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Farmer wants a value creator

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With estimates that the global population will expand by 2.7 billion by 2050, …, pressure is mounting for farmers to lift yields by 50 per cent to keep abreast of growth in global demand. …

With estimates that the global population will expand by 2.7 billion by 2050, …, pressure is mounting for farmers to lift yields by 50 per cent to keep abreast of growth in global demand.
We need to create conditions for innovation and then invest so that innovation moves from the lab to the farmer’s fields.
The Australian food industry as a whole supports 317,000 direct jobs, and a flow through of
about 1.6 million jobs. Yet Australian food producing and manufacturing sectors have
struggled to receive the recognition and support they deserve. Australia’s food
manufacturing exports are still very strong, worth $17 billion a year, more than education and
tourism. Australia also sits on the edge of a very fast growing and immense opportunity to
feed the booming middle class of Asia which is forecast to grow from 500 million people to 3
billion people in the coming decadesii.With the inevitable change of diet that increasing
affluence brings to our Asian neighbours we can expect to see a shift towards a more protein
rich diet and a desire to enjoy the good food, wine and cheer that many of us in Australia
enjoy every day.
Innovation in the food industry is sorely needed to meet the changing lives and needs of
today’s consumers, customers and communities.
Business innovation and international business need to be high on your priorities so you can
do more with less and learn from the fast emerging mega-markets in our region and their
immense demand potential for the Australian Food Industry.
Dermott Dowling is the founding Director of @Creatovate www.creatovate.com.au
Innovation & International Consultancy. Creatovate consult to businesses on how to create
and embed innovation processes and craft international business strategy, market entry
plans and set up or outsource international business services.

Published in Business , Technology
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  • Read 'Wheatbelly' or watch Dr. Davis / Wheatbelly related videos on YouTube. Also, notice that none of the naysayers have rebuked the science. Personally, I stopped eating wheat almost 6 weeks ago. I lost 14 pounds, and not eating wheat was all I did. I am having blood tests done by a cardiologist on Thursday. We'll see if there are significant changes in my cholesterol.
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  • Thanks Rick, bit harsh to put all the blame on modern wheat. Unhealthy diets, lack of exercise and over indulgence in 'not so good for you foods' has a lot to do with the obesity epidemic as well. Nothing we can not fix if we all - community, business & governments put our heads and hearts together and make smarter choices. Best regards, Dermott @Creatovate
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  • Modern wheat is the bane of the planet. It is the number 1 cause of obesity and diabetes. Now it is showing up on the list of foods bad for heart disease. Will we continue to dig our graves?
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  • Welcome everyone. I am here to talk to you a little bit about globalisation of food and beverages. Hopefully I might also encourage you as I talk for the 45 minutes, to not write off food; in terms of where you go with your own careers in international business. It’s not Apple or Google, and it’s not BHP or Rio or the other large companies that you will see and hear about a lot in the media. But what I am hopefully going to do today is talk to you about an industry that is omnipresent. We eat every day and we see it everywhere we go and wherever we shop. However, we often neglect it. It is neglected in the media as it is seen as a bit of a boring industry and it is neglected a lot by the Australian Government, and yet we have some enormous potential I would suggest - global potential, and you all have great potential to make an impact in this vital industry.
  • We need to create conditions for  innovation  and then invest so that innovation moves from the lab to the farmer’s fields.” – Rachel Kyte, Vice President of the World Bank “ Trade makes consumers less vulnerable to local shortages and the higher prices caused by bad weather, disease or civil disorder.  Free trade  helps feed a hungry world.  …Governments must encourage open trade and a fair, transparent, rules-based system to everyone’s gain, including the environment. And companies that are directly or indirectly in the business of feeding the world have a responsibility to promote trust-based free trade .” – Greg Page, Cargill Chairman and CEO Now, why would do I say it is an important industry? Purely and simply because, if you think about it these are two very, very powerful leaders of two very large multinational corporations (Paul Polman, CEO of Unilever a 51 Billion Euro business and Daniel Servitje is the CEO of Grupo Bimbo a 14 Billion USD business) saying that if you can imagine today as we sit here today [this was in Rio at the G20], all of the food that has been produced over the past 8,000 years, now needs to be produced again but in the next 40; to feed the growing world population of an estimated 9 billion people at 2050. So, you hear a great deal about technology trends, but one fundamental thing about humanity is that we all need to eat. The other fundamental thing that I am going to talk to you about in this presentation is that humanity is – and all of us as humans - are so successful at what we do that we are starting to overrun the planet and that is going to create some huge global challenges and issues, however, we must also not become too anxious and nervous as crises and challenges create opportunity.
  • So, just a little bit about my background and where I have come from and why I am here talking to you about food. I started my own business consultancy a year ago specialising in innovation and international business and my career background is very much from the fast-moving consumer goods or consumer packaged goods industry and it is very much at an international business background. Some of my students today were asking me what country I came from because my accent sounds so twisted. I was born in New Zealand, which is predominantly an agricultural economy, and I joined Fonterra as a graduate marketing trainee post my tertiary education. Fonterra is a world leading multinational dairy co-operative with a very solid graduate marketing program. The New Zealand Dairy board as they were known back then quickly sent me to Asia about 9 months into my career firstly to Singapore and then onto Taiwan. After 3 years working for Fonterra in Asia I moved to the UK and worked in licensed retail marketing for a couple of years and then I migrated to Melbourne in 2003. I spent 3 years working for Foster’s Brewing International marketing their beer brands across Asia Pacific and then I spent another 7 years at National Foods, now known as Lion Dairy & Drinks P/L leading the marketing of their international business for 5 years and 2 more years leading their Stage-Gate idea-to-innovation process. Why have I set up my own consultancy focused on the innovation and international business? Because I have a passion for innovation having studied the Masters of Entrepreneurship and Innovation here at Swinburne University Australian Graduate School of Entrepreneurship. In addition, the food industry is going to need an enormous amount of innovation. Historically it does not make the headlines for innovation like IT or other related tech industries, but we are going to need to be more innovative about how we produce food, make food and what food we serve up to future generations and I will tell you a little bit about why we need to be more innovative in the food industry.
  • So basically there’s a thing called the green revolution in the 60s and 70s, and I am not referring to the happy times where people were smoking pot in the Height Ashbury, San Francisco while listening to Jimmy Hendrix and Janis Joplin. The Green Revolution I am referring to was really a revolution that took place in global agriculture. So what happened was we were seeing a significant lift in the productivity on farms as a result of tractors, harvesters, fertilisers and what you would see everywhere nowadays in terms of modern start of the art farming processes and technologies. If you venture out into any of the big grain belts in Western or South Australia or Northern Victoria or you went to a large scale professional dairy farm you will see firsthand, how farmers are extracting significantly more grain out of an acre of farmland or more milk from a dairy cow than they were 30 or 40 years ago. That green revolution started predominantly in the post-world war II era and exploded in the 1960s and 1970s lifting global food production by about 150% in 50 years. This was good because our global population was growing very dramatically in tandem since the 1950s. However, we are going to have to lift it again by another 75% by 2050 as the population grows to 9.5 billion. Why this is significant is because as you can imagine, one thing in the world is finite and that is land, and the other thing that is more finite is good arable land. And a lot of the arable land we use for farming – and Australia is a really good example - is very close to the coast and major urban cities and populations. I was off visiting my web design guy in Werribee and driving down there and Werribee is a great place for growing vegetables and it has also now one of the biggest residential developments going on in outer Melbourne called Manor Lakes. So all of the places that used to grow our food are being encroached upon by increasing urbanisation, and then we’ll dig down a little bit more and talk about how climate change is having an impact. You would have to have your head in the sand not to hear every day about a drought or a cyclone or something like that. This is a little statement here from Anthony Pratt, who is son of the late Richard Pratt and he owns a very big packaging empire, he’s saying that “Australia at the moment is feeding 50 million people more than their own needs”, so he is saying that we are feeding 70 million people”... however we could quadruple that and feed up to 200 million people”. The reason Anthony Pratt was saying this at the Global Food Forum in April is because there is a booming middle class emerging right next door in Asia where effectively we will see the middle class swell, and that’s the reason Prime Minister Gillard and the rest of the country are all busy writing white papers on Australia and the Asian century. The Asian middle class is forecast to grow from 400 million to 3 billion. With that economic and wealth growth will accompany a major change in dietary behaviours. But the diet of our neighbours throughout places such as Indonesia and China and countries like that, Thailand, there has been traditionally a more starch based diet and maybe with a lot of seafood and a little bit of Pork and Chicken. But as they increase their wealth they will want a nice red steak and they will also like a nice glass of red wine to go with it, and with the sheer volume of people that are coming into the middle class, that is going to create a huge demand and opportunity.
  • Notes:  For undernourishment, data for 1990 in this graph are the same as data reported by FAO for period 1990-92; data for 2002 in this graph are the same as data reported by FAO for period 2000-2002; and data for 2008 in this graph are the same as data reported by FAO for 2008-10. FAO defines prevalence of undernourishment or chronic hunger as the status of persons whose food intake regularly provides less than their minimum energy requirements. The average minimum energy requirement per person is about 1,800 kcal per day (FAO [2013]  Hunger Portal ). Ironically, at the same time as we’re facing a hunger crisis or a need for the word to increase its food productivity we are seeing this... a surge in obesity. We are confronted with the headlines in the media everyday about obesity and undernourishment. So obesity and undernourishment are starting to go hand in hand. When we talk about the changes in dietary behaviours from traditional diets -which we are eating at home and which are very much raw foods picked up from the wet markets to people going to fast food which is processed and it doesn’t have the same goodness in it, so we are seeing a surge in obesity. So we are probably going to face the two crises hand-in-hand #1; how do we feed the feed the world? And #2 how do we slim the overweight and obese?
  • Overweight and obesity constitute a global epidemic even in a world of high and volatile food prices.   As food prices remain high and, arguably, increasingly volatile, unhealthy calories tend to be cheaper than healthy ones. This is the case of junk food in the developed world, but also of less nutritious food substitutes in poor households in developing countries coping with recurrent food (and other) crises. In fact, overweight is not an epidemic restricted to rich countries. Half of the world's overweight people live in nine countries, including the United States and Germany, but also in China, India, Russia, Brazil, Mexico, Indonesia, and 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. 31 The prevalence and numbers of people affected by overweight and obesity have increased in the last three decades, during both periods of low and high international food prices. So as one malnutrition problem, undernourishment, is falling, others, overweight and obesity, are increasing rapidly (figure 2). In 2008, the number of overweight adults was 1.46 billion, of which 508 million were obese. 29  Even conservative projections predict truly shocking numbers in the future if current trends are unabated: 2.16 billion adults might be overweight and 1.12 billion obese by 2030. 30  And such increases should be expected across all regions and in countries like China and India (figure 3). And you could easily be mistaken for thinking that all of the fat people live in America or Australia or the United Kingdom but you would be wrong. Obesity is not only a first world issue, it is also prevalent across sub-Saharan Africa, South America, Central America, Middle East and Asia and there is a whole host of factors there: inactivity, less exercise, diet is a key part of that and like what we mentioned before a little bit about the undernourishment. So we are going to see some pretty interesting dynamics happening around the world and we cannot assume that obesity is purely down to people eating too much; in fact it could be that they are eating the wrong types of foods. The food industry needs to take a good hard look at itself around how they serve food to consumers; so again, really good opportunities for innovation around a lot of new food products. It should come as no surprise that some of Australia’s best global business success stories are things like ‘Boost Juice’ because you know, Genine Allis in that case had a firsthand experience as a mother racing around trying to pick up her kids and drop them off to school and sport that, there was really no healthy food options for a busy person on the go. So she thought, you know “I will create this Boost Juice, I don’t want a meal I want something that isn’t a hamburger and that isn’t going to make me fat and put me in the grave early” So, watch this space because the other thing that goes hand in hand with crisis is opportunity.
  • This is something too, we don’t really hear enough about in Australia or in the global media, but if you dig around and you have a nose for finance and investing, or you play around investing in the share market, you will see some of the analysts start to talk about “soft commodities.” What do they mean by soft commodities; you’ve got hard commodities which are the mining, you know the minerals; iron ore, gold... it has almost monopolised the 7:30 finance report of ABC with Alan Kohler every night of the week however, in the background there are soft commodities. Soft commodities are the things that we eat and there are three or four pressures that are coming to play on absolutely everything here, causing soft commodities to surge, and they are also causing increased volatility in soft commodities. Just before the GFC in 2007 we headed into what they called the first ever soft commodity super-cycle. You guys here may have heard questions in the media about petrol, why is it now US$150 per barrel? Why is it so expensive? Is OPEC hoarding it? Are the speculators of Wall St doing things to manipulate the market? Petrol and oil also underpin food production. So off the back of that oil price surge was a massive spike in early 2007 before the GFC in soft commodities. Grain, rice, sugar... and it got to the stage where it was getting pretty scary in South-East Asia where countries like Thailand who are very big exporters of rice started saying now hang on a minute, maybe we should just hang onto our rice, and the places like the Philippines started saying things like we really needed that rice from you guys. Because food is very much linked to Geo-political safety and security and that’s why tariffs and subsidies exist in places like Europe etc. What was happening in 2007 in these countries where you have a large population that live at or below the poverty line they spend a huge amount of their daily wages on food. All of a sudden rice doubles, or bread doubles then it’s not unsurprising to see people in Haiti having a riot or people in Egypt wanting to overthrow their totalitarian government and a lot of it might also just come down to their daily food struggle, to just putting food in their bowl. So the GFC may have been a bad thing for economics but it was probably a good thing for food commodities. But already we’re seeing, and the world food watch reported in March that we are starting to see a return to soft commodities prices up at levels that were not seen since mid-2012 and that we are also pushing back to where we were pre GFC. Now there are a couple of other factors that impact on soft commodities: climate change, we’ve seen floods, all sorts of things like that. And the other thing that impacts on soft commodities is –again back to oil- as we run out of oil and the countries think ‘right, we’ve got to reduce our reliance on oil, let’s get into growing agri-crops for bio-fuels. You get competition in places like North America for food production for feeding people and, corn starch for ethanol and things like that so we will see if some of these issues really start to come to life in the years ahead. And I guess, underpinning all of this and underpinning climate change, and underpinning food prices, and all that sort of thing.
  • There is another elephant in the room that we do not hear talked about much but it has been talked about by countries like India and China with fervent discussion. We will probably soon start to reach global chit-chats between all the leaders and that’s population growth. Underpinning a lot of our problems on the planet is population growth and it is something that governments do not really go out and talk about, because as you can imagine population growth is good for economic growth. There was a strong debate going on during the Howard government in the later years between Dick Smith the entrepreneur and John Howard who was saying ‘Let’s plan for a big Australia’ which is 50 million people at 2050, and Dick Smith was saying hang on, can we feed 50 million people sustainably at 2050? And you know, all of those people were going to be migrants and the reality is that population growth feeds economic growth. But population growth also causes stress, stress on the planet. Here is a short clip, it is probably out of date now but it was done by The Economist back when the world just ticked over 7 billion people explaining a little bit about how population growth has surged and what they predict for the future because of course no-one could really predict the future and what’s going to happen but this little clip if it works might shed a little bit of light on population and the world and where it has been. [ Video clip ] That was done a while ago, like I have mentioned, that was done before we hit 7 billion so I think that video was from the back end of 2010. I am seeing a lot of comments now that we are going to hit 9.5 billion by 2050 so, you know, these are just predictions but you saw too how it really surged recently from the 60s to now. And you see now why it is really crucial for countries that have high birth rates, obviously trying to control it by law but it was always vital to countries like India to lift them economically because we know there is a correlation between economic wealth and how many children people have. The oldest insurance policy in the world was that if you were born really poor in India or Africa you would have 10 kids and hope that one of them might make it and they would look after you when you were old and could not work in the fields. So the world has an interest in economic growth and getting people up to a level of relative wealth but also there has got to be a clear interest in how the world can control population and how everyone can feed each other and share the food. International trade will be really vital. In the G20 Rio Climate Summit the CEO of Cargle from America spoke about the importance of free and unrestricted trade to try and smooth the bumps in the commodity road and to make sure that everyone shares their food in the future. So you can see there are some underlying causes here behind the crises and opportunities in food. Population growth is the key driver, it’s the driver behind everything, and it’s the driver behind climate change. The world will talk about carbon emissions and a lot of that comes down to just the sheer volume and number of people who are on the planet and the use of energy. Also, the growth and GDP will cause dietary changes, more protein so people will switch from carbohydrates to protein diets. We have got limited food productivity growth so a lot of productivity gains have been (the easy ones have been) made so it’s going to get a lot harder to increase productivity on the existing land, and then we have got that reduced land supply, and then we have also got thrown into the mass water shortages. So we’ve seen that in Australia with drought and it’s occurring in places like China. We’ve got water in the North, not so much in the South. China has water in the South and not so much in the North. So you will hear about water –not water wars-, but water will become a topic too.
  • One company worthy of a top 10 spot but difficult to find out its food assets from its industrial assets is Cargill with US$134b sales. Cargill has diverse commercial interests and food interests from farm to shelf. Additionally P&G is an $84b CPG company but predominantly non food & beverages but does have some big food brands e.g. Pringles Now in the middle of all of that in the land of global business and opportunity, we have seen some really big companies keep getting bigger; so global business certainly operates in food. However, the biggest food company, you could argue is not even on this list, I have put nestle at $98 billion, last year they were at $90 billion. I refreshed the charts since last year and they have jumped by another 8 billion. Cargill , which is a privately held company from the United States, is a US$134 billion business and they are into everything. They do a lot of food commodity purchasing and processing, and are also into other businesses. I do not know if anyone has heard of Archer Daniels Midland Company from America? Has anyone heard about them in the news in Australia recently? They just swooped in and bought a business in Australia? When I was doing this research for this lecture last year, I had never even heard of these guys I was like ‘Who is Archer Daniels Midland? And how did they become a $91 billion company?’ And I started looking and they process soy beans and food commodities and things like that and they have just flown over the last 12 months and scooped up Graincorp , which is one of Australia’s last listed big grain businesses which they purchased for several billion dollars. So they clearly see the value in agriculture, and these guys up the top ten of the global food companies like Archer Daniels Midland and Cargill and JBS and Tyson; they really look long when they buy. They are coming into countries like Australia and buy into industries where nobody in Australia would be investing because they cannot see the opportunity over the horizon. Graincorp has major grain silos and facilities at about 6 of Australia’s ports and processes a lot of Australia’s grain for export.   Unilever from Holland, Pepsi from the US, some of the usual suspects that you would have heard of. Coca Cola, ABInBev (The world’s biggest beer company), some companies like JBS from Brazil which is the world’s biggest beef grower and Tyson and other businesses in America. They are down around the $30 billion mark but they are still pretty impressive sized businesses. I was looking at something on YouTube for this and there was something by a Food futurist talking about ‘As China increases it’s consumption of red meat’ which they are doing as their wealth increases. What he said was that if every person in China just eats 10 pounds more red meat per year, which is not unforeseeable because they are eating such a low percentage compared to the countries that are doing well economically, that would be the entire American beef production. So these small increases in quantity, with large populations that are economically growing like China, really create a surge in demand. Not so much happening in India because of the vegetarian nature in their diet and they are not so interested in eating beef for religious reasons. You will see these companies keep getting bigger and you will see them keep buying, and if you look at most of the Australian brands on the shelves, a lot of them are owned by the top 20 global food multinationals.
  • AFGC consists of around 150 companies, mainly reflecting the Australasian subsidiaries of global companies such as Colgate Palmolive or Coca-Cola, the national big boys and a few smaller regional or local producers. Together, the members represent 80 per cent of the gross dollar value of the sector, which totals some $108 billion. It is Australia’s largest manufacturing sector, employing more than 310,000 people (per AFGC figures). http://www.businessinfocus.com.au/index.php/2012/03/australian-food-grocery-council/ viewed on 1/10/2012. That’s what I have done with this next slide which is just showing you that out of all of the countries’ brands in Australia there are not many that are left in Australia. There is Bega Cheese Cooperative which I think now is on the share market or bits of it, so watch that space. Cadbury’s was never Australian it was always British, it is owned by Kraft. The Coca-Cola Company we know them well, Smiths Chips which was an Aussie chips brand is Pepsi owned. Mainland Cheese, which is actually a New Zealand brand, is still owned by a New Zealand company Fonterra but that is really purely and simply because Fonterra is a co-operative; so the farmers who supply Fonterra own the company. Berri, which was one of the brands that I worked on which was an Australian Co-op in the past that grew oranges and processed fruit, in South Australia is now in foreign hands and the list goes on and on. You probably could go down the top 100 brands you would be struggling to find a lot of them that haven’t been acquired because if you are a successful food brand, you will pretty quickly get picked up by the big companies. And that creates opportunity too if you are an entrepreneur and you want to start your own food brand.
  • And in on the flip side it’s interesting in Australia we think about retailers as being really, really big. You know behemoths like Woolworths. You know, like ‘Woolworths is so big, and they are such an evil supermarket chain. And Coles is always Down, Down, and all their suppliers are out and they are so big and oppressive’. They are actually not that big on a global scale because they are so focused in Australia. They are big companies here and they are highly profitable companies and they are very good at what they do. But they are not big internationally. When you compare them to Wal-Mart which is nearly ten times bigger, Carrefour from France, which is again twice as big, and then you have Metro from Germany. Some interesting companies like Aldi, a store privately held and hard to find numbers on, is very successful and growing very fast both here and in the UK with their cost effective food operation and setup. I love it as a shopper going into Aldi when you scan your items if you are not at the end of the checkout catching them they just fall on the floor and then you ask them for bags and they say they are going to charge you for them. I mean the whole thing is just built to strip out costs; and they have been highly successful at it.
  • No grocery retailer today operates in all five of the world’s biggest markets. Retailers face serious obstacles in going global: It takes time to break into foreign markets, returns accrue only over time, and foreign entrants have to take on well-established local incumbents. Some retailers’ experiences suggest that to succeed abroad, firms must bring new things to market; focus on differentiation, not synergies; and enter at the right time. The Retailer’s Golden Rules of Globalization First explore all options for profitable growth in your home market. Continued success in the home market is necessary, but not sufficient, for success internationally. Unless you enter by acquiring a strong local player, make sure you bring something new to the market. Focus on local success and differentiation in each new country before exploring and leveraging synergies across your portfolio of countries. Don’t enter too early; you will fail. Don’t wait too long. Opportunities dry up, and competitors may become unassailable incumbents. Ref: HBR, Apr 12. But what is noticeable and interesting and different is when you look at food suppliers and food brands and then you look at food retailers, is that it is not that easy to dominate the world in retail. And each of those top ten retailers has got a bloody nose somewhere in the world of retail, possibly with the exception of Woolworths and Coles in the sense that they have not really ventured outside Australia too far and wide. But if they venture outside Australia and up into Asia and start throwing their weight around and telling all of the other Asian supermarkets ‘we’re going to beat you up and we are going to do a great job and become the Woolworths of Indonesia’ you might find they leave with a bloody nose like Carrefour have. Carrefour was in Indonesia and it sold out, they sold out of Malaysia, they sold out of Singapore. They could not make any money. Carrefour is doing well in China. Wall-mart went to Germany to teach the Germans how to do retail and got a bloody nose from Aldi. So retailing is very much a global game, but by the same token it’s a local’s game. If you are really good and strong locally and someone comes in and tries to knock you around it is quite hard and that’s why you probably haven’t seen a hell of a lot of retailers come in and invade the Australian shores. We have seen Costco come in and have a go and it has taken them a long time to get a foot hole. And we have seen Aldi come in and it has taken them a good 10-20 years to start getting some critical mass because it is quite hard to unseat the incumbents. And there is a great article on The Economist if you are interested in reading about retailing in China called ‘ Walmart versus Wumart’ . It talks about the big wide aisles of Wal-Mart and the professional nature of their shopping strategies and their staff, versus Wumart where it is sort of chickens piled high and dishevelled shelves but everyone is still shopping at Wumart because it’s low cost and it’s well run and the products are fresh and it’s tailored to local tastes. I am not saying that Wal-mart is doing badly in China but they may not necessarily be doing brilliantly. And this article was written in the Harvard business Review last year in April where it talks about retail doesn’t cross borders and why. And it’s pretty interesting because out of those top 3 global retailers: Carrefour, we have got somebody here from France who could probably tell us that they are very dominant in France are they not? But as they have grown out into Asia and they have gone out to China and Indonesia and Malaysia and things like that, they have also jumped across to Latin America and done very well in places like Columbia, they have sort of taken their eye off the ball at home and all of a sudden they have started losing share at home. Tesco shares a similar story. I do not know if you guys have been following their exploits but they have sold their supermarket chain in the US and they are concurrently saying they are underinvested in the UK which was their stronghold where they were number 1, Aldi is now rising up, Sainsbury has gotten better, Aldi is here and those guys are doing a great job so we had better retreat and defend home base. So sometimes you will see Retailers go out, go into other countries with their systems but that does not necessarily mean that they will succeed. Whereas, when you look at the number of countries that the grocery suppliers are in, like Coca-Cola, you would be pretty hard pushed to not find a Coke anywhere in the world now, maybe with North Korea the last remaining outpost. Likewise Procter & Gamble with the Gillette razor blade or with their shampoos and things like that so you tend to find the food brands and the consumer goods brands will get there quicker, obviously they can be sold by any retailers whether they are foreign owned or local. But the foreign retailers when they go into international territories find their formula and processes from home will not necessarily always work. Also there are some interesting case studies about how those retailers have entered those markets. I am more familiar with Asia that with any other part of the world but some retailers has done a great job at getting in there and carving out a space for themselves. Some have done a pretty ordinary job and ended up selling out to the locals and leaving with a lot less money in their pocket than when they arrived.
  • With total brand sales of US$300 million (€205 million), it’s the biggest brand of its kind not only in Asia but worldwide. Anlene is available in 17 countries across Asia, Africa and the Middle East. First launched in Taiwan in 1991, Anlene can today be found all across Asia. Its core target is women aged forty-plus, to whom bone health is very relevant. To date, Fonterra has spent more than US$50 million on bone health research and US$15 million directly on the development of Anlene, increasing our understanding of osteoporosis and the role of dairy in its prevention. The experts behind Anlene have funded, and been involved with 18 clinical trials relating to bone health. Sources: New Nutrition Business, 2008 & http://www.fonterra.com/global/en/our+products/our+brands/anlene viewed on 22.7.13
  • History of Berri   1943 "Berri Fruit Juices" were first produced at the Berri town in the Riverland region of South Australia. 1945 Riverland Co-operatives join to supply canned fruits to armed forces during World War II. 1950’s Berri dominated the Riverland and local fruit economy supplying Australia wide and to the UK and Middle East. Juice was a by-product of table fruit production. 1961 Berri Fruit Juices became a Cooperative. At this time the company was producing only Can Juices and Cordials. 1969/70 Introduction of Fresh Product. Annual turnover of $5million 1970s & 80s Expansion Australia wide through acquisitions with manufacturing plants in Melbourne, Sydney, Newcastle, Brisbane and Perth. 1982 Company was unprofitable due to focus on product disposal rather than on understanding consumer demand. Clearly, a change in marketing was needed. 1985 Cooperative converted to a company. Acquired Riverland Food Products Company. 1986 Doug Shears acquires a major shareholder of the company. Berri Limited was established. Doug Shears creates a partnership venture in Indonesia. 1988 Company acquired the “Patra” Orange Juice business and also “Mr Juice-Fresh Orange Juice” business. Launch natural spring water under the Pura label. 1980s & early 1990s Technology implementation and Innovation bring expansion and Brand recognition 1989 Daily Juice Company launched with significant investment in production capability in Australia and Indonesia. 1997 Financial restructure. Head Office moves from Adelaide to Melbourne and name changes from Berrivale Orchards to Berri Ltd. 2004 A deal with the San Miguel Corporation of The Philippines is announced. The deal delivers San Miguel 50% equity in Berri, with Doug Shears, Berri's major shareholder and former chairman retaining the remaining 50%. Berri, the Australia's biggest juice company was valued at $335 million at the time. 2005 San Miguel acquires the remaining 50%. National Foods dairy and Berri Ltd juice businesses are merged. 2007 San Miguel sells National Foods Ltd to Kirin Holdings Company Ltd (Japan) 2009 Kirin Holdings Company Ltd (Japan) acquires remaining shares of Lion Nathan and merges with National Foods to create LION This is the last slide I thought I would share with you and I am open to questions and discussion. I wanted to share a case study on successes and learning of an Australian business that went next door to Indonesia, which is Berri juice. I spoke before about Berri juice. I spoke to you before about Berri juice; it was in the top 10 brands, in Australia. It’s the number 1 brand of juice. It might be losing market share at the moment, and it has a very interesting history. Berri was a co-operative founded in Berri, which is a town in South Australia, if anyone has been there, and they originally started sending fruit juice and canned fruit pieces to armed forces for the soldiers during war times, which was often a way that a lot of Australian businesses ended up getting into international business. The troops go to war, they do not necessarily want to go there but they end up in the middle of nowhere, better send them some rations and fond memories of home. Or better send them some Foster’s to drink after they have shot at the opposition. So off goes Berri juices with them and they went through a stage of being a co-op and doing all sorts of interesting things and then I think they entered into a period of a bit of stress. And one of Australia’s least well known, but probably most successful food entrepreneurs Douglas Shears saw the opportunity to invest some money to help the business to grow. Shears invested, I think it was either the 1980s or 70s with them. They also had some bank debt, I think the ANZ bank was with them, and he slowly increased his share in the business and as he got into that business he realised there was a lot of untapped potential in that business and he put good management teams in, and he moved the bank out and he eventually bought all of the shares and it became his business. Now he was very entrepreneurial. He never worked for anyone, having always worked for himself for 22 years, and this was not his first corporate entrepreneurial play. He had previously been involved in spinning off Uncle Toby’s as part of a management buyout and they had built that brand up and then flipped it for $300 million to Goodman Fielder, who later ended up selling it to Nestle for about $800 million. Shears, had some money and he was ‘prepared to play the long game’ to use his words on this one. So what he did was he went around Australia buying up different regional fruit juice players. So he built up a national platform for manufacturing, and then he overlayed on top of that as well as Berri Juice brand they launched the Daily Juice freshly squeezed brand which became the number 1 Australian juice brand in the Australian fresh juice category. And then, being an entrepreneur you are always looking for the exit door, so before you even go in and buy a business you need to be thinking about how am I going to build this up? Who is going to buy it? Who is going to sell it? And Coca-cola, obviously, was doing well in soft drinks and people were switching from just drinking soft drinks to drinking juices and drinking waters and they wanted to increase overall share of throat so they said ‘we’ll buy that, thank you Mr Shears, that looks like a nice business, there you go here is $300 million to serve you right’, and then the ACCC ran their ruler over it and said ‘ooh we don’t think you can do that because this business now is about 50% of the Australian fruit market, and if we give that to Coca-Cola Amatil there really is not going to be enough competition, Coke will just squash everyone! Pardon the Pun. So, sorry coke, as much as you wanted to buy that business, you simply cannot buy Berri’. So Doug Shears and his management team had a very real imperative to grow that business internationally because all of a sudden the buyer is going to have to come from overseas. Berri crafted a strategy for international expansion called FEAR, Fast Expansion across the Region. They very much went on ‘Let’s get Berri juice out there fast all across Southeast Asia. Let’s put flags on maps and hopefully somebody will see it as not only the No. 1 juice brand in Australia, but they will also see this as a really powerful regional brand and want to buy us’. And, when you’re looking at where to go, one of the closest neighbours and a country with enormous economic opportunity and potential is Indonesia. So, in the early days, and it could have been a little bit of ‘Berri wants to go to Indonesia’, but I also think it was a little bit of the right person approaching them and knocking on the door. And I wanted to talk to you guys about whether it is Company initiated international expansion or whether it was initiated from an approach to the company. So a young entrepreneur from Indonesia approached them and said ‘I would like to do sort of a joint venture with you, I would like to import your long-life juices, that you make in Australia that are great into Indonesia, but I also think that there is a potential here because the Australian guys have those lovely fresh juices that you sell in the chiller. We don’t really have them over here in Indonesia, we mainly just drink ambient juice drinks; which are pasteurised and sold on the shelf. I think that with your guys’ expertise you could come to Indonesia and we could set up a joint venture, we could set up some factories’. So this was all in the early 90s and being an entrepreneur he might have flown up there, I’m not sure, but they shook hands, they signed and did the deal. So they had – in terms of successes- they had a very early entry into the Indonesian market and the other thing that was important was that they had this local joint venture partner. Because Indonesia at the time was still a developing economy that was starting to show signs of real promise, but it did have Governance issues at a Government level and it did have regulations and things like that so they did need a local partner. They also saw this opportunity; ‘Let’s get into the chilled juice market segment’...’So let’s not only sell juices on the shelf that are long-life and that traditionally have lower prices and lower margins. Let’s get into the chiller’. The Joint Venture set up a factory in Jakarta, and they also set up a factory in Bali. And they went off on all sorts of innovative and exciting tangents. They supplied Daily Juice, fresh squeezed juice, to all the 5-star hotels and you could get it in at your breakfast buffet and you could get it in your bar – with your vodka and orange. They sold the long-life juices in the supermarkets and simultaneously to all of that development happening was the retail rollout and expansion of these big international retailers that were coming into Indonesia like Carrefour and their local equivalents. Then interestingly, as sometimes can happen in Asia, a financial crisis came along to wreck the party. Before the GFC, 10 or so years earlier, there was the AFC. A lot of you guys may not have heard of the AFC, but it was the Asia Financial Crisis. So Asia was charging, and everybody was talking about the Asia tiger economies, of which Indonesia was one and then all of a sudden it almost self-imploded as countries like Indonesia, Thailand and the Philippines and a few others which basically did not have the right governance and business protocols in place and were borrowing too much, and it was getting out of control and all of a sudden the market’s got nervous and everything came crashing down and everyone went into crisis management and debt control. The World Bank came down along with all of their backers from the US, Europe etc. They said ‘Hey. You Asian guys you’re great! You’re fast-moving you’re innovative and you’re highly capable but you’re doing all sorts of dodgy stuff, now we’re going to teach you how to run your country and business economies like you should and here’s the money and here’s the conditions that it comes with. Now, when they went to do all of that it was literally riots and crises in the streets. There was banking crises in Indonesia, there were real riots. I was working for Fonterra in Singapore at the time and it was, you know, ‘How do we get the guys out of Indonesia safely?’ at the same time as the entrepreneurial regional CEO was saying ‘Why don’t you get the vans and load up the vans with milk powder and go to the bank where all of the people are queuing up to try to get their money out of the shaky banks –simultaneously to that they were trying to burn down the shopping malls and chase the Chinese who they believed had all the money. Our regional CEO was saying ‘Sell the milk powder to the people who are queuing up trying to get their life savings out.’ So there was all of this stuff going on, it was brilliant, sort of evacuate at the airport, I want to get out, please can I get out? ‘Nope, go and sell the milk powder to the people at the banks and then you can get out’. Now what was innovative and what Doug Shears did during this crisis which you probably would rarely see a corporate do –he doesn’t decide ‘oh okay, Indonesia looks a bit topsy turvy right now I think it’s probably a good time for me to shut that Berri Indonesia joint venture down and quit my losses’, he thinks ‘I’d better get on a plane and just go and see what’s really going on up there. So he gets on a plane and he flies up there and he meets with the joint venture partner and the joint venture partner says ‘Oh, look this is what has happened, you know. There’s people out there in the streets rioting, food prices have escalated, people are not sure about their means to live, people believe that the 3% of the population who are Chinese have all of the money and they are all after them’. Doug Shears said ‘yes, yes, yes well are there any opportunities?’, The JV partners say ‘Well yes, because nobody is advertising on the TV anymore and the ad rates have gone down massively on the TV, they have dropped by about ten times’. “ Are people still eating?” “Yeah, those who have got money.” “Well who are we selling to?” “We’re mainly selling to those who have got money because we’ve got the chilled juices.” And what’s the problem you’ve got? Oh, well I’m finding it hard to get my customers to pay me on time, all those independent supermarkets that may be closing. Yep, right. But is there any opportunity? Yeah, there’s good opportunity in the long run. Okay, well what do you need? I need some more money. So then you just put more money in. So Shears is like alright go out, advertise like crazy while the rates are cheap. Let’s secure all of those listings, do everything that you can. Start being an entrepreneur on how you sell. So, all of a sudden, when everyone else is retreating for the exit door and all of the other multinationals, Berri Indonesia are going in and going harder. And they started getting some massive traction and started getting market leadership in the chilled juice segment and started getting really good share in the shelf space because there are not a lot of people wanting to sell during that time. So that was a really good example of how to exploit an opportunity in a crisis for their mutual benefit. In 2011, a year after I have left the international division, unfortunately I heard that Lion was selling their share in this joint venture, and they were effectively going to quit their losses –for want of a better word- and exit the market after 10-15 years’ good work. And you sort of think well, why is that, you know, why are you guys backing out of such a good opportunity after all of those years of hard work? And there were some interesting things that started coming out as people were going through the work. First of all they were saying well, we did not really adapt and innovate fast enough we started selling Aussie juice and it was giant big bottles, and it was 100% juice and everyone in Indonesia didn’t really have a lot of money and they really wanted drinks and they needed low price drinks. And when you talk to the joint venture partner, because of course, I had firsthand experience with it, they would repeatedly tell you ‘we need this product’ or ‘we need that product’ and ‘we need you guys to come up and help us make this product’. And the reality was, the international business in Lion was a “pimple on the pumpkin”, or a small part of the Lions’ domestic business which was... they were the market leader in Australia and they had a lot of problems in Australia. They were like ‘nah, we can’t, you know, have the international guys off investing in factories in Indonesia, we have got to sort out this problem, with our too many factories in Australia, or we have got to sort out these things. The other thing that was noticeable was, they carved out good market share in long-life 100% juice on the shelf that was not super profitable –it wasn’t unprofitable but it wasn’t making a lot of money. And then they carved out good market share in the chiller, but unfortunately the pricing in the chiller wasn’t like it is in Australia. In Australia if you go to get your juice on the shelf, it might be about $1 per litre, and if you go to get it out of the fridge it’s about $3 per litre. Whereas in Indonesia when you went to get in on the shelf it was about $1 per litre and when you went to get it in the fridge it was about $1 per litre. Now hang on, that doesn’t work, because doing business in the fridge is a lot more expensive and if your product runs past the date code it comes back to you. So that wasn’t good and the majority of the market for juice in Indonesia was low-priced juice drinks. So, drinks sold in plastic bottles that maybe had about 5% or 6% juice in them or 10% juice, they were just mainly water, a bit of sugar and some flavour. They would sell for about A$0.50c per unit through all of the convenience stores or the mom and pop shops. You would have to make that juice very, very cheap, and probably about a quarter of that price and you might sell it for about half of that price. And to be honest, the parent company didn’t have that expertise so they didn’t come from a background where they knew how to make low cost products at high volumes. They also didn’t respond to backing the local joint venture partner to get into that segment. At the same time, Coca-Cola Amatil, who is a bottler in Australia for Coke, was learning these things (the hard way etc.) and saw this opportunity and said yeah we’re really going to get in and do this, this low priced juice thing. They had the machinery, they had the distribution systems, and then when they decided to advertise their brand, Minute Maid, when they launched that they went out and spent like $10 million on advertising on T.V so they were really pouring money into Indonesia and they could see the opportunity, whereas Lion could not. The other thing that happened simultaneous to all of that was Lion took their eyes off Indonesia because it was a small business. It was worth $3 - $4 million and they had a $3 billion business in Australia while they were busy buying other businesses. So they were buying other businesses. They were buying cheese businesses and consolidating a major Dairy business in Australia and that was the big news inside the big Corporate. So every time the CEO stood up to talk it was always about those issues. It was never really about what’s happening in Indonesia; Even if Indonesia was going to be a really big potential earner in 20-30 years. Lastly was that lack of capital investment and people investment. If a company wants to go international a lot of people think it’s just a matter of pushing some products out there and hoping they sell. The reality is that you’ve really got to invest a lot of capital money, whether it’s money, or whether it’s human capital so sending your best people up there. And that’s a little of what the retailers have been finding out about. Retailers like Carrefour have done well in China, certainly there are really experienced French leaders over there working but when they are over there working they are not working on the French business and all that sort of thing. So, certainly Companies need to put their people in these markets and work with the locals. They need to put their systems into training the capability but they need to invest. There is often a lot of putting money in before you can get some money out. The businesses that we looked at the start, the 10 businesses like Nestle and Unilever see that as their bread and butter so they are not going to shy away from the market. So if they are going to Bangladesh or Africa at the moment they don’t mind putting a hell of a lot of capital into it and they don’t mind sending their best people there because they know that they are going to get a return on that.
  • Be persistent, patient and play the long game. Go there, get on the ground, build strong partnerships, recruit and nurture local talent, adapt your business processes and products to the marketplace. In summarizing, if there’s anything that I wanted to give you guys to take away – I didn’t want to sort of put too much in the presentation on theories and trade and that- I think just sort of have a really brutal grassroots, you don’t need to be a rocket scientist level of analysis. We have a global hunger challenge coming so the awareness of it is there through the charities and through the initiatives like Bono going to Africa and Live Aid concerts around feed the world, and the reality is that there is enough food to feed the world at the moment but unfortunately most of it gets wasted in the West. But by the same token there is an emerging global hunger challenge in the sense that the population just keeps growing and we’ve got a finite amount of land to produce food. The other thing is, as the wealth grows those very populous nations like China and populous parts of the world because that’s also where the economic growth is at the moment it’s Asia, Latin America, Africa... and there is a lot of people there. Their diets change so they’re going to need more food. That actually creates a massive opportunity; global opportunity for Australia if they want to position themselves here. We would certainly hope that once Australia has finished digging all of the sand out of the sand pits and selling that to the Chinese and Indians to build the bridges and the buildings that they think a little about doing something with all of the grass and the goodness that comes out of the soil, because the guys are going to have to eat while they’re kicking back in their nice new apartments in Shanghai and Mumbai while they are watching their DVDs on their 40 inch plasma TVs. They are going to want to eat and drink good food. And I’m guessing that they’re not just going to want to eat a bowl of rice. They’re probably going to start having dinner parties like Master Chef and wanting to slice up a pork belly and a beef steak and glaze it and wash it down with a beautiful red wine or craft beer. So there is mass of opportunity. The future is uncertain. I think that’s the classic one that everyone likes to throw around in innovation and entrepreneurial scenes right now as people say ‘The world is so uncertain now and everything’s happening at light speed and if you’re not on an iPad or a hover board you’re going to be left behind’. Well, yeah to a certain degree we know that technology is going to keep coming at us at increasingly faster rates. But we also know with certainty that population will keep growing and humans will keep breeding. And we also know with certainty that climate change will keep coming at us; so the famines, the floods and the droughts are going to keep coming. We also know with certainty that the manufacturers are going to keep consolidating faster, because they’re going to have to do that to survive. They’re going to have to process more efficiently and they’re going to have to stand up against these bigger retailers. So with all of that internationalisation there is immense opportunity. Although I only used one example, it has its challenges. So when all of the Aussie businesses wake up tomorrow and the next day and start to think, we really should get going and start selling some food to Asia. You know we really should follow Julia Gillard’s lead and go to China. And you would notice that when she went to China she had miners with her, and bankers with her, but she didn’t have any food producers with her which was one of the criticisms which was made by Anthony Pratt at the Global Food Forum in April, where was the food delegation? Why hasn’t Australia signed this deal with China for the free trade agreement? But when you go to your nearest neighbours they are different places to what we call home, and the people are wonderful, the people will welcome you with open arms but there will be challenges. They will need international business students like you guys, particularly if you have come from overseas. The other thing about international business that I always like to encourage people to look at it as a career choice is that it’s a bit like if you follow football or soccer, depending on where you were born. You can play in the local leagues, you know like your local club league and you can get a promotion and you can go and play in your regional league and you can get another promotion and you can play in the premier league and then you can get a promotion and play champions league Football and then you can go and play World Cup Football. International business is like World Cup Football. If you don’t get your pass on to the next guy or the next girl in front of you and you don’t slot that goal in the back of the net you can be downright sure that the guys on the other side are going to be really swift operators. Whether they are the crack local team, wherever you are, or they are some international powerhouse made up of superstars. So if you enjoy business and you enjoy moving fast, thinking fast, navigating rules, operating with limited information, you will probably really enjoy a career in international business. I encourage you to keep pursuing your knowledge journey and when you’re ready to give it a nudge, jump into the work force.
  • Here are all my references if you want to read more about all of this as well.
  • Anthony Pratt (18-Apr-2013 Global Food Forum, Melbourne) Even with our large expanses of desert, over the next decade and beyond, Australia will have almost 20 times more arable land per head of population than China, India and Indonesia, and 60 times that of Japan. Overall, that’s 20 times the potential productivity of the arable land available to some 3 billion people in Asia. So in the most fundamental way, and well into the future, Australia is uniquely placed to produce surpluses of valuable commodities. The middle class in Asia is forecast to grow from 500 million to 3 billion consumers. Australia as Asia’s “clean, green food bowl” can be more than a marketing slogan. But for that to happen, we need imagination and innovation. Australia’s food manufacturing exports are still very strong: they’re worth $17 billion a year, more than education and tourism. The food industry as a whole supports 317,000 direct jobs, and a flow through of about 1.6 million jobs. Yet the food producing and manufacturing sectors have struggled to receive the recognition and support they deserve. High-profile industry disruptions, such as steel or car plant closures, make the news and attract political attention. They tend to attract subsidies -- because if a car factory closes, it makes an “atomic” impact, whereas food industry closures are more scattered. Today I’d like to highlight six proposals that can help us turn aspiration into implementation. Number one: we need accelerated depreciation for new manufacturing investments in food. Two: we need a massive boost in food and beverage sector innovation. Governments can’t create innovation. But they can help drive it by providing financial incentives, partnerships, and much greater R and D support. A third proposal: Australia needs to follow the American example in anti-dumping practice by putting the burden of proof on the offending party to prove that they are not doing it. Rather than the current situation in Australia, where the onus is on “the dumpee” to prove that he is not being dumped on. Fourth: Let’s find a way to suspend – not abolish-- payroll tax for food manufacturers. Fifth: Competition policy should be more relaxed to allow food companies to consolidate under certain conditions, thus enabling greater profitability and so encouraging companies to stay here. And sixth: As a matter of urgency, we need to get more young people into agricultural science. We’re only producing 750 graduates a year, and there are over 4,000 vacancies in the food industry.

Transcript

  • 1. Farmer wants a Value Creator HBI550: TRENDS IN INTERNATIONAL BUSINESS HBM250: TRENDS IN MARKETING Dermott Dowling Tuesday 23 July 2013
  • 2. Source: Brian Robins (June 29, 2013) http://www.theage.com.au/business/genetically-modified-crops-crucial-graincorp-chief-20130628-2p2rg.html viewed on 21/7/2013 With estimates that the global population will expand by 2.7 billion by 2050, …, pressure is mounting for farmers to lift yields by 50 per cent to keep abreast of growth in global demand. ''Therefore yields have to double to around three tonnes a hectare, yet they've been flattening. 'This increase would have to occur against the backdrop of climate change and declining soil quality, ''which will make it more difficult to achieve this''. Alison Watkins, GrainCorp Chief Executive, June 2013)
  • 3. Introduction  Director @Creatovate Innovation & International Business Consultancy  FMCG Background  Asia Focus Lion (National Foods) Foster’s Fonterra  16 years Food & Beverage  12 years focus on Asia Pacific
  • 4. 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%. • ANZ Bank estimated an additional $710b in Australian agri-exports to 2050 on Asia- led growth. (Cornell, 2013) (Anthony Pratt, Global Food Forum, Melbourne, 18-April-2013) Australia’s Food Opportunity 9b by 2050
  • 5. 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)
  • 6. 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. Figure 2. Projected Obesity in Selected Areas Source: FAO (March, 2013)
  • 7. 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 Increasing & Increased Volatility
  • 8. Higher Income diets are more resource intensive • 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) Source: ANZ Bank (2012) ANZ Focus: Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand, P.2
  • 9. Summary causes & shifts & trends  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 Feeding 9b @2050
  • 10. Top 10 Global F&B Companies Rank Company Est. 2012 US$b Revenue 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 AB 1366 InBev $40 USA 8 JBS 1953 $37 Brazil 9 Tyson 1935 $32 USA 10 Mars 1911 $30 USA Sources: Company websites & http://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-and-be retrieved on 23/9/12
  • 11. Australian Top 10 Grocery Brands Top 10 Brands Owner Origin of Owners 1. Cadbury Kraft Inc.. USA 2. Coca-Cola The Coca-Cola Company USA 3. Bega Bega Cheese Ltd Australia 4. Smith’s PepsiCo USA 5. Kleenex Cottonelle Kimberley Clark USA 6. Birds Eye Simplot USA 7. Mainland Fonterra NZ 8. Berri Lion (Kirin) Japan 9. Sorbent SCA / PEP 50/50 JV SCA Sweden 10. Colgate Colgate-Palmolive USA And where their parents come from… Sources: Nielsen top 100 brands report 2010 viewed on AFN website 6.5.13, Company Websites, Google
  • 12. Top Tier Global Grocery Retailers Top Retailers Country of Origin Turnover 2012 US$b 1) Wal*Mart USA $444b 2) Tesco UK $112b 3) Carrefour France $101b 4) Costco US $99b 5) Kroger US $97b 6) Metro Germany $87b 7) Lidl Germany $84b 8) Aldi Germany $73b (2011) 17) Woolworths Australia A$49b (FY 2012) 18) Wesfarmers (Coles) Australia A$34b (FY 2012) 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%20bus Viewed on 6/5/2013
  • 13. Global retail 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 Operating • Source: ‘Retail Doesn’t Cross Borders, HBR, Apr 12, p.109
  • 14. Anlene – Expert bone health brand From bulk milk powder in bags to highly concentrated value added milks… • US$300m sales, biggest brand of its kind, not only in Asia but worldwide. • Available in 17 countries across Asia, Africa and the Middle East. • Launched in Taiwan in 1991 • Core target is women aged 40+ years • Fonterra has spent more than US$50m on bone health research and US$15m directly on the development of Anlene • Anlene have funded, and been involved with 18 clinical trials relating to bone health. Sources: New Nutrition Business, 2008 & http://www.fonterra.com/global/en/our+products/our+brands/anlene viewed on 22.7.13
  • 15. Foster’s Asia 3 different countries 3 different tales 1998 JV Greenfield Brewery, built in Aurangabad Sold to SABMiller for US$120m in 2006 1998 Acquisition of two breweries (Central & Southern Vietnam) from BGI for $80m Sold to APB for US$105m in 2006 1993, acquired majority stakes in Shanghai, Guangdong & Tianjin breweries, Sold Guangdong and Tianjin breweries for $18m in 1999. Sold Shanghai to Suntory for $20m in 2006.Sources: Foster’s Annual Reports 99-06
  • 16. Foster’s India Pvt Ltd Challenges Successes  Early mover  Excellent people  Experiential marketing  F1  Cricket & BBQ  Fashion  Sales & Marketing • 1 country, 28 states • Taxes across borders • No advertising • Tap contracts (bars) • Low consumption
  • 17. Foster’s Vietnam Ltd • No. 4 or 5 on entry • Tap contracts (bars) • Low awareness • Low A&P budget Challenges Successes  Sales & Distribution  Draught beer (Angel)  Local brands  Biere Larue  BGI  F1 to Go Karts (localisation)
  • 18. Shanghai Foster’s Brewery Ltd • 1 country, 22 provinces • Oversupply / capacity • Price deflation/cost inflation • Wholesalers • Local to International price gap • Culture gap Challenges Successes  Formula 1  Shanghai race  F1 Sunday nights in Shanghai bars/hotels  Local beer (Guangming) – 2km from brewery sales drive
  • 19. Indonesia • 1986 Doug Shears creates a partnership venture Indonesia • 1996 PT Berri Indosari Joint Venture est. 80(Berri)/20(Local) • 2011 Lion exits JV selling back their share to local partner Successes Learning  Early entry – local insight  Fresh/Chilled Juice  Innovative marketing  Capital injection during Asian Financial Crisis 1997  Ambient & Chilled Juices  Foodservice & Retail  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
  • 20. 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
  • 21. References 1. ANZ Bank (2012) http://www.anzbusiness.com/content/dam/anz-superregional/AgricultureInsightsGreenerPastures.pdf , Issue 4, retrieved on 21 July 2013. 2. 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 3. Cornell, Andrew (2013) Our next boom. Australian Financial Review Magazine, 31 May, pp: 18-21. 4. 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). 5. 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. 6. 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. 7. Marcel Corstjens and Rajiv Lal (2012) Retail Doesn’t Cross Borders: Harvard Business Review, April, pp.: 104-111. 8. 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#ixz viewed on 23.9.12 9. The Economist (2011) We are 7 billion http:// www.economist.com/blogs/dailychart/2011/10/world-population retrieved on 23/9/12 10. http ://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-and-beverage-companies/20120416.htm retrieved on 23/9/12 11. http://www.globalharvestinitiative.org/index.php/2012/06/notable-food-security-quotes-from-the-rio20-and-g20-conferences/ viewed on 1.10.12 12. 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 13. Nielsen top 100 brands report 2010 viewed on AFN website 26.9.12, Company Websites, Google 14. 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 view 23.4.13
  • 22. Bibliography • Company websites: Major Retailers & Consumer Packaged Goods companies as listed • http://siteresources.worldbank.org/EXTPOVERTY/Resources/336991-1311966520397/Fo • http://www.theaustralian.com.au/business/in-depth/australia-the-clean-green-food-bowl-o • Stevens et al., "National, Regional, and Global Trends.“ http://www.pophealthmetrics.com/content/10/1/22 viewed on 29.4.2013 • http://www.fonterra.com/global/en/Our+Products/Our+Brands viewed on 22.7.2013 • https://www.new-nutrition.com/ viewed on 22.7.2013 • http:// www.ausfoodnews.com.au/2012/07/23/australian-supermarket-giant-releases-full-year-re viewed on 23.7.2013 • http:// media.corporate-ir.net/media_files/IROL/14/144042/fy12/2012_Full-Year_Results_Presen viewed on 23.7.2013
  • 23. Dermott Dowling Director T: +61 400 040 195 dermott@creatovate.com.au www.creatovate.com.au