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Our Food Future & Creating value
from Commodities case study
HBI550 / HBM250 TRENDS IN MARKETING
Dermott Dowling
Wed 11 Se...
Source: Brian Robins (June 29, 2013) http://www.theage.com.au/business/genetically-modified-crops-crucial-graincorp-chief-...
Introduction
 Director @Creatovate
Innovation & International
Business Consultancy
 16 years Food & Beverage
12 years A...
The Global Hunger Challenge
• The Green Revolution in
1960s lifted global food
production by 150% over 50
years
• We need ...
Global Irony - An Obesity Epidemic
Figure 1. Global Prevalence Rates of
Undernourishment and Obesity
Source: FAO for preva...
Dairy Commodities
Source: Dairy Australia Spot Price Report – Aug 13
International Market August 2013
•Early signs of a pr...
Higher Income diets more resource intensive
• Taste for protein
and sugar
• As average
earnings grow
diets change and it
p...
Summary causes & shifts in global Food
& Bev in future years
 Population growth
 From 7b to 9.5b by 2050
 Climate Chang...
Top 10 Global F&B Companies
Sources: Company websites & http://www.rediff.com/business/slide-show/slide-show-1-worlds-bigg...
Top Global Retailers
Top Retailers Country of Origin Turnover 2012 US$b
1) Wal*Mart USA $444b
2) Tesco UK $112b
3) Carrefo...
Global retailing is not easy
Number of Countries Operating
•Grocery retailers
– Carrefour 38
– Wal-Mart 15
– Tesco 13
•Gro...
Foreign Retailers Stumble in
China
Within any particular country, such
as China, what matters is local—
not global—scale.
...
Value Creation in Commodities
NZ$6.12 KgMS US$5/Kg HK$99/900g
A$5.43 KgMS (0.40cPL) $A5.31/Kg A$15.05/Kg
Milk is Milk is M...
Anlene – Expert bone
health brand
From bulk milk powder in bags to highly concentrated value added milks…
• First launched...
Conclusion
 The future is “uncertain” and certain
 We all need to eat and by 2050 that’s 9.5b of us!
 Consolidation of ...
References
1. ANZ Bank (2012) http://www.anzbusiness.com/content/dam/anz-superregional/AgricultureInsightsGreenerPastures....
Bibliography
• Company websites: Major Retailers & Consumer Packaged Goods companies as listed
• Dairy Australia, J. Dropp...
Dermott Dowling
Director
T: +61 400 040 195
dermott@creatovate.com.au
www.creatovate.com.au
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Our Food Future: How to Create Value from Commodities case study

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Looking out to 2050 what are some of the mega-trends that will impact on our food and beverage landscape as growers, processors, manufacturers and marketers of consumer packaged goods.
Global population growth past 9b by 2050 combined with increased urbanisation, changing diet patterns in the developing world and water shortages and climate change will impact detrimentally on food supply and exacerbate demand for protein and sugar and other soft commodities.
Food manufacturers will continue to consolidate as they attempt to extract efficiency from farm to shelf and retailers will grow globally, albeit with greater changes due to localisation challenges in global retail.
Fonterra case study on how an integrated supply chain from farm to shelf has increased returns to shareholder returns from cow to shelf using highly segmented nutritional products marketed to life stage needs segments.

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Our Food Future: How to Create Value from Commodities case study

  1. 1. Our Food Future & Creating value from Commodities case study HBI550 / HBM250 TRENDS IN MARKETING Dermott Dowling Wed 11 Sep 2013
  2. 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. 3. Introduction  Director @Creatovate Innovation & International Business Consultancy  16 years Food & Beverage 12 years Asia Pacific  Corporate experience Lion (National Foods) Foster’s Fonterra
  4. 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) http://www.youtube.com/watch?v=XdBPZ9we4rk&feature=youtu.be Australia’s Hunger Challenge 9b by 2050
  5. 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. 6. Dairy Commodities Source: Dairy Australia Spot Price Report – Aug 13 International Market August 2013 •Early signs of a promising season in NZ and Australia, … have not dampened buying in a market that simply cannot get enough product. •The biggest mover in price terms has been WMP, up a further US$200/t this month largely on the strength of heavy Chinese demand, but also as South-east Asian buyers act to secure requirements in the absence of long-awaited price relief.
  7. 7. Higher Income diets more resource intensive • Taste for protein and sugar • As average earnings grow diets change and it puts pressure on soft commodities which will increase in price (Chunn, 2012, AFR) Source: ANZ Bank (2012) ANZ Focus: Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand, P.2
  8. 8. Summary causes & shifts in global Food & Bev in future years  Population growth  From 7b to 9.5b by 2050  Climate Change  Growth in GDP in developing world changing diet (more protein)  Limited food productivity growth  Fixed/reducing land supply  Water shortages
  9. 9. Top 10 Global F&B Companies Sources: Company websites & http://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-an retrieved on 23/9/12 Rank Company Est. 2012 US$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 $30 USA
  10. 10. Top Global Retailers Top Retailers Country of Origin Turnover 2012 US$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 $54b (2011) 18) Wesfarmers (Coles) Australia $52b (2011) Sources: Company Websites http://www.insideretailing.com.au/IR/IRNews/Top-25-retailers-5718.aspx and http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Industries/C Viewed on 6/5/2013
  11. 11. Global retailing is not easy Number of Countries Operating •Grocery retailers – Carrefour 38 – Wal-Mart 15 – Tesco 13 •Grocery suppliers – Coca-Cola 200 (approx.) – Danone 120 – P&G 180 • Source: ‘Retail Doesn’t Cross Borders, HBR, Apr 12, p.109
  12. 12. Foreign Retailers Stumble in China Within any particular country, such as China, what matters is local— not global—scale. Guidelines for Success 1) In global retailing, depth will beat breadth. 2) Be open to local joint ventures 3) Go heavy on local adaptation 4) Lean toward relying on local managers  Anil Gupta and Haiyan Wang (2013) Retailing is a Multi-Domestic Industry
  13. 13. Value Creation in Commodities NZ$6.12 KgMS US$5/Kg HK$99/900g A$5.43 KgMS (0.40cPL) $A5.31/Kg A$15.05/Kg Milk is Milk is Milk isn’t it? SGD$19.40/800g SGD$18.45/800g Y 27.90 / 1L P 410/900g A$18.30/Kg A$17.40/Kg A$4.80/L A$11.20/Kg S$3.95 / 4x110ml A$7.62 Raw fresh milk Commodity Ingredient Branded Consumer Good Branded Consumer SegmentedFormat Value addLife Stage Functional Segmented value addFormat Value add Processing value add
  14. 14. Anlene – Expert bone health brand From bulk milk powder in bags to highly concentrated value added milks… • First launched in Taiwan in 1991, • US$300 million sales (2008) ++ • Anlene is now the established market leader in over 10 countries across Asia, and the Middle East. • Core target: women aged 40+, bone health is very relevant. • Fonterra spent > US$50m on bone health research and US$15m directly on Anlene • Funded & 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. 15. 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  Australia has significant productivity challenges to overcome in global food manufacturing & processing vs. NZ & Asia  Expect more competition, faster innovation and new rules and regulations to navigate Global Food Challenge = Australia’s International Opportunity
  16. 16. 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
  17. 17. Bibliography • Company websites: Major Retailers & Consumer Packaged Goods companies as listed • Dairy Australia, J. Droppet (2013) Spot Price International Commodity Report, August • http://siteresources.worldbank.org/EXTPOVERTY/Resources/336991-1311966520397/Food-Price-Watch-March-2013 • http://www.theaustralian.com.au/business/in-depth/australia-the-clean-green-food-bowl-of-asia/story-fni2wt8c-1226623 • 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 •  Anil Gupta and Haiyan Wang (2013) Why Foreign Retailers Stumble in China, 6 September, http://www.businessweek.com/articles/2013-09-06/why-foreign-retailers-stumble-in-china#r=hpt-fs viewed on 9.9.2013
  18. 18. Dermott Dowling Director T: +61 400 040 195 dermott@creatovate.com.au www.creatovate.com.au

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