Adding Value Development of Food Processing and Supply Chain

Transcription

1 Adding Value Development of Food Processing and Supply Chain A Plate to Farm perspective Asitava Sen Senior Director & Head Food and Agribusiness Research & Advisory, Rabobank

2 Rabobank Group From a rural Dutch credit cooperative to a leading full-service financial group Rabobank Nederland Rabobank International Coöperative Centrale Raiffeisen-Boerenleenbank, B.A. Two separate cooperative banks - the Coöperatieve Centrale Raiffeisen-Bank in Utrecht and the Coöperatieve Centrale Boerenleenbank in Eindhoven - were founded by enterprising rural folk, who, with little access to the capital market, decided to help one another. Leading full service financial group in the Netherlands, holding many subsidiaries with business in: Insurance, Pensions, Leasing / trade & Vendor Finance, Asset Management/Advice, Real Estate Project Development/Finance, Private Banking, Home Broker Rabobank International (Corporate Investment Banking) Largest financial group in the world specialized in Food and Agribusiness (F&A) on a Global Basis: Presence in >42 countries Over 1,300 F&A clients Global Approach Local Relationship All Industries Full Service (Corporate and Retail) Food and Agribusiness Focused Corporate Investment Banking Safest privately-owned Bank, more than EUR 700 billion in Assets Cooperative Principle: long-term relationship 2

3 Our approach to client relationships Driven by sector knowledge & supported by product capabilities Sectors covered: Farm Inputs Ingredients & Sugar Broader sub sector coverage Sub sector specialists involved in both origination and execution for financing and advisory products Sub sector coverage bankers cover an entire region (Europe, Americas or Asia) M&A bankers specialised into 11 sub sectors of the food, drinks and agri spectrum Grains & Oilseeds Animal Protein Dairy Beverages Value-added Processing Access to deeper research Rabobank has its own unique group of dedicated and highly specialised Food and Agri Research analysts (FAR) FAR comprises over 70 analysts in 13 countries around the globe Fundamental research covering the entire food and drinks chain Output in the form of tailored presentations for internal and external clients, World Maps, Industry Notes, F&A Reviews, Commodity Notes and Regional Banking Reports 3

4 Leading global financial institution in most sub-sectors 9/10 9 of the Top 10 Global Sugar companies are Rabobank clients 70 sugar clients around the globe 19/2019 of the Top 20 Global Beverage companies are Rabobank clients 100+ beverage clients around the globe $2.8 billion in commitments to the global sugar industry $5.9 billion in commitments to the global beverage industry 4

5 Agenda Emerging trends in global food supply chain Emerging integrated and dedicated supply chains in India Conclusions and questions for panel discussion 5

6 F&A supply chains are under unprecedented pressure Four drivers are responsible. The first three are well known. The fourth the great crossover is new. As a result, F&A companies are trying to maintain and grow their margins in an increasingly complex operating environment. Source: Rabobank,

7 The great crossover creates new complexity, adding pressure to the chain This concept is new, even though the individual elements are well known Outside agendas now influence traditional supply and demand dynamics Their influence has become material The complexity they create is set to remain Source: Rabobank,

8 Traditional conflicts in the supply chain - Dilemma Buyers are seeking to protect margin how much upside to be shared to secure supply and reduce volatility? Suppliers are gradually strengthening their negotiating position will returns be better in open market? How much to commit to one buyer? 8

9 Fundamental changes in supply chain management are needed in the F&A sector Source: Rabobank 2013 Chain partner engagement Significance of relationships From negotiation To collaboration Potential for adding value through the supply chain From transactional To transformational How much flexibility and potential upside need to be traded-off to achieve the increased 9 certainty that will drive growth.

10 Dedicated supply chains a new direction for F&A Dedicated supply chains are characterized by closer cooperation from one end of the chain to the other, longer-term supply agreements, and a focus on adding value Dedicated supply chains allow all F&A companies to increase control of supply to manage pressure and complexity Source: Rabobank, 2013 Companies outside supply chain cooperation models 10

11 Dedicated supply chains create value in five well-known areas Reduce Risk Reduce exposure to market price volatility through multi-year, stable, pricing agreements. Improve productivity Increase access to capital Optimise production through increased certainty. Improve process innovation through better insights into chain requirements. Improve investment opportunities through more stable cash-flow and multi-year supply agreements. Access new markets Improve product innovation through better insights into downstream needs and opportunities. Enhance brand reputation Work with chain partners on other product attributes, such as quality and sustainability. Source: Rabobank,

12 Leading F&A companies are responding to this concept Nestlé has formal structures and checks on suppliers to help manage its chain. Nestlé directly works with some 45,000 farmers, providing advice on agronomic practices and support to meet Nestlé's product quality and sustainability requirements, and to contribute to local sustainability. Coca-Cola is looking double its revenues by Can the supply of agri commodities keep pace with this sort of target? This question is already being addressed in the juice industry, with suppliers and off-takers adopting novel approaches to under-write new investments. Starbucks is investing in its supply chain in Yunnan Province, China, to improve its focus on quality. Starbucks has established a local coffee grower training centre to improve local production. In return Starbucks wants to market high-quality Yunnan coffee. India Examples Bayer Crop Science is strengthening relationships with growers and retailers in vegetable supply chains. Retailers select varieties, Bayer Crop Science produces seed, and growers deliver to market specifications, reducing risk for all involved. McDonald s has long established close working relationships with its suppliers, seeing them more as partners than transactional counter-parties. McDonald s promotes innovation by specifying what is needed rather than how partners should deliver its needs. 12

13 Agenda Emerging trends in global food supply chain Emerging integrated and dedicated supply chains in India Conclusions and questions for panel discussion 13

14 Beverages Quick Service Restaurants A few examples of collaboration in the supply-chain in India Dairy Grain Storage 14

15 Mismatch between QSRs footprint and processing facilities for key ingredients Source: Company websites, media articles, Rabobank analysis

16 Agenda Emerging trends in global food supply chain Emerging integrated and dedicated supply chains in India Conclusions and questions for panel discussion 16

17 Conclusions A clear view of the chain and getting the business model / focus right is more important than ever Positive outlook in F&A underpinned by demand growth. In a consumption led economy, demand will always precede supply. The question is how would the supply side cope with changing food demand and consumption? There is a case in favour of thinking Plate to Farm vis a vis the traditional concept of Farm to Fork Role of the captain at the downstream end is critical in this transformation. Growth in demand will lead to investments in upstream and midstream and compact value chains, which will be beneficial to all stakeholders 17

18 Key questions companies should ask about their supply chains Quality and price Questions increasingly being asked of suppliers and supply chains Security of supply 1 Protect and grow margins 2 Safety and sustainability 3 Strengthen the weakest link Support growth 5 4 Supply chains now need to deliver more 18

19 More Questions for the Panel Discussion For the panel, we would like to understand your viewpoint on the weakest linkages which need to be addressed first? Some more question relevant to our discussion today: Government Chain Captains Chain Partners What should be the focus of our policy initiatives to promote the right investments in the supply chain? What impact does the Food Safety regulation have on the food supply chain? What are downstream companies in India doing to improve supply chain linkages? What are some of the best practices in supply chains from the developed world that can be adopted in the Indian market? How do producers capture greater value in the supply chain? What other process hurdles need to be managed to make the supply chain dedicated and efficient, in the local context? 19

20 Contacts Rabobank International 1/F, Forbes Building Charanjit Rai Marg Fort, Mumbai India Rabo India Finance Asitava Sen Senior Director & Head Food & Agribusiness Research, India Telephone Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of the Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. ( Rabobank or Rabobank International ). The information in this presentation reflects prevailing market conditions and our judgment as of this date, all of which may be subject to change. This presentation is based on public information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information and opinions contained in this document are wholly indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas et cetera contained in this presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be relied upon in connection with any contract or commitment whatsoever. 20