Dr. David HughesEmeritus Professor of Food Marketing

Nuffield Contemporary Scholars ConferenceTe Papa Tongarewa, Wellington, NZMonday, March 7th, 2011

“Story Food” versus “Feeding the Family Food”: Different Strokes for Different Folks?

Top Global Grocery Profit Performers in 2009Profit Margin % ROCE %

Philip Morris Int. 40 47Altria Group 36 38BAT 32 24AB InBev 31 14GlaxoSmithKline 30 31Coca-Cola 29 24Diageo 28 21Johnson & Johnson 26 25SABMiller 25 14Colgate -Palmolive 24 46Reckitt Benckiser 24 19Procter & Gamble 24 56Pernod Ricard 23 9Reynolds American 21 16PepsiCo 19 33

Profit Margin = EBIT after earnings from associates and other exceptional itemsROCE = Return on Capital EmployedSource: OC&C UK, 2010

Top Global Food Profit Performers, 2009Profit Margin % ROCE %

Group Danone 16 12General Mills 16 19Kellogg’s 16 28Campbell Soup 16 35Nestlé 15 20HJ Heinz 15 24Kraft Foods 14 12Unilever 14 24Cadbury 13 15ConAgra 12 18

Profit Margin = EBIT after earnings from associates and other exceptional itemsROCE = Return on Capital EmployedSource: OC&C UK, 2010

Life Science CompaniesOwnership of Genetic Rights

market powerpolarised

nursery peoplegrowers/farmersdistributorsmanufacturers etc.get squeezed!

Major Global Food Retailers and Food Service FirmsOwnership of Information on Shopping Behaviour

Proprietary Technology and Demand Chain Squeeze

The Charge? Threatening Health & Well-Being of:- The Planet - issues relating to sustainability, climate

change, resource conservation, biodiversity, etc.- Consumers – food safety, obesity- Food System Participants – abusing farm animals,

threatening smaller-scale farmers

In the Dock: The Modern Global Food and Drink Industry

For the Prosecution

Hugh Fearnley-Whittingstall

% Obesity Levels in Selected Countries

%

Source: The Financial Times, September 9th, 2010

2010 Dietary Guidelines for Americans

• eat less, exercise more• eat more:

– plants i.e. fruit, vegetables– pulses, whole grains, nuts & cereals– seafood, low/no fat milk products

• eat moderately (government code for eat less)– lean meats, poultry and eggs

• eat significantly less– sugar, salt, solid fats, refined grains

Financial Times Report, October 2/3rd , 2010Nestlé To Invest $500 million in Health Science

• “The Swiss giant’s announcement marks an implicit step towards the recognition by Big Food that it bears responsibility for the unremitting worldwide rise in obesity – though food manufacturers are not yet ready to admit that their products are harmful, as the tobacco industry does ...”

“Food Has Never Been Safer”

US: Obama nominates food safety undersecretary27 January 2010 | Source: just-food.comPresident Barack Obama has announced that he plans to nominate USDA veteran Elisabeth Hagen as his first undersecretary for food safety.

US salmonella scare: farm inspections reveal manure, mice and maggotsCalls for main egg producers to be better regulated after two firms at centre of scare revealed to have breached basic hygiene guardian.co.uk Tuesday 31 August 2010

“Consumers are blissfully ignorant of the existence of farm assurance and what it stands for” UK Food Standards Agency Survey, 2002

• so, traceability schemes and requirements are a waste of time and money, with most costs carried by the primary producer?

• consumers simply expect that the food industry has food safety “sorted”. They believe as a matter of course that we know exactly where all our ingredients come from. If they find out that we don’t, then, they are outraged.

Wal*Mart Announces Global Sustainable Agriculture Goals, October, 2010 Support Farmers & Their Communities

selling $1 billion in food from smaller-scale farmers training 1 million farmers/workers in sustainable farming practices increasing income of above by 10-15% in USA, doubling sale of locally-sourced produce

Produce More Food with Fewer Resources + Less Waste over next 5 years invest $1 billion in its global fresh supply chain reduce food waste in stores worldwide by 10-15% introduce Sustainable Produce Assessment for suppliers

Sustainably Source Key Agriculture Products all Wal*Mart brand palm oil sustainably sourced by 2015 expand existing beef sourcing practice in Brazil with zero

tolerance on deforestation

Nestlé S.A. to Receive 2011 World Environment Centre Gold Medal for International Corporate Achievement in Sustainable DevelopmentWEC's independent jury selects Nestlé S.A. as the 2011 recipient of the Gold Medal Award

41%

36%

27%

25%

22%

21%

14%

10%

9%

7%

6%

4%

3%

2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

They Are Better Quality

Healthier

They Are A Treat

I Can Afford Them

They Are For Special Occasions

I Know I Will Like Them

Organic/ Natural Ingredients

More Ethically Produced

They Are Better For The Environment

I Will Spend More On Food For My Children

Special Dietary Needs E.G Gluten Free

Endorsed By A Brand Or An Organisation I Like And Trust

Religious Beliefs Eg Halal, Kosher

I Want To Impress My Friends

Reasons for paying more for food and drink

Thinking about food and drink that you are willing to pay more for, what are the most important reasons for doing so?

• Key Findings• As many as 1 in 7 (14%)

shoppers are willing to pay more for organic food

• 1 in 10 are willing to pay more for ethically produced goods and a similar number (9%) for goods that are better for the environment .

World Population: Who's Going Up and Who’s Going Down?

2010 2030 2050- billion-

World 6.9 8.2 9.0Africa 1.0 1.5 2.0Asia 4.1 4.8 5.1Europe 0.7 0.7 0.7LAC* 0.6 0.7 0.8North America 0.3 0.4 0.5Oceania 0.04 0.04 0.05

*Latin America & CaribbeanSource: UN (population scenario planning)

The Future of Food and Farming:Drivers of Change

• Global population increase from 7 billion in 2010, to 8 billion in 2030 and 9 billion by 2050.

• Dietary changes (increased global consumption of meat and dairy) will require substantially more resources than in the past.

• Future governance of global food system will have a big impact on supply and demand balance:– National food security policies– Production subsidies, trade restrictions– Growth of new food superpowers (e.g. BRIC)– Control of increasing areas of land for food production– Adequacy of current global international institutions

• Climate change• Competition for key resources

– Land (urban versus rural versus industrial)– Energy (e.g. green, price/availability of fossil fuel)– water

• Values and ethical stances of consumers – e.g. acceptance of new technology

London, UK, 2011

The Future of Food and Farming:High Level Conclusions

1. More food from less. Contain demand for meat and dairy (code for reducing consumption in Developed countries. Minimise waste. Improve political and economic governance.

2. Climate change initiatives and achieving sustainability in global food system inextricably linked.

3. Revitalise moves to end hunger – reduce unfair subsidies, focus on rural development

4. All policy options open – code for embracing new technology.

5. Food self-sufficiency at national level rejected but maximise benefits of globalisation to ensure food supply.

London, UK, 2011

Consumer Trends: Migration to the Poles

“Feed the Family Food”GlobalHigh TechDrudge/Chore ShopConsumer ShopperNew and ImprovedReady-to-EatFast FoodFuel FoodJust MeLow PriceGood For YouAll YearIntensive

“Experience & Story Food”LocalHigh TouchLeisure/Experience ShopCitizen ShopperTraditionalNatural/UnprocessedSlow FoodStory FoodFriends/FamilyPremium PriceNaughty but NiceSeasonalExtensive

“Feed the Family” or “Story” Food? Depends on Range of Factors Including:

• Income• Urban or rural composition of population• Family composition (e.g. children or not, help in

the home ... grandparents in China) • Meal occasion• Strength of national/regional food culture and

food heritage

Impact of Campaign

• 500,000 more households bought Yeo Valley products in the 12 weeks to December 25th, 2010, than in preceding period

• Outperformed total yoghurt market by 250% • Viewed 2 million times on YouTube (YeoTube!)• Sales boosted by £10 million – equivalent to 15% year-on-year

– for a campaign investment of £3 million• Advertisement aired 7 times during the X Factor (ITV1) and 25

ITV2 slots

We Want a Better World!Products which are:• better for me

– more convenient– better tasting– better price

• better for my well-being and body– feel good – look good– safer for my children

• better for the world and my locale– environment– Third World– my countryside

• better for Bambi/Flipper/Little Nemo/Babe/Bo Peep

CONTACT POINTS:e-mail

profdavidhughes@aol.com

telephone numbersoffice +44(0)1600 715957fax +44(0)1600 712544mobile +44(0)7798 558276

Check my latest podcast at www.profdavidhughes.com