Kellogg and PepsiCo led food and beverage companies in terms of water use efficiency according to a recent report from Lux Research. But the market analyst said while resource productivity is a crucial metric for calculating long-term profitability and sustainability, the consumer packaged goods sector as a whole needs better information in order to avoid resource risks.
For the study, Lux analyzed 4,000 companies and focused on 18 that lead the CPG sector and reported sustainability numbers on variables such as water usage, energy consumption and waste generation. Kellogg generated more than $1,200 of revenue per kiloliter (kL) of water used, compared with an average of $600/kL for all diversified food companies. Diversified beverage companies averaged under $400/kL with PepsiCo the best in its class at about $600/kL.
“Using resource productivity as a new metric for measuring system performance and targeted investments is critical to longer-term profitability in this age of sustainability,” said Ory Zik, Lux Research vice president of analytics and a co-author of the report titled, “Scarcity and Materiality: Benchmarking Resource Productivity in Food and Beverage.”
“Converting inputs into energy and water equivalents will help establish baselines and benchmarks, but improved reporting on a more granular level is essential to measure impact from the whole ecosystem and in setting corporate strategy,” he added.
Among researchers findings included:
Brewers lag other beverage makers, showing importance of product-level data: Compared to diversified beverage companies at $600/kL, makers of alcoholic beverages realized an even lower $250/kL, led by Heineken at over $300/kL.
Energy usage is another vital metric: Both food and beverage companies average about $12,000 in revenue per megawatt hours (MWh) of electricity used. The best in class in this sector is the J.M. Smucker Co., growing from about $14,000/MWh in 2010 to about $18,000/MWh in 2013 – likely due to infrastructure improvements started in 2010.
Full risks remain unassessed: Most companies only report partial information on resource use, and may remain unaware of the full risks they face. For example, a beverage company with a water use ratio of 3:1 in its own operations may find its ratio ten times or more higher if it takes the entire supply chain into account, implying much higher risks. Furthermore, because water is such a local issue –the value of a liter of water in California is different than in upstate New York – companies cannot quantify their resource risks unless they use accurate geospatial analytics.