Brought to you by:

David Donnan, Partner A.T. Kearney

November 2012

Can We Feed the World?Recipe for Change:

Limited and Constrained Resources

7 Billion Consumers

Capital Markets

Su

pp

ly C

hai

n

FarmersProducers/Extractors

Retailers/Buyers

Brands

Manufactures

Traders

Processors

300-500companies control

~70& of choice

Emerging New and Diverse Consumers

The Food Industry Bottleneck

Energy Land Water

By 2020 . . .Very few companies will control the vast majority of food supplyFarmers and producers are more likely to be corporationsConsumers will be serviced by large global retail and restaurant chains

By 2020 . . .Very few companies will control the vast majority of food supplyFarmers and producers are more likely to be corporationsConsumers will be serviced by large global retail and restaurant chains

Source: Jason Clay WWF, A.T. Kearney

The global agrifood industry is undergoing significant change.

Population Growth = Opportunity

Population Income HealthUrbanization

The world population continues to grow and provide opportunity for food & beverage companies

As a result, we are witnessing a global shift in diet and consumption

• 26 cities with > 10 million people

• 60% of global population in cities by 2025

• Today 7 billion people

• By 2050 over 9 billion people

• People over 60 will outnumber those under 15

• By 2015 more middle class households in China than USA

• Brazil and India rapidly increasing middle class populations

• Obesity and longevity expectations are shifting diets in Europe and North America

• Increased protein consumption in Asia

While supply systems face new challenges

Food AdvocacyResource AvailabilityFood

SafetyPackage Waste &

Sustainability

The future will be more about assured supply, than price

• Water, land and energy are all limited resources

• Continued use of crop land for biofuels

• Consumer perceptions of safe and nutritious food

• Lack of global standards and protocols - FSMA

• Driving strategy for many large CPG companies

• Sourcing sustainable ingredients (e.g. Palm oils)

• European restrictions of GMO’s

• California Proposition 37 – GMO labeling

After 20 years of stability…a future of commodity volatility

FAO — Annual Food Price Indices (2002 – 2004 = 100)

400

350

300

250

200

150

100

50

01/1990 1/1993 1/1996 1/1999 1/2002 1/2005 1/2008 1/2011

Food Price Index

Cereals Price Index

Meat Price Index

Oils Price Index

Dairy Price Index

Sugar Price Index

Can we feed 9 billion people by 2050?

The Green Revolution

Emerging technologies will play an important role in shaping the global agricultural landscape

Food & Beverage companies need to focus on four key priorities

2020: Four Future Scenarios

Scenario #1: Global Scarcity

• Agricultural output continues along its same path with no new technology innovations

• Commodity volatility continues as demand outpaces supply resulting in sporadic supply shocks

• Increasing gap between ‘have’ vs. “have not” nations

• Companies focus on reducing risk through operating and financial hedges

Scenario #2: Supply Exclusivity

• Increased regulation and traceability creates constraints on supply sources

• Supplier qualifications become more intense reducing the number of qualified suppliers

• Product differentiation through innovation and product exclusivity

• Competition between supply networks of companies

Scenario #3: Stagnation

• Improved agricultural innovations improve output and yields

• Supply matches and then outpaces demand

• Food prices drop as companies take advantage of agricultural surpluses

• Manufacturing efficiency becomes the main focus of food companies

Scenario #4: The World in Balance

• Continued innovation in agricultural technology

• Demand increases as middle class consumers consume higher valued products

• Government and international trade become more harmonized

• New era of strong global trade

Many thanks to our contributor

For additional information go towww.atkearney.com