Trends in the Global Food Industry

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Trends in the Global Food Industry

• Opportunities and Threats for Fresh and Processed
  Produce Suppliers

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• Talk by Tom Reardon
• Michigan State University
• Twenty- Second Annual Agribusiness Management
  Conference
• Center for Agricultural Business
• California State University, Fresno
• October 28, 2003

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1. Transformation of Retail - Globally

• Spread of supermarkets in the emerging, growth
  markets Asia, Latin America, Central/Eastern
  Europe
• KEY demand growth regions for fresh and
  processed produce

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• Supermarkets in food retail are about 70-80 now
  in US and Europe
• In Latin America 15 in 1990 ? 55 in 2000
• 3 out of 10 pesos spent by Mexicans on food are
  spent in Wal-mart!
• In Central Europe 25 in 1999, 50 in 2003!

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• China from a few supermarkets in 1992 to 6000 in
  2002!
• half of food retail in the 60 largest cities

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• Rapid consolidation of supermarket sector
  everywhere
• Top 5 chains in a given country
• 40 in the U.S. (up from 25 five years ago)
• 70 in France (2/3 global chains)
• 65 in Latin America (3/4 global)

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• Consolidation of procurement
• Shift to big Distribution Centers
• Ahold in East Coast
• Shift to specialized wholesalers and distribution
  companies
• Melissas / Wal-mart
• CS Wholesale Grocers / Ahold/US

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Shaws (Sainsburys) 480,000 sq ft DC in Maine
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• Shift to regional and global networks
• www.globalsources.com
• Procurement changes mean move to fewer, bigger
  suppliers
• and preference for ONE-STOP-SHOPPING from
  supplier for variety of products in a category

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• Rise of tough private standards of quality and
  safety
• This week a major UK retailer announced WE DO
  NOT CARE WHAT EU AND US GOVERNMENT NEGOTIATIONS
  ON GMO LABELING COME UP WITH .
• OUR CHAIN WILL REQUIRE GMO LABELING

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• EUREPGAP (reductions in pesticides on produce by
  early 2004)
• CIES Global Food Safety Initiative
• to harmonize food safety standards and
  practices among retailers

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• CIES clout to implement global food safety
  PRIVATE standards
• Top 250 retailers
• Top 250 suppliers

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• members sales 2.8 trillion dollars
• (clout?)
• ? Converge of and increase in standards globally

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2. Opportunities and Challenges from Rapid Change
in Markets

• Opportunities
• Rise of supermarkets integrates, de-fragments
  food markets
• ... Far easier targets to hit (story of snack
  firm in Costa Rica)

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• If you can get in WOW!
• Shift to national DCs in China
  Hualian-Lianhua, Wal-mart, Carrefour
• story 3 melon growers in Brazil/Carrefour

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• Supermarkets in emerging markets are eager to
  diversify, innovate
• Supermarkets are the gateway to 1 billion middle
  class consumers in these regions eager to buy
  produce

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• Supermarkets in developing regions Market that
  fuels growth of agribusiness sales
• fresh-frozen carrots in supermarkets in
  Singapore, Croatia, Chile, Brazil
• massive growth of fresh-cuts in China and rest
  of Asia market
• imports of US produce

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Nicaraguan Supermarket with U.S. apples
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Michigan, Chilean, Washington, Oregon apples
HORTIFRUTI, Nicaragua
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Canadian and Californian onions sold to CARHCO
Supermarkets (in Nicaragua)
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• Threats/Challenges
• Broad consolidated procurement systems and
  networks
• allow chains to source over globe and get
  cheapest and best quality
• ? quantum leap in competition
• the days are gone of stable home markets or
  captive niches

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• Global convergence in safety standards
• Chilean and Chinese food processors and packers
  have already raced to get ISO and HACCP full
  certification

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Typical Scene in Chile.. Or China
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3. Opportunity and Threat Proliferation Globally
of World-Class Suppliers to Supermarkets

• Industry massive investments in production and
  processing
• Government investment in infrastructure
• since 1990 in Chile, China, Mexico, New
  Zealand, Australia, South Africa
• Long-distance supply enabled by
• Trade liberalization
• Improvement in distribution technology

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• Responding to rise in demand
• Adapting to deep transformation in retail in past
  10 years. Chains want
• Quality and Food Safety
• Diversity of products BUT One-Stop-Shopping from
  suppliers
• Year-round availability
• Low cost

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Example Tanimura and Antle

• Vegetables to supermarkets in Mexico
• Started a few years ago with bulk vegetables
• Quickly moved to value-added vegetable packs
• Rapid growth in shipments

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Example of XinCheng Foods, Shanghai

• 1997 on supermarket-market in China (200 stores
  in 1992 to 6000 in 2002)
• Vegetables and meat to chains in China, Korea,
  Japan, Hong Kong
• Certifications
• ISO 9001 (quality), HACCP (safety), Green Label
  (low pesticide) No Pollution Label
• Fresh cuts 150 tons, 97 ? now 1800!

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Example Global Berry Farms

• GBF, Florida, October 2000, LLC owned by
• Michigan Blueberry Growers Marketing
• Hortifrut, Chile raspberries, blackberries,
  blueberries (35 of global bushberry off-season)
• Naturipe, California strawberries

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• YEAR-ROUND (north and south)
• VOLUME required by big chains
• ONE-STOP-SHOPPING for diversity of berries
• High quality and safety
• Growers in California, Chile, Costa Rica,
  Guatemala, Mexico, Michigan

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4. Implications

• ? A key implication is the need to make timely
  and substantial investments to stay in the game

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• but, given that key implication, can all keep
  up?
• the challenging and common now in every
  country - story of ASUMPAL coop

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ASUMPAL Coop, Guatemala

• - Cooperative of 330 members in 2001
• Shift from roma to salad tomatoes
• Contract with McDonalds
• Stringent private standards
• Implied large investments

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• 2002 Membership from 330 to 30 to 6 today
• the 6 buying the land of the 300 who dropped
  out
• .. The 6 made investments and won