Pathways for Growth:
2011 Update
Agenda
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Pathways for Growth
News from the world
News from Ireland
Ireland has an enviable agricultural situation
that almost every other country would kill for…
… at a time when the global demand for food is
projected to increase by 70% over the next 40
years.
Pathways for Growth
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Challenges
– Fragmentation
– Lack of consumer orientation
– Low confidence in the future
Solutions
– Cooperation instead of competition (Co-opetition)
– Innovation leading to differentiation
– Brands built around customer feedback
– Umbrella strategy
“Come See Us”
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World class agricultural industry by 2016
“We are natural and we can prove it”
– Tough standards
– Universal adoption
Work as one to achieve export growth
Umbrella brand for Irish food and drink
Trends in the Global Food System
2011 Prices at Record Levels
Source: FAO
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Fundamental Shift Supply – Demand Balance
– China, others eating more meat
– Biofuels use continues
– Productivity growth not keeping pace
• New land = marginal land
• Low investment R&D
China
China
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Relentless urbanization
– 2011: 160 cities 1 M+ (35 in Europe!)
– 2025: 219 cities 1 M+; 24 > 5 M
– 2030: 1 BILLION in cities
Losing land
– Houses, offices, roads, factories, desertification
China
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Food policy under review
– Produce? Import?
50% of soybean exports go to China
Largest corn imports in 15 years
FDI $12 B in Brazil in 2011 ($82 M in 2008)
– Also Africa, New Zealand….
China’s Challenge:
From quantity to quality
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Food safety incidents continue
– Technology
– Brands
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Obesity a growing problem
– KFC’s “New Fast Food”
China will affect your business
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Market?
Competitor?
Partner?
Price
“When I go back to the US, it’s like a
movie playing in slow motion.”
Brazil
Brazil has 19% of the world’s arable land. More
than 100 million hectares to be used in Cerrado
Brazil
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Economy strong, domestic demand growing
– Inflation 6.4%
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Labor shortages
– Skilled workers
– Management
Brazil’s agricultural strategy?
Brazilian Real is Strengthening…
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Making Brazilian production more expensive
… and international acquisitions cheaper
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JBS
– Global footprint = Market access
– Acquisitions: Argentina, Australia, USA
– Beef, swine, poultry
– 2010 Revenues $33 billion
– Execution/Efficiency
• 15 M head cattle slaughtered 2009
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Brasil Foods
– Merger Perdigão & Sadia (2009)
– Poultry, pork, dairy
– Nestlé strategy
• Processed foods + Brands
– Targets: Africa, Middle East, Latin America
– 2010 Revenues $14 billion
Key Trends
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Volatility
Sustainability
Technology
Volatility
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No end in sight
Cereal production, utilization and stocks
Source: FAO
% Return – Agricultural Commodities vs. Bonds
2 Year
Source: Michael Filighera, Seeking Alpha, January 21, 2011
Environmental Sustainability
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Coca-Cola
– Secure supply
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McDonald’s
– Consumer confidence
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Nestle
– “Shared Value”
– Embedded in individual brand propositions
Sustainability
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Defense?
Lower costs?
Differentiator?
Barrier to entry?
Necessary but not sufficient for a premium price
Good for You, Good for the Environment
Source: Barilla Center for Food and Nutrition
Technology
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Personalized diets
– 23andMe.com
– Nestlé
• Imaging work with GE
• Acquired Prometheus
• Jenny Craig
Traceability – There’s an App for that!
– Ice Breaker (New Zealand)
– HarvestMark (USA)
– thisfish (Canada)
Social Media
Predictions – May 2010 (also 2011)
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Commodity prices will be volatile
– Biofuels will shift to efficient feedstock (not corn)
– Food security v. free trade
– End of “very cheap food”
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High fuel costs will drive re-examination of supply chains
– Efficient production and transportation
– Local, national, or global production?
– Approach to inventories (stocks)
– Infrastructure a growing bottleneck
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Substantial change in investment flows
– Global business models for production (e.g., beef, poultry, dairy)
– Food security for buying nations
– Increased interest in sector
• Venture capital, sovereign wealth funds
Predictions – May 2011
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Commodity prices will be volatile
– Biofuels will shift to efficient feedstock (not corn)
– Food security v. free trade
– End of “very cheap food”
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High fuel costs will drive re-examination of supply chains
– Efficient production and transportation
– Local, national, or global production?
– Approach to inventories (stocks)
– Infrastructure a growing bottleneck
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Substantial change in investment flows
– Global business models for production (e.g., beef, poultry, dairy)
– Food security for buying nations
– Increased interest in sector
• Venture capital, sovereign wealth funds
News from Home
Industry Optimism
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Competitiveness
Talent
Market
Government Support
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Food Harvest 2020
Commitment
Reality
Capital is Available
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Large firms with viable strategies
SME less access
Global investment in sector
– Banks and funds
– Consolidation and globalization
Export or Perish
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Growth outside of Ireland
Clarifies decision making
Scale
Customer orientation