Food and Beverage Sustainable Sourcing - Planning for a Changing Planet

Planning for a Changing Planet: Creating Ethical, Sustainable and Eco-Friendly

Sourcing Strategies

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Highlights

Planning for a Changing Planet:

Creating Ethical, Sustainable and Eco-

Friendly Sourcing Strategies

• Changing planet – global trends

• Sourcing strategies

• Case studies across the supply chain

• Where to go from here?

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Changing planet – global trends

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The Challenges

EnergySecurityEnergySecurity

ClimateChangeClimateChange

PopulationGrowthPopulationGrowth

FoodSecurityFoodSecurity

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Food Security – Population Growth

Demand

Population

9 Billion2050 (UN)

Global Population Growth Forecast to 2050

Asia

Latin Am

Europe

Africa

N America

Oceania

-0.5%

2.0%

-200 1,800

Absolute Change (millions), 2000 to 2050

CAG

R (

2000-2

050)

Source: Frost & Sullivan / UNESA

Africa's population to more than double between 2000 and 2050

Percentage of the world's population living in cities: 3% (in 1800); 47% (in 2000); 67% (in 2025 – UN forecast)

Source: Frost & Sullivan.Source: Frost & Sullivan.

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Global Food & Beverage Demand, 2002 through 2014

Food & Beverage Market: Retail Industry Revenues, in $ Billions (World), 2002-2014

Small dip in global revenues due to lower feedstock prices and

economic slowdown

Small dip in global revenues due to lower feedstock prices and

economic slowdown

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000Re

tail

Food

& B

ever

age

Indu

stry

Sal

es ($

bill

ions

)

Latin America (LA) 869 963 1,066 1,305 1,375 1,549 1,710 1,661 1,787 1,872 1,977 2,094 2,217

Europe (EU) 1,475 1,783 2,030 2,164 2,288 2,631 2,896 2,579 2,673 2,744 2,830 2,925 3,025

Asia Pacific (APAC) 1,945 2,192 2,425 2,731 2,866 3,265 3,660 3,618 3,846 4,093 4,380 4,701 5,073

Mid. East & Africa (MEAF) 1,409 1,651 1,803 2,122 2,086 2,283 2,516 2,480 2,638 2,785 2,941 3,108 3,283

North America (NA) 911 966 1,034 1,108 1,182 1,252 1,287 1,247 1,295 1,349 1,406 1,465 1,521

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

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The Need for Green Approaches

Business-as-usual Scenario

Source: WWF.Source: WWF.

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The Need for Green Approaches

Sustainability Scenario

Source: WWF.Source: WWF.

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Annual CEO Survey: Perceptions of Green Issues

Perceptions of Green Issues

30%

30%

18%

12%

9%

1%

29%

23%

15%

12%

19%

2%

30%

34%

20%

12%

3%

1%

0% 10% 20% 30% 40%

Moral, ethical obligation

Critical to growth ofcompany

Important to customers

Good public relations

Irrelevant

Don't know/care

Total Sample (N=593) CEOs (N=248) Other Organization Leaders (N=345)

How do you primarily view the current high profile of environmental/green issues?Source: Frost & Sullivan.Source: Frost & Sullivan.

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Annual CEO Survey: Motivations for Green Investment

There are many drivers which contribute to a company making environmental investments, what are the main reasons driving your decision to “go green”?

Motivations for Going Green(N=400)

33%

38%

46%

50%

54%

59%

62%

69%

67%

61%

0% 20% 40% 60% 80%

Potential competitive advantage

Growth opportunity for company

Corporate social responsibility

Meeting customer expectations/requirements

New technology opportunities

Ability to enter new markets

Greener Image

Product development

Potential cost savings

Leverage existing markets

61%

Note: Only top ten responses shown.


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Sourcing Strategies

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Sourcing Strategy – Common Practices

Quality / Cost Sourcing Sourcing StrategiesStrategies

Operational Efficiency

TypicalTypical


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Sourcing Strategy – Best Practices


Global Delivery

Ethical Sustainable Eco-Friendly



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Sourcing Strategy – Best Practices


Global Delivery

Ethical Sustainable Eco-Friendly


ReinventReinvent


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Consolidation of the Global Supply Chain

Pro

s

Pro

s

Lower Cost

Opportunity

Quality Management

Flexibility

Potentially Sustainable


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Consolidation of the Global Supply Chain

Pro

s

Pro

s

Co

ns

Co

ns

Management Rhetoric

Lower Cost

Opportunity Quality Management

Flexibility Potentially Sustainable

Narrow Minded

Complacency

Limit Innovation?

Monopoly


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Debating Global vs Local

• Development of communication

• Trade efficiently & effectively

• One step removed

• Reliant on the price of commodities; fuel

• Greater profit

• Control

• Understand principles

• Supports community

• Bespoke innovation

• High labour costs

• Niche markets

• Greater profit

Global Local


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• GMO – modern plant breeding

• Increased yield / quality / disease & pest

control in a sustainable way

• US & Argentina global leaders in GM

soybean cultivation and production

• Phenomenal growth of GM soybean

cultivation within 10 yrs

• Total Acreage 4% in 1997 to 92% in 2008

• Assists growth of the bio-lubricants market

• Not the case in EU

GMO – Blessing or Curse?

Cultivation Area in Million Hectares in US, 1997-2008

Source: GMO CompassTotal soybean cultivation area

GMO soybean cultivation area

Year Total Soybean

GM Soybean

GM Ratio

1997 25.66 3.6 4%

2008 30.10 27.7 92%

GM Soybean Ratio in US, 1997-2008

2008 Soybean Production in United States

Reduced Biodiveristy?


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Energy Consumption

Climate Change

Growing Demand

Competing Land Use

Bio-fuels

Renewable EnergiesCareful use

of Raw Materials

Carbon Offsetting

Efficiency Savings

Limited Oil Sources

Rising CO2

Emissions

xxxxx


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Waste Reduction

Biodegradable Packaging

Recycling

‘Just in time delivery’

Portion Control

Reducing Food Wastage

Alternative Raw Materials


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Raw Material Supplier

Eco-labelling - Consumer Awareness

Source: Frost & Sullivan

Distributors and Retailers

Final ConsumersFinished Good Manufacturer

We Are Still

GreenAre We Green?

Is this Green?

Distributors and Retailers Final ConsumersFinished Good

ManufacturerRaw Material Supplier

We Are Still

Green

We Are Still

Green

We Are Still

Green

We Are Still

Green

3rd Party Verified

Without a clear industry icon…

With a clear industry icon…

We Are Still

Green

Product FlowProduct Flow

€ and Feedback Flow€ and Feedback Flow

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Case Studies across the Supply Chain

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Sustainability and Financial Performance

Index 1999=100 Source: Dow Jones Indexes and SAM

DJSI World vs MSCI World (1999-2010)

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Marks & Spencer – Plan A

Climate Change

Waste

Natural Resources

Fair Partnership

Health & Wellbeing

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PepsiCo – Performance with Purpose

EnvironmentalEnvironmental

SustainabilitySustainability

TalentTalent

SustainabilitySustainability

PerformancePerformance HumanHuman

SustainabilitySustainabilityGood forSocietyGood forSociety

Good forBusinessGood forBusiness

==

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Danisco – Ingredients for Sustainability

Global ChallengesGlobal ChallengesGlobal ChallengesGlobal Challenges

FoodFood

HealthHealth

EnergyEnergy

ChemicalsChemicalsPeople, Planet

& ProfitPeople, Planet

& ProfitBecoming

First ChoiceBecoming

First Choice

ComprehensiveApproach

ComprehensiveApproach

Danisco’sApproachDanisco’sApproach

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Green Sourcing - Differences Across the Supply Chain

Driver

Sustainable Sourcing

Sustainable Sourcing

Cost /Pricing

Restraint

B-2-B Producer FMCG / Retail End User

Cost

Quality

ContinuousSupply

Efficent

Global Delivery

EthicalEco-Friendly

Cost

Quality

ContinuousSupply

Efficent

Global Delivery

EthicalEco-Friendly


Customer ExpectationNew Market

Product Innovation

Feel GoodConscientious

Social ResponsibilityCompetitive Edge

Growth Opportunity

Confusing MessageInadequate

LabellingLimited Budget

Willingness to PayExtra – 5 to 25%

More?

Marketing MessageIncreased Cost

Pass onto Consumer?

Marketing MessageIncreased CostSmaller Profit

Margin

Implementation CostCompeting PrioritiesLack of KnowledgeVendors not Green

Implementation CostNo Industry

StandardVendors not Green

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The Current Benchmarks to Increase Sustainability


Water Recycling & Conservation

Energy Conservation

Waste Management

Reduce CO2

Emissions

Consolidating Transportation &

Distribution

Reduction & Recycling of Packaging

Increased SustainabilityIncreased Sustainability

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Where to go from here?

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The Future Direction

Open Mindedness to Scientific Advances

Rigorous Monitoring &

Constant Evaluation of

Existing Strategies

Global Legislative Enforcement

Unification Across Companies & Even Countries Towards The Common Goal

Increase Investment in

R&D

Continue to Build Consumer Awareness


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The Food & Beverage Industry Today and Tomorrow

2010 20202015

Population Growth &

Food Security

Increasing consolidation in food supply chain

Increased utilisation of by-products as feedstocks

Demands from bio-energy and growing population mean rising food prices

Demands from bio-energy and growing population mean rising food prices

Increasing urbanisation impacts demand for healthy & high quality F&B products beyond BRIC

Increasing urbanisation impacts demand for healthy & high quality F&B products beyond BRIC

Continuous re-assessment of “safe” chemicals, technologies & materials

for F&B & agricultural production

Continuous re-assessment of “safe” chemicals, technologies & materials

for F&B & agricultural productionFood safety driven by customer access to F&B processing information

Food safety driven by customer access to F&B processing information

Mega Trend

Climate Change &

Energy Security

Sustainability driven by increasing raw material costs

Successful company sustainability strategies become economic not moral decision

Successful company sustainability strategies become economic not moral decision

Peak oil extraction limit reached

Peak oil extraction limit reached

Consumer demand for sustainability sourced products & increased legislation

Consumer demand for sustainability sourced products & increased legislation

Full industrialisationof developing countries

Full industrialisationof developing countriesDevelopments in energy efficiency & renewable energiesDevelopments in energy efficiency & renewable energies

Oil extraction volumes in terminal decline – Global vs Local

Oil extraction volumes in terminal decline – Global vs Local

Sustainability is here to stay Sustainability is here to stay Embrace it and create opportunities from it Embrace it and create opportunities from itSustainability is here to stay Sustainability is here to stay Embrace it and create opportunities from it Embrace it and create opportunities from it

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For Additional Information

Chiara CarellaHead of Communications

+44 (0) [email protected]

Food and Beverage Sustainable Sourcing - Planning for a Changing Planet

Documents

sustainable source

forecast source

monopoly source

global revenues

frost sullivan small

usual scenario source

global food beverage

changing planet