Going global in food and beverage manufacturing, marketing and retailing is easy is it not? The big get bigger and fewer in number. The little guys keep popping up in their local niches. The middle gets squeezed. Its not all beer and skittles expanding your exports in Asia and its even harder if you are a retailer. The opportunity is there for business to capture in the long run we have more hungry mouths to feed and innovation is sorely needed to grow and feed the population sustainably.
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Going global in food & grocery retailing business
1. GLOBALISATION OF FOOD &
BEVERAGES
HBI241N AUSTRALIAN GLOBAL BUSINESS
PERSPECTIVES
Dermott Dowling
5 Oct 2012
2. ―Imagine all the food mankind has produced over the past 8,000 years. Now
consider that we need to produce that same amount again — but in just the
next 40 years if we are to feed our growing and hungry world.‖
– Paul Polman, CEO of Unilever, and Daniel Servitje, CEO of Grupo
Bimbo
―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. Export restrictions and trading bans
isolate local markets and give farmers little incentive to expand production
for the next season. 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
Source: http://www.globalharvestinitiative.org/index.php/2012/06/notable-food-security-quotes-
from-the-rio20-and-g20-conferences/ viewed on 1.10.12
3. Introduction
Director @Creatovate
Innovation &
International Business
Consultancy
FMCG Background
Asia Focus
Fonterra
Foster’s
National Foods (Lion)
15 years F&B
11 years F&B focus
on Asia Pacific
4. Globalisation of Australasian
FMCG
My own working experience to date
Company Ownership Structure Owner / Country of Date of Acquisition
Origin
Fonterra Co-operative New Zealand n/a
Foster’s Subsidiary of PLC SAB Miller / SA-UK 2011
National Foods Ltd Subsidiary of PLC Kirin / Japan 2008
(now Lion Dairy & San Miguel Corp / 2005
Drinks Pty Ltd) Philippines
Do we have anything left? Vegemite has gone to Kraft. Hoadley's Violet
Crumble is with Nestle. Kiwi and Nicholas Aspro went to Sara Lee. Arnott's
Biscuits were gobbled by Campbell Foods. Holden is really General Motors. I
could go on and on . . .
K. Dunstan (2011) The Age ―Our lost heritage is enough to drive a person to
drink‖
http://www.theage.com.au/opinion/society-and-culture/our-lost-heritage-is-enough-to-drive-a-person-
to-drink-20110922-1kn4u.html#ixzz27GS2ENT5 viewed on 23.9.12
5. Fundamental drivers & shifts in
global Food & Bev in recent years
Population growth 9b by 2050
From 7b to 9b by
2050
Climate Change
Growth in GDP in
developing world
Limited food
productivity growth
Water shortages
6. Top 10 Global F&B Companies
Ran Company Establishe 2011 US$b Country of
k d Revenue Origin
1 Nestle 1866 $87 Switzerlan
d
2 Archer Daniels 1923 $81 USA
Midland Company
3 PepsiCo 1965 $60 USA
Sources: Company
websites & 4 Kraft 1903 $54 USA
http://www.rediff.com
/business/slide- 5 Coca-Cola 1886 $47 USA
show/slide-show-1-
worlds-biggest-food- 6 ABInBev 1852 AB $39 USA
and-beverage- 1366 InBev
companies/2012041
6.htm retrieved on 7 Tyson 1935 $32 USA
23/9/12 8 JBS 1953 $31 Brazil
9 Mars 1911 $30 USA
10 Unilever 1930 $23 (€47b) UK/Holland
7. Australian Top 10 Grocery Brands
& their Parents
Top 10 Brands Owner Origin of Owners
1. Cadbury Kraft Inc. USA
2. Coca-Cola The Coca-Cola USA
Company
3. Bega Bega Australia
4. Smith’s PepsiCo USA
5. Kleenex Cottonelle Kimberley Clark USA
6. Birds Eye Simplot USA
7. Mainland Fonterra NZ
8. Berri Lion (Kirin) Japan
9. Sorbent SCA / PEP 50/50 JV SCA Sweden
10. Colgate Colgate-Palmolive USA
Sources: Nielsen top 100 brands report 2010 viewed on AFN
website 26.9.12, Company Websites, Google
8. Top Global Retailers
Top Retailers Country of Origin Turnover 2010 US$b
1) Wal*Mart USA $405b
2) Carrefour France $120b
3) Metro Germany $91b
4) Tesco UK $90b
5) Lidl Germany $77b
6) Kroger US $77b
7) Costco US $70b
8) Aldi Germany $68b
20) Woolworths Australia $36b (2011)
23) Wesfarmers (Coles) Australia $25b (2011)
Sources: http://www.insideretailing.com.au/IR/IRNews/Top-25-retailers-
5718.aspx and
http://www.deloitte.com/view/en_AU/au/industries/consumerbusiness/e278116
0f279d210VgnVCM3000001c56f00aRCRD.htm viewed on 2.10.12
9. Global retailing is not easy
Number of Countries Operates
Grocery retailers
Carrefour 38
Wal-Mart 15
Tesco 13
Grocery suppliers
Coca-Cola 200
(approx.)
Danone 120 Source: ‘Retail Doesn’t Cross Borders, HBR, Apr 12,
p.109
P&G 180
10. Case study – Foster’s in Asia
3 different countries – 3 different tales
India
1998 JV 1993, acquired
Greenfield 1998 Acquisition
of two breweries majority stakes
Brewery, built in in Shanghai,
Aurangabad (Central &
Southern Guangdong &
Sold to Tianjin
SABMiller for Vietnam) from
BGI for $80m breweries, Sold
US$120m in Guangdong and
2006 Sold to APB for
US$105m in Tianjin
2006 breweries for
$18m in 1999.
Sold Shanghai
Sources: Foster’s Annual Reports 99-06 to Suntory for
$20m in 2006.
11. Foster’s India Pvt Ltd
Challenges Successes
1 country, 28 states Early mover
Taxes across Excellent people
borders Experiential
No advertising marketing
Tap contracts (bars) F1
Low consumption Cricket& BBQ
Fashion
Sales & Marketing
12. Foster’s Vietnam Ltd
Challenges Successes
No. 4 or 5 on entry Sales & Distribution
Tap contracts (bars) Draught beer
Low awareness (Angel)
Low A&P budget Local brands
Biere Larue
BGI
F1 to Go Karts
(localisation)
13. Shanghai Foster’s Brewery
Ltd
Challenges Successes
1 country, 22 Formula 1
provinces Shanghai race
Oversupply / capacity F1 Sunday nights in
Price deflation/cost Shanghai
inflation bars/hotels
Wholesalers Local beer
Local to International (Guangming) – 2km
price gap from brewery sales
Culture gap drive
14. Conclusion
We all need to eat and by 2050 that’s 9b 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
15. References
Marcel Corstjens and Rajiv Lal (2012) Retail Doesn’t Cross Borders: Harvard Business
Review, April, pp: 104-111.
K. Dunstan (2011) The Age ―Our lost heritage is enough to drive a person to drink‖
http://www.theage.com.au/opinion/society-and-culture/our-lost-heritage-is-enough-to-drive-a-
person-to-drink-20110922-1kn4u.html#ixzz27GS2ENT5 viewed on 23.9.12
The Economist (2011) We are 7 billion
http://www.economist.com/blogs/dailychart/2011/10/world-population retrieved on 23/9/12
Fosters Group Annual Reports (1998-2006), Press Releases,
http://www.fostersgroup.com/news/results-and-reports-1.aspx viewed on 1/10/2012
http://www.rediff.com/business/slide-show/slide-show-1-worlds-biggest-food-and-beverage-
companies/20120416.htm retrieved on 23/9/12
http://www.globalharvestinitiative.org/index.php/2012/06/notable-food-security-quotes-from-
the-rio20-and-g20-conferences/ viewed on 1.10.12
http://www.insideretailing.com.au/IR/IRNews/Top-25-retailers-5718.aspx and
http://www.deloitte.com/view/en_AU/au/industries/consumerbusiness/e2781160f279d210VgnV
CM3000001c56f00aRCRD.htm viewed on 2.10.12
Nielsen top 100 brands report 2010 viewed on AFN website 26.9.12, Company Websites,
Google
Editor's Notes
Presentation Swinburne University of Technology, Faculty of Business & Enterprise, Strategy, Innovation & International BusinessUnit 241N week 8: Australian Global Business PerspectivesGlobalisation of Food & Beverages
Beginning course details and/or books/materials needed for a class/project.
A trend apparent for many years has been the transfer of ownership of Australian food assets into foreign ownership. Predominantly acquisition of Australian based food and food processing businesses by larger multinational corporations based out of US, UK and Asia.Most recently in the news there has been a lot of commentary about Chinese state owned enterprises acquisition of farming and dairy assets e.g. Cubby Station. Most of the news is politically motivated.There has been an increased interest by global corporations and governments to secure food production and processing assets as population growth outstrips productivity growth in food supply
One company worthy of a top 10 spot but difficult to find out its food assets from its industrial assets is Cargill. The US 3rd biggest private entity. It has diverse commercial interests and food interests from farm to shelf. Additionally P&G is an $80b CPG company but predominantly non food & beverages but does have some big food brands e.g. PringlesOf surprise to myself when compiling this table was the prevalence of food and meat processing companies in North and South America .i.e. ADM, Tyson, JBSUnilever is arguably a bigger entity than represented but due to lower value of Euro at time of conversion to US$ has slipped in ranking on this table.
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.
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 GlobalizationFirst 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.
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.