The World’s Top 100 Food and Beverage Companies - 2013: Operating in a new global environment
A profound shift in the global economy from developed to emerging markets has changed the landscape for the world’s leading food and beverage manufacturers.
The past few years of economic hardship and fluctuating fortunes in different geographic regions have brought about extraordinary investment activity, restructuring, cost cutting and repositioning in the ranks at the world’s leading food and beverage companies.
Nowhere has Top 100 activity been greater than in emerging markets where sector growth, fuelled by the burgeoning middle classes and rising incomes, has posed an attractive stream of investment for food and beverage manufacturers. Here, companies have sought acquisitions of and partnerships with their counterparts, and activity has reaped rewards for the successful players and stimulated these countries’ economies even further.
China, the world’s largest grocery market, is currently valued at US $1 trillion and is forecast to be worth US$1.5 trillion by 2016, according to the Institute of Grocery Distribution (IGD). Encouragingly for many big players, the US is likely to remain the second-largest grocery market globally and is predicted to accelerate from the compound annual growth rate of 3.6 percent seen between 2010 and 2012 to 4.7 percent between 2013 and 2016. India is forecast to overtake Japan as the world’s third-largest grocery market by 2016, and the gap between Russia and Brazil (currently in sixth and fifth place respectively) is narrowing fast.
“For food and consumer goods companies, the Asia-Pacific and Latin American grocery markets offer long-term growth opportunities, with many businesses already profiting from entering them,” says Joanne Denney-Finch, chief executive of IGD. “By 2016, the top five —US and BRIC (Brazil, Russia, India and China) nations—will increase their share of the global grocery market to 65 percent compared with 60 percent in 2012.”
“Over the past several years, a number of forces have combined to radically reshape the external environment in which the food and beverage industry operates. These changes have had a major impact on where and how companies must compete to survive and thrive.”
Although the energetic investment taking place in the developing world continues, activity has become less frenzied. In the Top 100 boardrooms, management teams are coming to terms with the new international structures they now head and creating strategic plans that are better equipped to cope with the challenges and opportunities posed by having a truly global reach.
“2012 confirmed in spectacular manner the profound shift in the global economy that is gathering apace,” says Franck Riboud, chairman and CEO of Danone, which sits at number 13 on the Top 100 list again this year. “Management’s responsibility consists of adjusting its strategies quickly and rethinking its company organization in order to take advantage of the growth momentum in the new economies while regaining maneuvering room in Europe. Significant changes are underway to enable Danone to reinvent itself in response to this new global environment.”
View the Top 100 Food
and Beverage Companies
of other years
Further up the ranking in the number two slot, PepsiCo is also grappling with the new global environment. “Over the past several years, a number of forces have combined to radically reshape the external environment in which the food and beverage industry operates. These changes have had a major impact on where and how companies must compete to survive and thrive,” says Indra K. Nooyi, chairman and CEO of PepsiCo. “Global macroeconomic growth has slowed significantly, and the outlook remains mixed, particularly in developed markets. Global economic power is becoming more distributed, with the East becoming a larger player in the world. The demographic equation in the West is shifting, with an increasing share of consumption in the hands of boomers, women and smaller households and the rapid growth of diverse ethnic and immigrant communities across countries.”
As with all companies at the top of the ranking, PepsiCo has had to remain agile to cope with the changing business landscapes. It has also had to reevaluate its structure to ensure resilience.
“PepsiCo has historically been managed as a loose federation of countries and regions. This organizational structure fostered an entrepreneurial culture in the company, but not necessarily global efficiency,” says Nooyi. “Starting in 2010 and accelerating in 2012, we began to modify our global operating model, balancing independence and scale, to become a globally networked company. Our in-country and regional teams are empowered to serve their markets, but through global groups and functions, we are harmonizing our efforts across the world around brand building, innovation and the management of the supply chain.”
To achieve this, the company is in the process of harmonizing its global processes, master data and IT systems to “increase visibility across the company, ensure compliance with all its initiatives, easily measure its progress and speed up decision-making.”
SABMiller, up from 10 to eight this year, has also capitalized on the economic growth in emerging markets, and is now concentrating on leveraging scale, driving efficiency and effectiveness through global business and using the opportunity to move best practice and learning across the organization as rapidly as possible.
Further down the list, Carlsberg, which has nudged up from the 33rd to 26th position this year, has begun the rollout of a supply chain integration and business standardization project in Western Europe in a bid to strengthen the company’s growth profile in one of its least-performing regions. “The project will be a key enabler for the transformation of our Western European operating model, with all procurement, production, planning and logistics across the region being centrally managed, supported by standardized processes and data and full transparency,” says Jørgen Buhl Rasmussen, president and CEO of Carlsberg.
“Impacted by a challenging macro and consumer environment and bad weather during the summer, the Western European market declined overall by around 3 percent [excluding a strong-performing Polish market] in 2012,” Rasmussen says. “The Russian beer market was flat for the year while the Asian markets continued to grow.”
The company’s supply chain integration and business standardization activities build on Carslberg’s earlier decision to revise the regional structure of the Carlsberg Group, which led to Carlsberg’s Northern and Eastern European entities being combined into one managed region to allow “more focused allocation of resources, the development and deployment of various tools to extract maximum return on investments, acceleration of working capital initiatives and ongoing cost-reduction initiatives.”
According to Rasmussen, mitigating initiatives to combat the economic downturn, plus Carlsberg’s projects to integrate its supply chain and focus on investment opportunities in growth markets outside of Europe, has meant the economic downturn is no longer considered as a high risk for the group.
In Japan, both Kirin (at number 15) and Suntory (at number 17) have highlighted their moves to streamline activities in response to their growing international footprint and the changing global environment. “In this age of rapid globalization that transcends national borders and brings people closer together, we are further strengthening the operating base we use to achieve growth in the global marketplace,” says Nobutada Saji, chairman of the board, Suntory Holdings, which formed a strategic beverage alliance in Vietnam with PepsiCo at the end of last year. Designed to create new growth opportunities, the joint venture will serve as the bottler for both companies in Vietnam.
Kirin Group announced its intention to foster group synergies by promoting collaboration. Targeted at implementation and qualitative expansion, the company’s 2011 medium-term business plan brought “steady progress in implementing management focused on the generation of group synergies and the realization of lean management, and worked to improve profitability and efficiency.” In 2012, these objectives were expanded to include the combined resources of the entire group.
“We will accelerate the generation of group synergies in Southeast Asia by such actions as sharing sales channels and manufacturing bases and strengthening systems for product development attuned to local preferences. We will maintain our efforts for hiring, training and positioning global personnel who underpin our advance to globalization,” states the 2012 plan. The company also says it will implement training programs to develop talented overseas business managers and boost personnel exchanges between domestic and overseas group companies to facilitate the global transfer of technology and know-how. This transfer of know-how and the nurturing of a talented international team, fostered through the creation of the right global operating environment, have also fueled innovation.
“Over the past few years, we have harmonized many of our processes, making it easier to move talent across the company,” says Nooyi. “Our new model has already begun to yield results. Our global category groups are guiding regions to rationalize their brand portfolios and focus the bulk of our spending behind 12 global brands.”
PepsiCo’s innovation efforts have also improved substantially, adds Nooyi. “In 2012, for the first time in PepsiCo, we created a design capability in the company. Our goal is to use design in the early stages of innovation efforts to create memorable products and experiences for our consumers. We have put in place a common stage-gate process to facilitate data-driven decision-making. Plus, we created the capability to lift and shift ideas across the various countries within PepsiCo.” One example is PepsiCo’s “Do Us a Flavor Campaign” for Lay’s, which was rolled out in the US after its success in Europe, Asia, South America and Africa.
“Thanks to such initiatives, innovation from products launched in the past three years accounted for approximately 8 percent of our net revenue,” says Nooyi, who confirmed new R&D centers were established in China, Germany and Mexico during 2012.
Successful innovation crossover from one market to another has benefited Nestlé, which remains in its number one slot again this year. The company introduced its Popularity Positioned Products (PPP) business model a few years ago. Affordably priced, nutritionally enhanced, appropriately formatted and easily accessible for emerging consumers, Nestlé’s PPP offerings began to find traction in Europe as the economy began to impinge on consumers’ budgets.
“PPP accounts for about 15 percent of our total sales now,” says Paul Bulcke, CEO, Nestlé, who explained the PPP model involves product, communication, format and packaging. “It is the whole way of going about meeting the needs of the emerging consumer. We want our consumers to trade down or up, but not to trade out.”
Products adhering to Nestlé’s PPP model are now growing 2.5 times faster than the company’s Zone Europe’s 2.4 percent growth. One example of a PPP brand that has found favor further afield is Nestlé’s peelable ice cream. First launched in Thailand in May 2010 under the Eskimo brand, the ice cream wrapped in a peelable jelly shell has now been rolled out globally.
“One of Nestlé’s strengths is that we have found a way of being decentralized, allowing our scale to play in our favor through having aligned R&D and innovation processes, and yet coordinating the whole business through the strategic business units,” explains Bulcke.
Building on innovation as well as investment in emerging markets to fuel its growth, Campbell Soup Company, at number 49 in the ranking, announced its new strategic vision for the company back in 2011. Since then, the business has focused on three core categories: simple meals, healthy beverages (fueled by its acquisition of Bolthouse Farms at the beginning of 2013) and baked snacks. Campbell is also looking for investment in high-growth segments and geographies and is investing heavily in innovation.
“We have begun to rebuild our powerful innovation pipeline, with a redesigned process that delivers accelerated speed-to-market,” says Denise M. Morrison, president and CEO. In 2012, Campbell introduced 41 new soup and simple meal items, up from seven the year before. “Our new products are reaching demographic groups with which Campbell has historically been under-represented, penetrating new times of the day and expanding into new packaging formats.
“We know our existing US soup business is an immensely valuable and powerful engine, but one which, standing alone, will not deliver the levels of overall growth we need to reach our long-term targets,” continues Morrison, who saysthe higher levels of growth will come from other segments, other categories and other parts of the world.
Campbell will be accelerating its activities in Indonesia, Malaysia and Mexico, evolving its business model in China and continuing to expand its export business in Europe, Asia and the Middle East. Closer to home, it announced this summer its plans to launch more than 200 new products in 2014. These include Homestyle soups, featuring wholesome ingredients such as juicy strips of roasted white meat chicken, vegetables with farm-fresh goodness and seasoned chicken stock; Slow Cooker Sauces; and new juice cocktails under the V8 V-Fusion Refreshers brand.
Still fresh from its spinoff as a separate company from Kraft Foods (sitting at number 18 this year), Mondelez, in the number seven spot, continues to invest in growth in emerging economies, which will be funded by “ongoing restructuring, primarily by extending gross margins in North America and Europe,” according to Irene Rosenfeld, chairman and CEO. “In both regions, the company will focus on growing its Power Brands, which typically have gross margins that are 100 to 200 basis points higher than other brands.”
Building on these power brands, Mondelez will capitalize on white space opportunities by entering new markets with new categories, such as its launch of Stridegum in China, plus the investment in extended production facilities in Suzhou, China for the manufacture of the company’s well-known Oreo and Chips Ahoy! cookie brands.
As with all investment activities and strategic plans, Mondelez’s new Suzhou plant focuses on sustainability and environmental concerns. In 2011 and 2012, the Suzhou plant received awards from Suzhou’s Industrial Zone for various green innovations, including air compressor and oven waste heat recovery and high-efficiency lighting and air conditioning. The office building was also awarded LEED Silver certification, making it the first Mondelez plant to gain this certification in the Asia Pacific region.
In Mexico, Grupo Bimbo, up from 38th to 30th on the Top 100 list, has plans to expand its business with 100 percent sustainable production plants in all the countries where it has a presence. “In Grupo Bimbo, sustainability is at the core of our strategic decisions. As a leading company at a global level, we are sensitive to environmental challenges; hence, we strive to contribute through innovative and purposeful actions to reduce the environmental footprint,” explains Javier Servitje, CEO of Grupo Bimbo. The company continues the integration of the Sara Lee businesses it purchased in the US and Spain, as well as the bread and bakery business Compañía de Alimentos Fargo in Argentina, which it acquired in 2011.
“2012 was a transitional year for Grupo Bimbo. We have focused on integrating three transformative acquisitions while investing in a low-cost production profile, and doing so at a time when consumer demand is still weak in some of our key markets. In that context, we are pleased that performance in the year showed steady volume growth in most regions and a rise in net sales,” says Servitje.
“We aim to be good corporate citizens not only by delivering top-quality products and services to meet the needs of our customers, but also by striving to protect the global environment and undertaking various social initiatives to help realize a truly prosperous society.”
The company also opened a new bakery plant in Brasilia, a Barcel snack plant in Texas and inaugurated the Piedra Larga Wind Farm, which has 45 wind generators that provide enough energy to cover the consumption of almost all of its plants and other operating centers in Mexico. “This is a big step forward, not only because of the savings it brings us, but because of its importance in the nationwide effort to reduce environmental contamination,” says Servitje.
Grupo Bimbo’s commitment to reducing its carbon and water footprint and integrating waste management into all stages of production includes many energy projects and technology investments, the use of biodegradable and thinner gauge packaging materials, and its new 100 percent sustainable production plant for snacks and confectionery in Jalisco, Mexico. Products from the Jalisco site will be distributed in Mexico, the US, the UK, Spain, Guatemala, Salvador, Nicaragua, Honduras, Costa Rica and Panama.
Suntory’s corporate philosophy, “In harmony with people and nature,” reflects the company’s commitment to the environment. “We aspire to coexist with all the people around the world and the magnificent nature that surrounds us,” says Saji. “We aim to be good corporate citizens not only by delivering top-quality products and services to meet the needs of our customers, but also by striving to protect the global environment and undertaking various social initiatives to help realize a truly prosperous society.”
Such sentiments are reflected in many of the activities of the Top 100 food and beverage companies. The credos serve to support market growth, plus produce the cost savings that will help fuel all future growth .