandra sieber and evgeny Káganer call “digital density”17 and it is what ultimately has a transformative impact on the lives of people and the different business sectors.

dIgItal transForMatIon

17 e. Káganer, J. zamora, and s. sieber, “5 skills every leader needs to succeed in the Digital world,” IESE Insight, 18, third quarter of 2013.


Food & Beverage

Industry 4.0: Intelligent Production Processes, Innovation and Technology

without a doubt, industry is where technology has become a key and transformative factor. what has been dubbed “industry 4.0” includes all the intelligent industrial processes in which technological advances are having a direct effect on improving processes, efficiency and innovation. technology is the current and future solution to many of the challenges facing the farming industry and the food and beverage industries.

gartner’s famous illustration18 showing the maturity and adoption of different technologies and applications is also relevant in the case of intelligent factories. it shows the potential and level of development of certain technologies as solutions to the different business challenges. if we focus on the food and beverage industry, of all the emerging technologies we should highlight the internet of things, data science, cloud information, mass data, voice recognition and recognition between machines as engines of change that may be interesting in farm production and the food and beverage industries.

in fact, the application of many of these technologies in the sector’s factories and industries is already leading to major strides and changes in both capacity and the forms of production, such as customization and manufacturing on demand. they also allow natural resources (for example, water) to be used more efficiently in specific processes, such as crushing and grinding grain or cereals. these technologies also make possible the existence of production plants and industrial schemes that improve hygiene and quality controls and incorporate applications that extend use-by dates and product lifespans. on the other hand, as some technologies such as 3-D start reaching higher levels of maturity, they can make interesting contributions to areas such as spare parts, stocks, packaging and wrapping.

18 see: http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp.

technology is also a decisive factor in the field of r&D, which is fundamental in an industry such as that of food and beverages, where responses are expected to such important challenges as the foods of the future, the evolution and scarcity of raw materials and the need to find alternatives, among others.

in this sense, technology today is leading to significant headway in different areas of research related to new raw materials, flavors and foods. consequently, variations of the same product can be created by applying different microbiotic components in the manufacturing process. technology also allows for the biotransformation of flavors, textures and micronutrients, and it contributes to the development of new grains (such as tritordeum) with the incorporation, testing and blends of different raw materials from other spheres.

regarding the future, given the context of demographic growth, technology will also be a crucial factor in experimenting, researching and developing alternative sources to animal proteins and/or in inventing intelligent systems that allow the nutritional value to be extracted from new alternative sources coming from other sources, such as seaweed, insects, new legumes, seeds, etc. likewise, there are technologies today in the field of agriculture, such as precision technologies, irrigation systems and solar energy, among others, that will be crucial in guaranteeing resources in the next 15 or 20 years.


Industry trends

technology and information are not only changing industries and production processes – they are also changing the ways we shop and consume, and they influence households and homes and will continue to do so even more in the next few years. in the graph above, we can see the still preliminary state of what might be called “connected homes,” which, beyond home automation, will change how we live.

the internet of everything – that is, the connection of things, people and data – will lead to many transformations, such as home logistics being joined to sensors and applications that connect not only household appliances but also living areas within the home such as the living room or kitchen, with functions including maintenance, supervision, repairs, shopping lists, recipes, etc.

the internet of everything will radically change homes and the way they are managed because in the next few years the interaction between the home and its occupants will happen not only inside the house but also with third parties outside the home who are essential to its functioning and needs: from repair services to the supermarket or fruit stand.

The Internet of Things: From the Intelligent Home to Intelligent Kitchen

For example, an intelligent digital kitchen will help to make shopping lists through an integrated tablet, sensor or device, either in the fridge or at some spot on the counter, so that consumers or users can manage their shopping whenever they want via the internet from their kitchen or their synchronized cell phone. another recent example of the way technology is reaching home kitchens is the recent release of the project and cookbook Cognitive Cooking With Chef Watson, the outcome of a partnership between iBm research and the institute of culinary education. through it, iBm’s famous intelligent computer, watson, uses a cognitive cooking system and is able to understand flavors and suggest different recipes because it has learned a host of theories on food pairings and on compatibilities and incompatibilities between flavors and textures.

the challenge will be to find the business models related to the internet of everything in the area of future digital and intelligent houses with hyperconnected consumers and new shopping and consumer habits.


Food & Beverage

Digitization leads to new consumer expectations, new habits and new demands. however, it does not affect each company or industry equally, nor does it connect identically to all consumers from different sectors.

the key issue lies in a precise understanding of how many of our consumers are connected and how they are connected. once we have identified this, we need to define the best way to interact with them – that is, first we must know and measure the real impact of digitization in our environs, in our competition and in our customers or consumers and, on this basis, we must adopt the right strategies. in this sense, each company must perform its own connectivity studies.

one of the most groundbreaking aspects of the digitization process is the ability to access a vast amount of data and information. the more connections and interactions there are, the more data will be available. the advantages and potential of mass data are widely recognized: companies that know how to administer and manage the information and data available are the ones that will gain efficiency and a competitive advantage. however, mass data make sense only if relevant information is obtained and analyzed – that is, mere access to a lot of information has no value in itself.

the challenge lies in filtering the vast amount of data and systematizing and interpreting them in order to make them an advantage and ensure that they translate into successful business models, sales strategies or new and more efficient processes for each company and sector in particular. that is, it is important to move from mass data to intelligent data but in the right way for each sector and each company.

thus, in the case of data on consumers, the challenge is not only to access the relevant data for a given product and business but also to organize and interpret them properly in order to gain insight into shopping behaviors and habits, so that we understand what customers want and can implement improvements in the business models.

A Connected, Informed Consumer: Challenges for Distribution

Are Our Consumers Connected? From Mass Data to Intelligent Data


Industry trends

there is an increasing number of companies that offer their customers the possibility of shopping via the internet. throughout europe, e-commerce is growing in double digits in the majority of countries and currently accounts for €312 billion (in B2c, business-to-consumer), 3.5% of european gDp.

The Boundary Between the Physical and Online Worlds Is Blurring

the impact of digitization in the field of distribution is unquestionable and also in the particular case of food and beverages, as illustrated by the fact that walmart, tesco and casino are among the companies that generated the highest volume of online sales in 2012.

Electronic and Mobile Commerce: Multichannel Strategies

Furthermore, if we center on the consumer, transparency and democracy are two concepts that are closely tied to mass data. we can find information on everything – everyone can express their opinion, share and evaluate a product or company. the same thing happens in the opposite direction: companies can learn a lot of information about their customers or potential customers. mass data are an opportunity and an advantage but they are also a challenge for users and companies – everything depends on whether or not they are used well. receiving and being the target of marketing or choosing personalized content matching personal tastes may be something consumers value, perhaps if they are tired of an excess of information that they are not always interested in or motivated by. however, the uncertainty about how much information and what type of data are available may generate a great deal of mistrust in a world in which people still value privacy, anonymity and the recently coined “right to be forgotten” despite our constant connectivity.

on the other hand, one of the factors that will be crucial in the field of data and information is the greater development of application program interfaces, which will allow for better interconnection between the data gathered in different interfaces and environments.

For example, data on a person’s health may become interconnected with other information in the field of restaurants, nutrition, recommended products or what a person with a given profile should or should not buy and eat, and all of this might be integrated, in turn, into “wearable” technology or a kitchen sensor. consumers may even become interconnected with stores or services that they have predefined. therefore, the transformation not only requires accessing, systematizing and interpreting the relevant data but will also come from an increased integration and interconnection of data from different sources.

source: www.emarketer.com

FIGURE 17. thE top 10: ClassIFICatIon oF REtaIlERs aRoUnd thE woRld wIth thE

hIGhEst IntERnEt salEs, 2012

Countryof origin

Retail sales(billions)


Food & Beverage

however, generally speaking, the food and beverage sector is still in the early stages of developing e-commerce compared with other sectors such as

source: euromonitor international19


FIGURE 19. thE Food and bEvERaGE IndUstRy In thE pERCEntaGEoF IntERnEt REtaIlInG salEs by REGIon, 2008–2014

electronics and other categories, as shown by the graph below:

likewise, its degree of development is also uneven by geographic region, as oceania and western europe are

the regions where internet-based food and beverage sales are the highest.

19 and 20 “online grocery: strategies for growth,” euromonitor international, october 2014.

FIGURE 18. volUmE oF REtaIl salEs woRldwIdE by CatEGoRy, 2008–2013


Industry trends

Delving into further detail, the countries with the strongest prospects for growth in the online food and beverage trade include china, south Korea and the United Kingdom, as illustrated by the graph below:

the leading actors in each of these markets include coFco womai, yihaodian (walmart), alibaba and JD in china; gs holdings, lotte group, shinsegae (e-mart) and tesco (homeplus) in south Korea; and tesco, sainsbury, walmart and ocaso in the British market.

21 “online grocery: strategies for growth,” euromonitor international, october 2014.


market size 2013 (Us$ billion)

FIGURE 20. IntERnEt REtaIl salEs In thE Food and bEvERaGE IndUstRy:maRKEt sIzE and GRowth pRospECts pER CoUntRy, 2013–2018

even though there is no single strategy when defining distribution in an environment of connected, informed consumers, there does seem to exist a consensus that determines that it should be multichannel – that is, it should address all the channels and fronts through which


Food & Beverage

consumers gain access and information and may end up buying. the boundaries between the physical and the digital are increasingly blurred, and the interactions between both consumer environments move from the traditional to the digital and vice versa. that is, consumers are still shopping in the traditional channels and physical stores but they also shop using the internet – they are not, nor will they be, mutually exclusive channels. this interconnection between the physical and digital world is illustrated graphically in a very widespread phenomenon: consumers who are in a physical store send messages and chat via their smartphones as they buy a given product, and they compare prices and share their questions or shopping decisions in real time on social media from the store itself.

there are different studies that segment the different digital channels according to age, and there seems to be agreement about the fact that the main users of smartphones and tablets for shopping are members of generation y and that there are sectors in which e-commerce has been particularly strong, such as travel and financial services. the following study by e-marketer22 reflects this issue and shows a sample of uses and purchases in the United states according to generation or age, sector and device:

source: www.emarketer.com

FIGURE 21. dEvICEs UsEd by U.s. smaRtphonE/tablEt UsERs FoR shoppInG,

by GEnERatIon and IndUstRy, oCtobER 2014

these figures are illustrative and may contribute to defining more precisely different multichannel strategies according to the different segments or consumers.

22 m. Dolliver, m., et al. (2015), “millennials and their smartphones: how many have them and what they Do with them,” emarketer, pp. 1–17.


Industry trends

multichannels can be dealt with in many different ways in the food and beverage industry. some companies guarantee that customers can purchase the same products in both physical stores and via the internet, with the same experience and services, while others combine online shopping with in-store pick-up, among other possibilities.

New Actors, New Business Models

one trend that is closely related to the digital environment and multichannel sales is the entrance of new actors into the value chain. indeed, it is more and more common to see companies from outside the industry with new business models. For example, amazon is offering a new format of online shopping through its amazon Dash system. other companies, too, such as instacart, use a mobile application to offer an internet shopping and home delivery service to match customers’ priorities. this business model has a network of people in charge of shopping for customers who have defined and identified their priorities, tastes and stores previously.

these are just a few examples of how digitization opens the doors to collaborative economic models and the entrance of actors that are initially outside the food and beverage industry. this field must be linked increasingly to companies from other fields, especially from the field of technology or small emerging companies with new ideas and solutions. in this same vein, and in the realm of the synergies between nutrition, health and technology, there are also noteworthy new alliances between actors from the food and beverage sector, from industry, the horeca channel and wholesaling, with members of the health sector, as well as with new actors in the digital and technology fields, which are offering “wearable” solutions and technologies from outside the traditional food and beverage industry with health-related data and nutritional recommendations.


Food & Beverage

Challenges and implications of demographic growth:

• the world population in 2050 will be 34% larger than it is today, and 70% of the population will live in cities or megacities:

- in addition to china, india, the United states, nigeria, indonesia and pakistan will experience demographic growth and urbanization processes.

- the population of europe will decrease between now and 2050, and the challenge will be the longevity of its population.

• this growth in the world population may be dealt with by increasing current production levels but it requires us to begin to adopt measures today:

- innovation and technology to develop raw materials, new manufacturing processes and new consumer patterns.

- investment and public policies.

• technology is paving the way for major headway in fields of research related to new raw materials, flavors and foods, and it will be increasingly important to experiment with, research and develop alternative sources to animal proteins and/or to invent intelligent systems that allow nutritional value to be extracted from new alternative resources (such as seaweed, insects, new legumes, seeds, etc.).

Challenges of internationalization:

• in a context of worldwide demographic growth, the internationalization of the food and beverage industry will continue to be one of the main engines of growth in the coming years.

• where should we begin? what markets are attractive today and will be attractive in the next decade?

ConClusIons

• the attractiveness index of the “vademecum on Food and Beverage markets” illustrates the countries that show objective conditions in terms of macroeconomics, population and consumption. the top 10 are the United states, china, germany, Japan, the United Kingdom, France, the netherlands, italy and canada.

• in terms of regions:

- europe, the United states and canada show attractive conditions from the perspective of consumer spending, imports and indicators of legal security and per capita income.

- asia has attractive conditions in terms of population, a rising middle class and prospects for demographic growth.

- latin america shows attractive conditions in terms of growth in the middle class as well.

- africa, especially nigeria, shows attractive conditions from the vantage point of growth in gDp, the population and the middle classes.

Challenges and implications of digitization:

• technology is the current and future solution to many of the challenges facing the food and beverage industry.

• agricultural and food and beverage processes are increasingly taking place in intelligent, innovative environments thanks to technology and the internet of everything:

- industries and factories are increasingly connected and have intelligent manufacturing processes.

- today, technology is a crucial factor in the sphere of r&D, and it will be so more and more. innovation will become even more important from the standpoint of products: new foods, textures and flavors; new grains; new nutritional sources; new raw materials, etc.


Industry trends

• the internet of everything will have a huge impact on connected and intelligent households, which will change radically the way we live, shop and consume.

- the challenge will be to find related business models in the field of future digital houses with hyperconnected consumers and new shopping and consumer habits.

- some areas of the home, such as the kitchen, offer a host of possibilities and business ideas related to logistics centers, shopping and decision making that are closely associated with the food and beverage industry.

- synchronizing the pantry and fridge with stores and supermarkets in an easy, affordable way, from a cell phone or any other device or sensor that allows shopping and other needs to be managed, will be a reality within a few years.

• the digital density will not affect all companies or sectors in the same way, nor will it connect all consumers equally. the key issue is understanding precisely how many of our customers are and will be connected and, once they are identified, to define the best way to interact with them.

• Digitization generates new consumer expectations, new habits and new demands. it also provides a great deal of data and information on consumers.

- the challenge lies in filtering the vast amount of data and systematizing and interpreting the data that are truly relevant to us (from mass data to intelligent data) so that they become an advantage and translate into successful business models, sales strategies or more efficient new processes for each company and sector in particular. they can also provide a great deal of useful information in the field of health, prevention and nutrition.

- the transformation will come not only from access to relevant data and interpreting this data but also from an increasing integration and interconnection of data from different sources.

• in the field of distribution, there is no single strategy but there is a broad consensus about the fact that it should be multichannel – that is, it should address all the channels and fronts through which consumers gain access and information and may end up buying.

- Digitization opens the doors to collaborative economic models and the entrance of actors that are initially outside the food and beverage industry.

- this field should be linked increasingly to companies from other fields, especially from the technology sector, which provides ideas and solutions.


Food & Beverage

rEFErEnCEs

Deloitte (2015), “global powers of retailing 2015: embracing innovation,” pp. 1–43.

Dolliver, m., et al. (2015), “millennials and their smartphones: how many have them and what they Do with them,” emarketer, pp. 1–17.

e. Káganer, J. zamora, and s. sieber, “5 skills every leader needs to succeed in the Digital world,” IESE Insight, 18, third quarter of 2013.

Fao (2009), “how to Feed the world in 2050,” pp. 1–35.

FiaB and Kmpg (2015), “retos y perspectivas de la industria de alimentación y bebidas en españa,” pp. 1–27.

gifra, J., et al., st-374-e, “vademecum on Food and Beverage markets 2015: selling across continents,” iese, may 2015.

iese (2014), “los i-motores del sector,” iese industry meetings, pp. 1–27.

Kasriel-alexander, D. (2015), “top 10 global consumer trends for 2015,” euromonitor international, pp. 1–37.

— “top 10 global consumer trends for 2014,” euromonitor international, pp. 1–21.

“online grocery: strategies for growth,” euromonitor international, october 2014.

United nations (2014), World Population Prospects: The 2012 Revision – Methodology of the United Nations Population Estimates and Projections, Department of economic and social affairs, population Division.

United nations (2014), World Urbanization Prospects: The 2014 Revision – Highlights, Department of economic and social affairs, population Division.

United nations (2014), “measuring the information society report 2014: executive summary,” itU, pp. 1–41.


Industry trends

19th Food and BEvEragE Industry MEEtIng 2015

Agenda

May 26, 2015

welcome

prof. Jordi canals, dean, iese Introduction: program and vademecum 2015prof. Jaume llopis, academic director of the meeting, ieseFernando pasamón, partner for strategy, consumer industries and distribution, Deloitte

socioeconomic trenDs

today’s topics that will shape tomorrow prof. antonio argandoña, iese Changes in the Global Economy and their Consequences for worldwide Consumption ira Kalish, chief global economist, DeloitteQ&a with the participants

engaging tomorrow’s consUmer

Global Consumer trends Daphne Kasriel-alexander, consumer trends consultant, euromonitor internationalpanel with a new Generation of Consumersmoderator: prof. iñigo gallo, iese

trenDs anD implications For the inDUstry

new Industrial solutions Dr. Béatrice conde-petit, expert on food science and technology, Bühler new technologies maria company, director of marketing, 3-D printing, hewlett-packardmoderator: Fernando pasamón, partner, Deloitte


Food & Beverage

trenDs anD implications in consUmer liFestyles

miguel Ángel Fernández, director of marketing, electronics and household appliances, lg electronics spainJorge lang, director of innovation for southern europe, intel ianko ignatiev, co-founder, edamam moderator: raimon ripoll, partner, Deloitte

trenDs anD implications For DistriBUtion

prof. sandra sieber, iese Interpretation and responses of El Corte Inglés on the future of distributionvíctor del pozo, director of mass market purchasing, el corte inglésmoderator: prof. miquel lladó, iese

FooD anD Beverage gloBal awarD 2015

to georges plassat, ceo, carrefour

closing session

pedro astals, president, FiaB alfonso merry del val, president, angeD prof. Jaume llopis, academic director of the meeting, iese Fernando pasamón, partner for strategy, consumer industries and distribution, Deloitte


Industry trends

Academic Directors

aCadEMIC dIrECtIon andCo-organIzatIon

maria CompanyDirector of marketing,3-D printing,hewlett-packard

víctor del pozoDirector of mass market purchasing,el corte inglés

pedro astalspresident,FiaB

Jaume llopis CasellasAcademic directorSenior lecturer on Strategic Management,IESE

Co-organizer

miquel lladó Lecturer on Strategic Management,IESE

Fernando pasamón Partner for Strategy, Consumer Industries and Distribution,Deloitte

Jordi CanalsDean,iese

Speakers

antonio argandoñaprofessor,iese

dr. béatrice Conde-petitexpert on food science and technology,Bühler


Food & Beverage

Jorge langDirector of innovation for southern europe,intel

Speakers

Ianko Ignatievco-founder,edamam

miguel Ángel Fernándezmarketing Director he&ha,lg electronics spain

Raimon Ripollpartner,Deloitte

alfonso merry del valpresident,angeD

sandra sieberprofessor,iese

daphne Kasriel-alexanderconsumer trends consultant, euromonitor international

Iñigo Galloprofessor,iese

Ira Kalishchief global economist,Deloitte

www.iese.edu/IIM

barcelonaAv. Pearson, 21 08034 Barcelona, Spain (+34) 93 253 42 00

madridCamino del Cerro del Águila, 3 28023 Madrid, Spain(+34) 91 211 30 00

new york165 W. 57th Street New York, NY 10019-2201 USA(+1) 646 346 8850

munichMaria-Theresia-Straße 1581675 Munich, Germany(+49) 89 24 20 97 90

sao pauloRua Martiniano de Carvalho,573 Bela Vista01321001 Sao Paulo, Brazil(+55) 11 3177 8221

IESE Business School

IESE Business School

iesebs

iese