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The Global Food Jungle: Cutting edge value chains

The Global Food Jungle: Cutting edge value chains. John Purchase Standard Bank Agri Conferences 19 February 2013. Global food jungle: Survival of the smartest. Value Chain Approach. Consumers. Output Markets - Wholesale - Retail . Service providers - Processing - Storage

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The Global Food Jungle: Cutting edge value chains

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  1. The Global Food Jungle: Cutting edge value chains John Purchase Standard Bank Agri Conferences 19 February 2013

  2. Global food jungle:Survival of the smartest

  3. Value Chain Approach Consumers Output Markets - Wholesale - Retail Service providers - Processing - Storage - Manufacturing - Packaging Policy & Legislation environment Policy & Legislation environment Primary agriculture - Smallholders - Commercial • Input service providers • - Finance & Insurance • Seed, Fert’s, Agro-chemicals, etc. • Livestock inputs

  4. BRAZILIAN BEEF PRODUCTIVE CHAIN Sum of Sales of the Various Links: US$ 167.5 billion in 2010 Cattle Slaughtered (millions of heads): 42.8 Livestock (millions of heads): 209.5 Slaughtering Capacity (heads/day): 198.731 BEFORE FARMS US$ 11.4 billions FARMS US$ 31.4 bilhons INDUSTRIAL INPUTS US$ 1.7 billions SLAUGHTERHOUSES US$ 42.0 billions DISTRIBUTION US$ 57.6 billions US$ millions US$ billions Distributors/Wholesalers/Trading Retailers US$ 14.740,6 US$ 42.883,3 Domestic Sales: 37.2 US$ millions Animals sent to slaughter US$ 30,770.4 millions Exports: 4.8 Genetics US$ 1,313.9 US$ millions FINAL CONSUMER Packaging US$ 804.3 Meat US$ 35.8 billions Mineral Supplements US$ 1,307.3 Food Industry and Food Service Trading US$ 246.8 millions US$ millions Finished Steer US$ 19,646.0 Eletricity US$ 496.0 US$ billions US$ millions Feed Supplements US$ 553.3 Domestic Sales: 31.9 Exports: 3.9 Meat: 163.2 Byproducts: 83.6 Cows US$ 7,162.3 Maintenance Parts & Equipment US$ 151.1 Vitamins & Additives US$ 23.1 Other Products US$ 6.2 billions Young bulls US$ 3,953.5 Fuel Oil for Boilers US$ 83.2 US$ billions Distributors/Wholesalers US$ 14.493,8 millions Animal Health US$ 496.1 Domestic Sales: 5.2 Exports: 0.9 Veal US$ 8.6 Retailers US$ 42,883.3 millions US$ millions Chemicals for Cleaning US$ 41.9 US$ millions Pesticides US$ 1,084.2 Meat: 13,976.1 Byproducts: 517.8 Leather US$ 1,147.6 US$ millions Fertilizers US$ 332.4 Refrigerant Gas US$ 41.4 Offal & Glands US$ 1,110.2 Major Retail Chain Exports of Live Cattle US$ 658.7 millions Meat: 25,060.7 Byproducts: 1,601.5 Industrial Meat US$ 887.9 Forage Seed US$ 203.0 Water Filters US$ 37.1 Tanning industry Feet, Instestine, Stomach, etcUS$ 741.5 Exports US$ 1,729.2 millions Small and midsize retailers Agricultural Lime US$ 108.0 PPE US$ 27.4 Tallow US$ 722.3 Meat: 15,119.0 Byproducts: 928.8 Cosmetic Lubricants US$ 8.9 Prepared & Canned Foods US$ 498.2 Diesel Oil US$ 3,757.2 Food Slaughterhouses own retail stores Tripe US$ 437.6 Fencing & Posts US$ 1,684.2 Animal Feed Meat: 163.8 Byproducts: 9.5 Byproducts for Industry US$ 322.8 Pharmacy Tractors & Implements US$ 527.9 Meat Meal & Bone Meal US$ 194.6 Other Industries Bladder US$ 75.5 SISBOV Ear tags US$ 3.4 Facilitating Agents US$ 23.4 billions Blood Meal US$31.3 Facilitating Agents – US$ millions Freight and Diesel:2,252.2Farm Credit: 17,100.6Payroll: 3,913.3 Traceability: 23.0 Transport to exports: 59.5Agregated Tax: 16,531.6 Research: 23.1 Animal Register: 10.0 Figure 3. Brazilian Beef Chain (gross revenue). Source: Neves et al. prepared with data generated by Markestrat and Scot Consultoria.

  5. Your Consumer:Most important

  6. Global demographics

  7. FAO Food Price Index

  8. Supermarket phenomenon Retailers, the Giants of the Chains, and Powerful - Wal-Mart sold €337 billion worth of food from 8 400 stores in 15 countries in 2010. Carrefour & Tesco next. - Concentration (Top 20) down from 23,4% (2003) to 21% (2010) - Private versus retailers labels/brands - Neighbourhood concept: proximity & convenience - Powerful: Information about consumers - Supply chains incredibly important: Internationalisation - Move to ‘Green Economy’, Fair Trade, Smallholder procurement, increased convenience, tasting areas, etc. - Shopping experience: ‘Lock-in’ customers Source: Marcos Fava Neves

  9. BRICS to drive Modern Retail growth Note: 2014F is calculated using fixed exchange rates based on the average rates of 2009 from www.oanda.com (01.01.09 to 07.12.09). Source: IGD Research, December 2009

  10. The Producer:Key link in Value Chain

  11. In the Bio Era, everything comes from farms! Modern technology and other advances have made farms a multiproduct and service supplier. No. 1: Respect our farmers! Food & Beverages Feed Paper Construction & Furniture Fuel From Farms to…… Pharma Medicine Shoe & Leather Ind Pharma Cosmetics Textiles & Clothing Electricity Entertainment/ Tourism Plastics Environment Source: Marcos Fava Neves

  12. Our Challenge Today:Produce more with less • Cutting edge technology • Cutting edge management

  13. Efficiency Driven Producer and Agribusiness Marcos Fava Neves: The Future of Food Business . World Scientific, 2011

  14. Technology Usage at Farm Level

  15. Agribusiness as ‘Hub’ Source: Marcos Fava Neves

  16. Efficiency-driven Agribusiness Model (EDA) • Land use and management • Plant production • Animal Production • Waste management • Risks • Government • Relationships with retailers/processors • Diffusion and knowledge transfer • Storage and movement • Research and innovation architecture Source: Marcos Fava Neves

  17. Look to Consumer: Be demand-driven • 70’s-90’s: Mass production, mass marketing • 90’s change: globalisation, market deregulation, new technology, information & communication progress, speed of socio-cultural changes, consumerist movement, growth of ethics, and societal inclusion. • Era of consumer sovereignty, so be demand-driven • Know your consumer, competitor & environment, and have depth analysis and reaction to changes. • Value satisfaction and well-being of buyers • Smooth and collaborative networks with suppliers, distributors and service providers • Problem-solution based approach

  18. Companies becoming more Demand-driven 1 – They listen and pay attention. 2 – They don’t fear being evaluated. 3 – They dedicate formal time to thinking. 4 – They analyse and exercise macro-environmental changes. 5 – They do mental simulations of possible future scenarios. 6 – High stakeholders contact. 7 – Demand-driven organisations share a sense that they are owned by the consumer. 8 – They don’t fear to change. 9 – Entrepreneurial and innovation behaviour. 10 – They also share discipline to make things happen. Source: Marcos Fava Neves

  19. Understand Consumer’s Kingdom!

  20. Technology Usage at Farm Level

  21. How to Organise Supply Chains Sequence of six steps to evaluate the company´s integrated supply chain (CISC): • Understand the company´s integrated supply chain structure. • Analyse the market characteristics of the major inputs • Diagnosis of each input of company´s integrated supply chain. • Make a proposal of a governance structure for each input of the integrated supply chain. • Building the contract (relationship) • Managing the relationship. Source: Marcos Fava Neves

  22. Need to develop value chains to create and unlock value As country’s GDP per capita grows, so does the importance of its agribusiness sector increase relative to its primary agriculture As primary producer, how do I effectively access the value chain, or add value and integrate my enterprise in a value chain?

  23. Status and Trends South Africa

  24. Africa Tomorrow$1.4 TrillionAfrica’s Consumer spending in 2020128 million households with discretionary income in 20201.1 billionNumber of Africans of working age in 2040

  25. Africa’s Imports and Exports of Agricultural Products (current values)

  26. Africa’s net Imports of Food Groups(current values)

  27. Source:

  28. Corporate farms, family farms and smallholders? • Impact of land reform – uncertainty • Scale of economy and risk management/ mitigation leading to bigger farming units • Corporate farming making significant inroads into SA’s agricultural production • Social sustainability – how to incorporate smallholders?

  29. Projects for Including the Networks of Smallholders (PINS) 1. Introduction and research problem One of the most important challenges currently facing agribusiness is how to include smallholders in modern integrated food chains in a sustainable way. 2. Objective and method Governments and development agencies need to implement sustainable and integrated agribusiness projects in order to promote the inclusion of smallholders into mainstream agriculture.

  30. Conclusion • Major shifts in global food demand • Scarcer resources having major impact • Efficiency and productivity gains through technology/innovation critical • Know your value chain in detail: cutting edge advantage • Risks to be managed, but many opportunities!

  31. Thank you

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