Embed Size (px)
Citation preview
Mega Trends Review—Growth Strategy
Optimization in the Global Food & Beverage
Industry Value Chain
Going from Mega Trends to Actionable Opportunities
Christopher Shanahan
Global Program Manager
Food & Beverage Practice
4th June 2012
© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the
sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced
without the written approval of Frost & Sullivan.
2 2
Today’s Presenter
Functional Expertise • Direct experience in data analysis, project management, consulting and market engineering. Particular
expertise in: - Econometric-based market analysis including mathematical programming, statistical benefit-cost analysis, market forecasting, and scenario engineering - Product innovation adoption models and business strategy decision models
Industry Expertise Experience base covering broad range of sectors, leveraging past experience across various industry
verticals - Agricultural and food & beverage markets with a focus on food ingredients, animal feed additives, consumer packaged goods, food packaging, and dietary supplements - Specific expertise in the following in food and beverage additives for digestive health, immune health, bone and joint health, sports, fitness, and weight management, cognitive health, nutricosmetics, heart & anti-hypertensive health, antioxidants and antimicrobials, and animal feed.
What I bring to the Team Economic, social and environmental business strategy development and implementation Sound understanding of functions such as corporate strategy, tracking consumption trends, and sales &
marketing functions Ability to understand client requirements and deliver optimum solutions Career Highlights Published research in the Review of Agricultural Economics Journal and Agribusiness and the
International Food and Agribusiness Management Association Review Education Master of Science in Agricultural Economics from the Ohio State University, Columbus, United States
Christopher Shanahan
Global Program
Manager – Food &
Beverage Practice
Frost & Sullivan
North America
San Antonio, United
States
3 3
Focus Points
• Definition of the Global Food
and Beverage Value Chain
• Mega Trends Overview
• Frost & Sullivan’s Strategic
Approach—From Mega
Trends to Actionable
Opportunities
4 4
Definition of Mega Trends
Our Mega Trend Definition? Impact of Mega Trends on Key
Organizational Functions
“Mega Trends are global,
sustained forces of
development that are
transformational to
business, economy, society,
cultures and personal lives”
Marketing and Strategy
R&D Budget Spending
Product Planning and Development
Technology Planning
Innovation Scouting
5 5
Food
Safety
Globalization and Changing Economy
Health &
Wellness
Sustainability
Consumer
Seeds and
Traits
$43
Agricultural
Production
(Includes
Animal Feeds)
$3,917
Agricultural
Logistics
$646
Food and Beverage
Logistics
$168
Retail Grocery
(Food at Home)
$7,664
Retail Food Service
(Food Away From Home)
$3,544
Food
Processing
$4,841
Software
for Ag
$2.15 Software for
Logistics
$2.89
Software for
Processing
$7.94 Software for
Retail
$18.05
Food Packaging
$261
Processing
Equipment
$223
Food Additives
and Supplements
+$300
The cumulative value of all revenue derived from the global food and beverage value chain
was over $20 trillion dollars in 2011, representing nearly 30 percent of the entire world’s
economy.
The Global Food and Beverage Value Chain
Food and Beverage Market: Generalized Value Chain, $US Billion (Global), 2011
Source : Frost & Sullivan analysis.
6 6
• With respect to the F&B industry, the
key Mega Trends expected to have a
direct affect on industry growth and
performance can be grouped into four
main categories—globalization and
changing economies, growing need for
health and wellness solutions, and
growing sensitivity to food safety, and
sustainability issues.
• By 2020, Frost & Sullivan expects that
companies with a truly global market
and product strategy, that fully exploit
the growing demand for health and
wellness solutions, and that adopt an
all-encompassing sustainability
strategy, will lead the F&B industry.
.
Relative Impact of Mega Trends, Global, 2012
1 5 2 3 4 7 6
Low High
Low High Food Safety
and Security
Globalization
and Changing
Economics
Low High Being Green—
Sustainability
Low High Health and
Wellness
Your Opportunity Universe is Shaped by the Mega Trends
Source : Frost & Sullivan analysis.
Gre
en
, S
afe
, a
nd
He
alt
hy
7 7
0
50
100
150
200
250
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: International Monetary Fund and Frost & Sullivan analysis.
Globalization and Changing Economies—Growing
Food Prices
Index: January 2002 = 100
There has been a significant structural shift in price growth in the last 10 years that is
expected to continue. Rising raw material costs, and the associated difficulties with
transferring the increase to customers, will likely affect profit margins during the next decade.
Commodity F&B Price Index* (Global), Jan 1980 to March 2012 • Agricultural prices are once again
approaching the historic highs demonstrated
in 2008, as a result of various factors,
including rising petroleum costs due to social
unrest in the Arab world and the flat growth in
the production of key grains and oilseeds.
• Above normal price growth can influence
product reformulations and decreased
package sizes.
• With continued price growth, a slowdown in
consumer spending and a decreasing
willingness to pay will occur.
• Accordingly, a food manufacturer’s ability to
use pricing as a tool to maintain margins will
be constrained.
Key: * The Commodity Food and Beverage Price Index
is made up of 30 different commodities from petroleum
and fertilizer prices to grains, fruits, meats, oilseeds, and
sugars. This index reflects prices relative to Jan 2002.
8 8
Globalization and Changing Economies—Contributing
Drivers to Price Growth
Impact: High Medium Low
1-2 years 3-5 years 6-10 years
Population growth in emerging regions and
associated growth in meat and dairy
consumption.
Total Food and Beverage Market: Key Price Growth Drivers
(World), 2011-2020
Source: Frost & Sullivan analysis.
Population growth in emerging regions, economic growth and associated growth in the cost of
energy, and the expected increase in the occurrence of averse weather events are all
significant growth drivers of food prices, none of which are expected to abate.
Mark
et
facto
rs
Economic growth drives the demand for oil,
thus increasing the cost of energy and
potentially drive the demand for biofuels.
Averse weather events over the last ten
years has had a significant impact—
climate change is expected by many
experts to continue, thus potentially
disrupting future harvests.
9
Globalization and Changing Economies—Typical Food
and Beverage Market Profit Margins
10 10
Globalization and Changing Economies—Typical Food
and Beverage Market Profit Margins (continued)
11 11
All Other Food
Processors 62%
Next 75 Top Food
Processors 11%
Top 25 Food
Processors 27%
Food Processor Industry Shares (%), 2011
Globalization and Changing Economies—Industry
Consolidation Stable
• This is expected to increase the overall bargaining power of food processors when it comes to sourcing key inputs from ingredient suppliers, and thus add increasing pressure on top-line ingredient industries growth.
• Increasing food industry consolidation will be driven by growing power of food retailers in the future in order to offset lost bargaining power.
• This is expected to drive increased industry consolidation among ingredient suppliers as this is a means of increasing economies of scale and maintain bargaining power.
As of 2011, the top 25 food processors in the United States earned 27 percent of total industry revenues - this has remained the case for roughly the last decade and is
not expected to see a significant change.
Source: Frost & Sullivan analysis.
12 12
As long as a company communicates its green, safe, and healthy initiatives as being more
beneficial or less costly than its competitor’s product offering, customers will be willing to pay a
premium for it. A fully-integrated software solution is needed by industry participants.
Source: Frost & Sullivan analysis.
Green Safe
Healthy
• Waste
prevention
• Degradable
after
chemical
product use
• Use of
renewable
feedstocks
• Minimize
chemical by-
products
• Maximize
energy
efficiency
• Maximum
pollutant
production
monitoring
during the
production
process
• Slow minimization of unhealthy
ingredients
• Inclusion of functional
ingredients
• Healthcare products
• Dietary supplements
Smart value-
added Solutions
• Safe chemical
product design
• Minimal hazard
chemical
syntheses
• Avoidance of
chemical
derivatives
• Use of safer
solvents
• Minimize
product and
production
accidents
Green, Safe, and Healthy—A congruence of trends that
expands the potential product/market opportunity space
The Intersection of Green, Safety, and Healthy, 2012
13 13
The Need
Health & Wellness—Weight Management Solutions will
Dominate the Food & Beverages Industry
• Overweight and obesity “..abnormal or excessive fat
accumulation, which presents a risk to health.”
• Obesity on the rise in low- and middle-income states,
particularly in urban areas. Over 6 million Americans are
morbidly obese
• 15% of children & adolescents are obese
Men Women
African Americans 57% 66%
Hispanic Americans 64% 66%
White Americans 61% 49%
Proportion of the population with a body mass index (BMI) equal to or more than 25 (United States), 2010
The Costs
• Direct medical cost for weight-related diseases Over $50 billion per year
• Direct spend on weight management products (Books, food, and diet programs) Over
$40 billion per year
• Lost work days due to weight problems Over 40 million work days
Source: Frost & Sullivan analysis.
14 14
Health & Wellness—Weight Management Solutions will
Dominate the Food & Beverages Industry (continued)
Recommended versus Actual Consumption Rates of Macronutrients (United States), 2010
The Costs
• The average American consumes 50 to 75% more calories then recommended by the
majority of nutritionists.
• Surprisingly, the average American does not consume enough carbohydrates and proteins
according to the majority of nutritionists’ recommendations.
• The average American consumes about 40% more fat then recommended by the majority
of nutritionists.
The average American’s diet is highly imbalanced, yet it is expected that per capita calorie intake, and all associated nutrients, is expected to diminish or remain stable over the next
ten years due to rising awareness of the associated weight issues.
Recommended Actual Variance
Per Capita Calorie Consumption (Kcals) 2000 to 2500 3522.5 +1000 to +1500
% Carbohydrates Per Capita 50-60% 49.5% 0 to -10%
% Protein Per Capita 15-20% 12.4% -2.5 to -7.5%
% Total Fat Per Capita 25-30% 38.1% +8 to +13%
Source: Frost & Sullivan analysis.
15 15
Health & Wellness— The 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
Correlation between
obesity and urbanization
points to opportunities in
growing cities in emerging
markets
Significant correlation
between spending on
health solutions and
urbanization suggests
that growth opportunities
exist in regions with
growing urbanization.
y = 0.0524x + 3.6258
R 2 = 0.1831
0
5
10
15
20
0 20 40 60 80 100 % of Urban Population
To
tal e
xp
en
dit
ure
on
hea
lth
as
% o
f G
DP
y = 0.3578x + 21.648
R 2 = 0.1646
0
20
40
60
80
100
0 20 40 60 80 100
% of Urban Population
% P
OP
w/B
MI >
= 2
5 k
g/m
²
Source: Frost & Sullivan analysis.
16 16
Note: All figures are rounded; the base year is 2010. Source: CDC/NCHS, Frost & Sullivan analysis.
Overweight Adults per State: Proportion of the population with a body mass index (BMI) equal to or more than 25 (United States),
2010
Almost 62 percent of Americans are classified as “overweight” (in terms of a body mass index of more than 25) and more than 25 percent of Americans are obese. This has motivated regulatory bodies and
nongovernment organizations to rank this as one of the most critical health problems—and, consequently, national defense—facing Americans today.
Health & Wellness—Weight Management Solutions will
Dominate the Food & Beverages Industry (continued)
USDA scientists
found that people
eat 500 more
calories on
average on days
that contain at
least one fast food
meal compared to
days that don’t.
17 17
Note: All figures are rounded; the base year is 2010. Source: U.S. Department of Agriculture, Frost & Sullivan analysis.
Total Food and Beverage Market: Consumption Per Capita per State in Pounds, United States, 2010
The South Central United States has the lowest per capita consumption levels in terms of food weight
despite these same states have some of the highest obesity rates. This suggests that the quality of
food consumed is much lower in this region and waste is greater in higher income states.
Health & Wellness—Weight Management Solutions will
Dominate the Food & Beverages Industry (continued)
Key
Unit = Pounds
18 18
Confusion over the many different food standards and regulations impacts the implementation of effective food safety practices. Increasingly, food safety standards are
indirectly enforced by retailers as opposed to government bodies.
Food Safety and Security—Industry Challenges Drives the
Need for More Effective Solutions
“Everybody wants to supply Wal-Mart. Wal-Mart is not the only one, but when Wal-Mart begins, everybody
starts to listen because everybody hinges their (profit) margin on that account…” (Large Food and Beverage
Ingredient Manufacturer)
Source: Frost & Sullivan analysis.
Food Safety Standard
Confusion and
Redundancies
Heightened Awareness
of Food Security
Breaches
Retailer Demand for
Safer Products Mistrust of Third-party
Auditors
19 19
The top four product categories in terms of retail sales are fresh vegetables, pulses, and
cereals, fresh fruit, fresh milk, and fresh meat, respectively. Bakery products is the largest
processed food category at $430 billion in 2011. In addition, delivering fresh food
necessitates the need for value chain speed.
Food Safety and Security—The Need for Value Chain
Speed
Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan analysis.
Total Food At Home Revenue and Value Chain Speed Estimates by Product Type, Global, 2011
1,7
05
1,5
03
1,4
52
729
430
400
246
220
175
129
125
112
108
105
105
100
100
82
80
75
70
70
62
47
42
20
15
10
8
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0
300
600
900
1,200
1,500
1,800 Faster Medium Slower
Value Chain
Speed
Reve
nu
e (
$U
S B
)
20 20
Food Safety and Security—Refrigeration Critical for
Ensuring Food Safety
In terms of preservation type, fresh food still dominates all retail sales and market share
diminishes as the need for refrigeration increases. Almost 50 percent of all food and
beverage products needs some form of cold storage when it is traversing the value chain.
Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan analysis.
Total Food At Home Revenue Share by Preservation Type,
Global, 2011
Frozen Processed
$243 2.9% Chilled
Processed $692 8.3%
Chilled Fresh Food
$3,198 38.4%
Shelf Stable Fresh Food
$2,386 28.7%
Shelf Stable Processed
$1,804 21.7%
Chilled food and frozen
food demand is
constrained by access to
effective refrigeration in
developing countries
21 21
Being Green—What is Sustainability?
• A sustainable profitability margin Economic Bottom Line
• A sustainable competitive advantage Economic Bottom Line
• Sustainable Revenue Growth Economic Bottom Line
• Minimize/maximize the production of negative/positive externalities produced by the company
over time that impact a given company's constituents Social Responsibility
• Minimize wasted inputs and unusable byproduct Environmental Awareness
• Avoid/minimize use of non-renewable resources such as resources that have a virtually fixed
amount (petroleum) and resources that have a virtually fixed amount whereby the resource’s
harvest rate is greater than the resource’s renewal rate Environmental Awareness
In general, the primary objective of a food and beverage company will be to generate, evaluate and implement an effective sustainability strategy. An optimal sustainability
strategy will attempt to satisfy the following seemingly unrelated, but highly interactive, objectives:
Sustainability, in a broad sense, is the ability to maintain a given process or state. In an ecological context,
sustainability can be defined as the ability of an ecosystem to maintain ecological processes, functions,
biodiversity and productivity into the future. With respect to business applications, the key processes that are
meant to be sustained overtime are the economic bottom line, social responsibility and environmental
awareness.
22 22
Being Green—What is Sustainability? Optimization of
the bottom lines over time
Ch
an
ge
in
Bo
tto
m L
ine
Time
Ch
an
ge
in
Bo
tto
m L
ine
Time
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. Social responsibility and environmental awareness 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.
Source: Frost & Sullivan analysis.
23 23
Cereal loss is minimized throughout the value chain, but consumers tend to through away roughly 15% percent of all cereal produced (usually in the form of baked goods).
Consumers also tend to throw away a significant amount of cereal, fruit and vegetables due to spoilage.
Being Green—Food Waste Continues to be a Major
Issue Throughout the Value Chain (continued)
Percent Loss or Waste Through the Value Chain by Selected Product Types, Global, 2011
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Agricultural Production
Postharvest Handling and
Storage
Processing and Packaging
Post Processing to Retail
Distribution
Consumption
% L
os
s o
r W
as
te
Cereals Roots & Tubers Oilseeds & Pulses Fruit & Vegetables Meat Fish & Seafood Milk
Note: All figures are rounded. The base year is 2011. Source: USFAO and Frost & Sullivan analysis.
24 24
• 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
• It is perceived by some industry participants that
many 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 and except the
risk.
• It is in the opinion of Frost & Sullivan that many
companies do not understand the benefits of
adopting a food safety standard and how to
effectively integrate that into their marketing
strategy.
Confusion over food standards impacts implementation of effective Green, Safe, and Healthy best practices.
Green, Safe, and Healthy—Industry Challenges Drives
the Need for More Effective Solutions
25 25
Green, Safe, and Healthy—Industry Challenges Drives the
Need for More Effective Solutions (continued)
Effective green, safe, and healthy message communication involves the entire value chain, yet many challenges persist that is constraining the adoption of a good solution.
Raw Material Supplier
Source: Frost & Sullivan
Distributors and
Retailers
Final Consumers
Finished Good
Manufacturer
We Are Still
Green, Safe,
and Healthy
Are Green,
Safe, and
Healthy?
Is this Green,
Safe, and
Healthy?
Distributors and
Retailers
Final Consumers
Finished Good
Manufacturer
Raw Material Supplier
We Are
Green,
Safe, and
Healthy
We Are
Green,
Safe, and
Healthy
We Are
Green,
Safe, and
Healthy
We Are
Green,
Safe, and
Healthy
3rd Party Verified
Without a clear industry icon…
With a clear industry icon…
We Are
Green,
Safe, and
Healthy
Product Flow
$ and Feedback Flow
Frost & Sullivan’s Strategic Approach—From
Mega Trends to Actionable Opportunities
27 27
Growth Consulting Approach
The core objective of The Growth Model is to identify your Company's GROWTH ZONE—those set of opportunities which have been optimized and validated based on your
Company’s own strategic objectives and capabilities weighed against the opportunities in the marketplace.
28 28
The Overarching Objective is to Filter Top Level Mega
Trends into Actionable Portfolio Prioritization
Changing Economics
RELEVANT MEGA
TRENDS
Sustainable
Addressable Market
Detailed
Opportunities
Mega Trends Identification
and Prioritization
Final output: Prioritized
sustainable
addressable markets
and potential
opportunities
• Detailed analysis of specific
need-based opportunities in
each sustainable addressable
market to provide actionable
data and outcomes
Determination Which
Addressable Markets are
Sustainable and Driven By
Mega Trends
Identified core total
addressable market and
specific opportunities
Being Green
Food Safety
Health & Wellness
Need-based
Opportunities
29 29
Our Analytical Approach for Going From Mega Trends to
Identifying Specific Opportunities
Project Phases
Activity
Process Steps
PHASE 1
GROWTH PIPELINE
PHASE 2
OPPORTUNITY
EVALUATION
PHASE 3
IMPLEMENTATION
STRATEGIES
Identification of
Mega Trend and
Sub Trend
Opportunity
Universe
Prioritization of
the Sustainable
Addressable
Market and
Resultant
Opportunities
Down
Select/Shortlist
Optimal
Submarkets and
Opportunities
For Phase 2
Research
Deep dive
analysis of
shortlisted
opportunities to
support and
facilitate growth
workshop
sessions with
F&S and internal
experts
Determination of
Strategic
Options for each
selected
Opportunity
from Phase 2 –
selection and
Agreement. Key
Action Items
Mega Trend Growth
Workshop and
Group Pre Work
Mega Trend Workshop / Research
Research and
Decision Support
Matrix Population
Growth Strategy
Workshop and
Action Plan
30 30
Adjacent
Focus on New Product Development and Line
Extension or Acquisition of Complementary
Companies
“Blue Sky”
Focus on Innovation and R&D
Core
Focus on Competitive Strategies to Increase
Share in Current Markets through increased
Marketing, Distribution, Sales, or Acquisition of
Competitors
Adjacent
Focus on New Verticals and Geographies or
Acquisition of Complementary /Substitute
Companies in new Verticals/Geographies
Pro
du
cts
N
ew
C
urr
en
t
New Current Markets
The Product- Market Matrix (PMM) Model helps to map out the addressable market, the potential market, and the adjacency market landscapes and provides guidance to the optimal
growth strategies that need to be adopted in order to address opportunities. Your optimal growth strategy will be dependent on the pre-determined growth criteria, the nature of the
market place, and your company’s ability to win.
The Goal is to Capture Your Company’s Growth Options
for Further Analysis
31 31
Next Steps
Develop Your Visionary and Innovative Skills
Growth Partnership Service Share your growth thought leadership and ideas or
join our GIL Global Community
Join our GIL Community Newsletter
Keep abreast of innovative growth opportunities
32 32
Your Feedback is Important to Us
Growth Forecasts?
Competitive Structure?
Emerging Trends?
Strategic Recommendations?
Other?
Please inform us by “Rating” this presentation.
What would you like to see from Frost & Sullivan?
33 33
http://twitter.com/frost_sullivan
Follow Frost & Sullivan on Facebook, LinkedIn,
SlideShare, and Twitter
http://www.facebook.com/FrostandSullivan
http://www.linkedin.com/companies/4506
http://www.slideshare.net/FrostandSullivan
34 34
For Additional Information
Jeannette Garcia
Corporate Communications
Chemicals, Materials and Foods
210.477.8427
Christopher Shanahan
Global Program Manager—Food and
Beverage Practice
(1)210-477-8419
