Global Food & Beverage Industry Consolidation
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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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Global Food & Beverage Industry Consolidation
- 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
Notas do Editor
- 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.