2020 vision_global food & beverage industry outlook
TRANSCRIPT
2020 VisionGlobal Food & Beverage
Industry Outlook
Christopher ShanahanIndustry Analyst
May 18th, 2010
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2
The CEO’s 360 Degree Perspective of the Complex Business Universe
1. Global Perspective
2. Integrated Industry
Perspective
3. Technology Perspective
4. Economic Perspective
5. Competitive Perspective
6. Customer Perspective
7. Best Practices Perspective
3
Global Food & Beverage Retail Revenues, 2002 through 2014Global demand for Food & Beverages Reached $11.6 Trillion in 2009 and is likely to reach $15 Trillion in 2014
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Reta
il F
ood &
Beve
rage
Indust
ry S
ales
($ T
rillio
ns)
Latin America (LA) 1.1 1.7 2.2
Europe (EU) 2.0 2.6 3.0
Asia Pacific (APAC) 2.4 3.6 5.1
Mid. East & Africa (MEAF) 1.8 2.5 3.3
North America (NA) 1.0 1.2 1.5
2004 2009 2014
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
CAGR (2009 – 2014)
5.5%
CAGR (2004 – 2009)
9.6%
4
Food & Beverage Retail Sales by Region, 2002 - 2014Global share of demand for Food & Beverages is increasing in Emerging Regions which is driving continued Globalization of the industry
2009
MEAF
21%
APAC
32%
EU
22%
NA
11%LA
14%
2014
MEAF
22%
APAC
33%
EU
20%
NA
10%LA
15%
2004
MEAF
22%
APAC
29%
EU
24%
NA
12%
LA
13%
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
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Food & Beverage Demand by Product Category, 2009Spending on meat and poultry increases with increased market development �Increasing odds of Health Issues??
Food & Beverage Market: Product Category Share of Revenues per Region, (World), 2009
20.1% 18.4% 17.7% 16.6%20.2%
14.6%14.6% 14.0% 15.5%
14.2%
19.0% 24.3% 26.4% 27.1%26.5%
34.1% 30.0% 29.2% 28.6% 25.9%
3.2% 4.6% 5.5% 5.5% 5.7%
8.0% 7.1% 6.6% 7.4%8.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NA EU APAC LA MEAF
Bread & Grains Dairy Fruit & Vegetables Meat & Poultry Fats & Oils Sugar & Sweeteners
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
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The Food & Beverage Industry Today and TomorrowKey Mega Trends’ Impact as a Function of Time on the Food & Beverage Industries
2010 20202015Mega Trend
Increasing urbanization impacts the demand for health & wellness
solutions beyond BRIC
Globalization & Changing Economics
Full industrializationof developing countries
Health & Wellness
Continuous re-assessment of “safe” chemicals and materials for F&B and agricultural production
Food Safety &
Sustainability
The Adoption of Safety &Sustainability Strategies will be Common-place
as opposed to being the exception
Customers increasingly gainaccess to F&B
processing information
Increasing consolidation within food processing
Rising Food Prices Due to Demand from Bioenergy
China begins to shake off food
ingredient safety concerns
Increased Use of Health Claims
Economic rebound continues
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The Economic Downturn of 2008 & 2009 and 2010 RecoveryThe Relative Impact of the Economic Downturn and Recovery on Specific Industries
Total Value of the Market Capitalizations of Top U.S. Public Companies Per Industry in Years 2008, 2009, and 2010 Relative to its Value in Jan 2007 (US), 2007 – 2010
92% 101%
93%
125%
96%
133%
95%
87%
131%
84%
78%
62%
79%
78%
92%
60%
56%
87%
102%
84%
78%
93%
81%
126%
79%
62%
83%
0%
20%
40%
60%
80%
100%
120%
140%
Food Processing Health Care S&P 500 (Total
Market)
Energy Personal and
Household Care
Crops Containers &
Packaging
Paper & Paper
Products
Chemical
Manufacturing
J-2008 J-2009 J-2010
J - 2007
Relatively Little
Change in Industry
Performance
Relatively Little
Change in Industry
Performance
Source: Frost & Sullivan
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The Economic Downturn of 2008 & 2009 and 2010 RecoveryProduction Input Costs have Stabilized Since 2008’s Historic Rise, For Now…
50
75
100
125
150
175
200
Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Nov-09
Commodity Food and Beverage Price Index Monthly PriceCommodity Food and Beverage Price Index, 2005 = 100, (Global), March 2005 to March 2010
• Price growth has
abating since its
rapid rise in 2007-
2008 � Back to
Historical Growth
Rates, For Now
• Commodity prices
are highly
correlated with
crude oil prices �
Likely to Happen
Again Before 2020
• Price growth has
abating since its
rapid rise in 2007-
2008 � Back to
Historical Growth
Rates, For Now
• Commodity prices
are highly
correlated with
crude oil prices �
Likely to Happen
Again Before 2020
Source: FAO
9
Global Food Industry Industry ConsolidationFragmented and Stable Market, but Expected to Slowly Concentrate Over Time
WorldAsia PacificLatin AmericaNorth AmericaEastern EuropeWestern Europe
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
20.9%5.8%22.3%37.5%12.8%21.2%
Market Share of the Top 20 Global Food Processors by Region (2008)The Largest 20 Food Processors Command 20% of the Global Market
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Increasing Demand for Health & Wellness IngredientsShift from Reduced 'Bads' to Fortified with ‘Goods’ Food & Beverage
$40.00
$50.00
$60.00
$70.00
$80.00
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Glo
bal
Sal
es
($U
S Billion)
Fortified ‘Goods’ DairyFortified ‘Goods’ Dairy
Reduced 'Bads' Dairy Reduced 'Bads' Dairy
Global Sales of Reduced 'Bads' Dairy Compared to Nutraceutical-Fortified Dairy, $ Billions, (World), 2002 - 2015Global Sales of Reduced 'Bads' Dairy Compared to Nutraceutical-Fortified Dairy, $ Billions, (World), 2002 - 2015
Source: Frost & Sullivan
Avoiding ‘Bads’ is Key Megatrend that is Set to Continue Through to 2020Avoiding ‘Bads’ is Key Megatrend that is Set to Continue Through to 2020
Growth of Added Goods accelerating year on yearGrowth of Added Goods accelerating year on year
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Increasing Demand for Health & Wellness IngredientsThe Need for Health & Wellness Solutions Will Increase with Increased Urbanization
Beyond BRIC � Look for increasing urbanization,
dietary changes, and economic development in
emerging markets, especially in Latin America and
Africa, as these are future growth regions for
Health & Wellness Solutions
Beyond BRIC � Look for increasing urbanization,
dietary changes, and economic development in
emerging markets, especially in Latin America and
Africa, as these are future growth regions for
Health & Wellness Solutions
y = 0.0524x + 3.6258y = 0.0524x + 3.6258y = 0.0524x + 3.6258y = 0.0524x + 3.6258
RRRR2222 = 0.1831 = 0.1831 = 0.1831 = 0.1831
0000
5555
10101010
15151515
20202020
0000 20202020 40404040 60606060 80808080 100100100100% of Urban Population % of Urban Population % of Urban Population % of Urban Population
Total expenditure on health
Total expenditure on health
Total expenditure on health
Total expenditure on health
as %
of GDP
as %
of GDP
as %
of GDP
as %
of GDP
y = 0.3578x + 21.648y = 0.3578x + 21.648y = 0.3578x + 21.648y = 0.3578x + 21.648
RRRR2222 = 0.1646 = 0.1646 = 0.1646 = 0.1646
0000
20202020
40404040
60606060
80808080
100100100100
0000 20202020 40404040 60606060 80808080 100100100100% of Urban Population % of Urban Population % of Urban Population % of Urban Population
% POP w/BMI >= 25 kg/m
²
% POP w/BMI >= 25 kg/m
²
% POP w/BMI >= 25 kg/m
²
% POP w/BMI >= 25 kg/m
²
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The State of Food Safety & Sustainability Confusion Over Standards Impacts Implementation of Effective Safety Practices
• The plethora of choices of voluntary food
safety standards and mandatory
government regulation has been an
inhibitive factor on the adoption of any
type of voluntary/mandatory industry
standard
• Some industry participants feel that
voluntary/mandatory food safety
standards are redundant with already-
existing government regulations that
merely need to be enforced
• Some companies feel that it is much
easier to just meet the minimum level of
government-enforced safety laws without
being noticed
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GOAL ���� The more Green we are the more Green we make
What is Sustainability?Optimization of the bottom lines over time
Change in
Bottom
Lin
e
Time
Economic Bottom Line
Social Responsibility
Environmental Awareness
Change in
Bottom
Lin
e
Time
Economic Bottom Line
Social Responsibility
Environmental Awareness
Yesterday’s Objective Today’s Objective
In the past, the only metric that a given company really paid attention to and worked toward sustaining was its economic bottom line (EB). Social responsibility (SR) and environmental awareness (EA) were not considered key objectives. This has changed ���� With the growing power of external constituents that demand increasing social and environmental responsibility, companies now must adopt business practices that meet these additional objectives.
Maximize Growth
Max/Min Positive/Negative Impact on Internal
and External Community
Minimize Waste and/or the Negative
Impacts on the Environment
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• The company’s ink product is incorporated into its patented barcode array and automatically modifies
ordinary coded data into an advanced cold chain monitoring mechanism when exposed to an adulterating
temperature level or other negative environmental factors
• The ink is invisible under normal circumstances
• If tampering or other negative environmental factors are present, the ink will turn the barcode bright red, and
rendering the barcode unscannable or it will change the barcode data to indicate exactly what has happened
• The company’s ink product is incorporated into its patented barcode array and automatically modifies
ordinary coded data into an advanced cold chain monitoring mechanism when exposed to an adulterating
temperature level or other negative environmental factors
• The ink is invisible under normal circumstances
• If tampering or other negative environmental factors are present, the ink will turn the barcode bright red, and
rendering the barcode unscannable or it will change the barcode data to indicate exactly what has happened
Barcode # and bright purple visual marker indicates an
unsafe product
Barcode # and lack of a bright purple visual
marker indicates a safe product
Negative Environmental Factors
Shipped Product
Distribution Channel
Distribution Channel
Received Product
Current work is under development by which the inks can be
“turned on”
Activation devices are in final-stage development by the
company for use for weigh scales, printing press add-ons,
production line systems, Benchtop printers and hand-held
devices
Having a Best Practices PerspectiveEmploying Innovation to Enhance Food Supply Chains and Safety
Source: Frost & Sullivan
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• Invest in marketing strategies that
focuses on your core product offering
• Show that your product is an essential component of
the average consumer’s grocery basket
• Build brand equity through targeted efforts by
Marketing and Sales
• Company positioning as a partner to help end users
through this tough economic time
• Integration of disparate products into a complete
solution
• Exploit opportunities from consumer
feedback
• Proactively seek the final consumer’s need set and
match product lines to those needs
• Establish partnerships with other
suppliers
• Seek out joint branding with other food manufacturers
to exploit complementary synergies
Conquering the Food & Beverage Ingredient Markets
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• Adopt proactive product and service
differentiation strategies• Focus on successful product lines and global diversification in
order to drive sustainable growth
• Focus on product innovation as a long term goal for a
sustainable competitive edge
• Understand the consumer’s motivation for
buying your product• Fear or Greed: these are the primary motivators that impacts
whether the consumer will buy your product or not. Consumers
will be more willing to buy if the product effectively
communicates that it will help avoid a potential loss or pain or
help to deliver a gain or pleasure.
• Effectively communicate the indirect costs of
product switching• Look for opportunities that will communicate to consumers that
product switching entails a sacrifice. Such ‘costs’ should be
pitched as an investment opportunity for the consumer.
Conquering the Food & Beverage Ingredient Markets
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Conquering the Food & Beverage Ingredient MarketsSuccess is Based on Boosting Top-Line Growth Through Differentiation
Service DifferentiationService Differentiation
Product DifferentiationProduct Differentiation
Top Line Accelerated Growth Top Line Accelerated Growth
Maximize Customer Value by being Maximize Customer Value by being
the Low Cost Providerthe Low Cost Provider
Optimize Relationships with Customers
The Solution Provider: The Marriage of Value-Added Quality
Enhancement and Customer Relationship Optimization
Enhance ValueEnhance Value--Added Quality Added Quality
through New Product Developmentthrough New Product Development
Source: Frost & Sullivan
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