Turn off your screens

It has been Olympic Week here in Lausanne where all the local sports clubs set up stands in and around the Olympic Museum to introduce new sports to young people. The event has been going on, I think, for nearly thirty years now and coincides each year with the school’s half-term holidays. Nearly forty clubs/sports are represented, and nearly seven thousand children took part, in the week.

I took Monday and Thursday off from whatever else I had to do, and helped man the rowing club’s stand. We had borrowed six rowing machines from the club and set up a system where we first showed the kids to use the machines correctly—or at least without hurting themselves, and  then let them “race” themselves or their friends over five hundred metres.

On each of the two days, we introduced nearly three hundred kids, aged between eight and fourteen, to the sport. They had a great time, as indeed did I. It was wonderful to see them all so enthusiastic—and competitive.

Out of the three hundred or so kids that passed through the stand each day, there were perhaps three, or maybe four, who were over-weight. Certainly none were obese. I say that because this week the world “celebrated” World Obesity Day.

The day coincided with a report issued by Imperial College London and the World Health Organisation which showed that childhood obesity rates in the world’s children and adolescents increased from less than 1 percent (equivalent to five million girls and six million boys) in 1975 to nearly 6 percent in girls (50 million) and nearly 8 percent in boys (74 million) in 2016. Combined, the number of obese five to nineteen year olds rose more than tenfold globally, from 11 million in 1975 to 124 million in 2016.

The lead author of the report, Professor Majid Ezzati, of Imperial’s School of Public Health, said, “These worrying trends reflect the impact of food marketing and policies across the globe, with healthy nutritious foods too expensive for poor families and communities. The trend predicts a generation of children and adolescents growing up obese and at greater risk of diseases, like diabetes. We need ways to make healthy, nutritious food more available at home and school, especially in poor families and communities, and regulations and taxes to protect children from unhealthy foods.”

Dr Fiona Bull, from the WHO, took a more nuanced stance, saying, “countries should aim particularly to reduce consumption of cheap, ultra-processed, calorie dense, nutrient poor foods.” However, she added, “they should also reduce the time children spend on screen-based and sedentary leisure activities by promoting greater participation in physical activity through active recreation and sports.”

This is not the first time that the WHO has called for measures to promote active lifestyles. They write on their website, “the fundamental cause of childhood overweight and obesity is an energy imbalance between calories consumed and calories expended. Global increases in childhood overweight and obesity are attributable to a number of factors including:

  • A global shift in diet towards increased intake of energy-dense foods that are high in fat and sugars but low in vitamins, minerals and other healthy micronutrients;
  • A trend towards decreased physical activity levels due to the increasingly sedentary nature of many forms of recreation time, changing modes of transportation, and increasing urbanization.

Back in 2014, the Institute of Economic Affairs drew attention to the energy expenditure side of the equation, writing that, ‘Only 18 per cent of adults report doing any moderate or vigorous physical activity at work while 63 per cent never climb stairs at work and 40 per cent spend no time walking at work. Outside of work, 63 per cent report spending less than ten minutes a day walking and 53 per cent do no sports or exercise whatsoever.’

Last week also saw the controversy continue over sugar taxes, with Chicago abandoning theirs, and arguments in the press both for and against. It is an emotive issue but while everyone argues about the food intake side, let’s not forget the energy expenditure side of the equation.

So this weekend, turn off your screens, go outside, and take your kids with you.

The Sixth Extinction

The Guardian newspaper voted the Sixth Extinction: An Unnatural History, by the award winning journalist Elizabeth Kolbertthe best non-fiction book of all time. It isn’t, but it is still worth reading.

Life has existed on our planet for around four billion years but mass extinctions seem to have taken place on our earth every twenty-six million years or so. Although everyone (more or less) agrees that a meteor strike caused the fifth mass extinction (of the dinosaurs, amongst others), geologists disagree as to what caused the others. Perhaps other meteor strikes; perhaps natural climate change.

Pretty much everyone, however, agrees that mankind is the cause of the sixth mass extinction that we are currently living in a geological era that geologists call the “Anthropocene”. Ms Kolbert writes,

The Anthropocene is usually said to have begun with the industrial revolution, or perhaps even later, with the explosive growth in population that followed World War II. … But the megafauna extinction suggests otherwise. Before humans emerged on the scene, being large and slow to reproduce was a highly successful strategy, and outsized creatures dominated the planet. Then in what amounts to a geologic instant, this strategy became a loser’s game. And so it remains today, which is why elephants and bears and big cats are in so much trouble…Though it might be nice to imagine there once was a time when man lived in harmony with nature, it’s not clear that he ever really did.

Man destroys biodiversity in three ways: first by eating it; second, by encroaching on—and stealing—its territory; and third by accident–spreading alien species or bacteria. Ms Kolbert writes,

“During any given twenty-four hour period, it is estimated that ten thousand different species are being moved around the world in ballast water. Thus a single supertanker (or for that matter a jet passenger) can undo millions of years of geographic separation.”

Meanwhile, the tsunami that struck Japan in 2011 has carried almost 300 species of sea life  across the Pacific Ocean to the west coast of the United States. In what could be the longest maritime migration ever recorded, an estimated one million creatures – including crustaceans, sea slugs and sea worms – made the 7,725km journey on a flotilla of tsunami debris.

Introducing alien species (including bacteria) into new areas can quickly wipe out native fauna that have no historical resistance. Ms Kolbert gives two examples -frogs in Central America and bats in North America – but there are millions of others. This process began one hundred and twenty thousand years ago when Homo Sapiens began its migration out of Africa, (arguably) wiping out the Neanderthals on the way (after mating with them first).

The process of extinction has been going on for so long now it seems all but inevitable that it will continue until the only animals that will be left on the planet will be the ones that we eat—or the ones that we can marvel or laugh at in zoos, or on YouTube. Looked at in this way, you might be tempted to think that the forces behind this are so powerful that we are powerless to stop it.

And if you think this mass extinction is not your fault, Ms Kolbert has this to say,

If you want to think about why humans are so dangerous to other species, you can picture a poacher in Africa carrying an AK-47 or a logger in the Amazon gripping an axe, or better still, you can picture yourself, holding a book on your lap.

And in case you think that it doesn’t matter if the world loses a few species of fogs or bats, Ms Kolbert adds,

The anthropologist Richard leaky has warned that Homo Sapiens might not only be the agent of the sixth extinction, but also risks being one of its victims.

So we are all doomed; we will take the world’s biodiversity with us. And there is nothing we can do about it.

But wait a minute; aren’t we already doing something about it?

Just this month, a convention came into force to prevent the transfer of potentially invasive species in ballast water, one of the many problems that Ms Kolbert wrote about in her book. Ballast water must now be treated before it is unloaded into a new location, so that any micro-organisms or other small marine species are destroyed.

Last month, the International Union for Conservation of Nature (IUCN) – the global standard for assessing extinction risk – announced that the conservation status of the snow leopard  has been improved from “endangered” to “vulnerable”. The species still faces serious threats from poaching and habitat destruction, but at least it is a step in the right direction.

Perhaps even more optimistically, last month saw the 30th anniversary of the signing of the Montreal Protocol for the preservation of the earth’s ozone layer. Thanks to the treaty, over 98% of ozone-depleting substances have been phased out globally to date. Without the treaty, the hole in the Antarctic ozone would have been 40% larger in 2013. And what’s more, the global health and economic benefits of the treaty are expected to amount to US$2.2 trillion, as a result of averted damages to agriculture, fisheries and materials.

Charles Darwin once wrote, In the long history of humankind, those who learned to collaborate and improvise most effectively have prevailed.

The Montreal Treaty is an example of what mankind can do when we work together. The Paris Agreement is another. We can fix this!

Image courtesy of Pixabay

The risk in brands

Last week Nestlé, the world’s biggest food packaging company—and by far the world’s biggest retail coffee company—paid a rumoured $425 million for a 68% stake in Blue Bottle Coffee Co, a specialist, single-origin coffee company. There is probably little that Blue Bottle can teach Nestlé about how to make coffee, so I guess that Nestlé is paying for the brand.

Nestlé is not only the biggest coffee company, it is also one of the world’s biggest manager of brands—they currently own more than 2,000 of them. Nestlé probably know even more about brand management than they do about making a good cup of coffee. But as the NY Times pointed out in July, traditional brands are under pressure as more people buy their groceries online. Sales of classic brands have plateaued, and small start-ups are grabbing market share, leaving companies like Nestlé struggling to adjust. Hence their purchase of Blue Bottle Coffee Co.

Blue Bottle was founded in 2002 by a former professional clarinet player, and has a strong following among customers concerned about where their coffee comes from, and its impact on the environment and human rights. The company optimistically argues that that being taken over by Nestlé won’t change a thing.

In an article on the acquisition, the Guardian newspaper quoted a customer—a yoga instructor—at one of Blue Bottle’s branches in Manhattan as saying, “Where you buy anything right now – especially now – is part of a large point of view around how conscious you want to be about your impact on the world. Nestlé is not an ethical company.”

Although it is not explicit in the article, the yoga instructor appeared to be referring to a time in the 1970s when Nestlé was selling powdered baby formula to developing countries. There was nothing wrong with the milk powder; the problem was the unhealthy water that mothers mixed with it. But Nestlé was obviously not without blame.

Having said that, I would take issue with the claim that Nestlé is not an ethical company. Although there is always room for improvement, the company is an industry leader in terms of sustainable supply chains, human rights and living wages for the farmers that feed us. As in most big companies, the people that run Nestlé are not faceless individuals but human beings that want to make the world a better place for their children.

The price that Nestlé paid for Blue Bottle clearly shows how important it is for the big companies to remain “brand relevant”—to move with the times and reach out to younger consumers. But it also highlights that the money in the agricultural supply chain lies firmly with the retail brands.

However, the yoga teacher’s comments show how easily brands can become damaged and lose value—and how long what is perceived as unethical behaviour stays in people’s minds. The milk powder controversy occurred almost half a century ago, but it is still recent enough to discourage a potential customer from consuming Nestlé’s coffee.

Even if brands are “where the money is” in the food supply chain, the risks involved in protecting the brand probably justify the returns. Brand managers are now the guardians of a food company’s value; they increasing feel under siege from a civil society that views them as “easy targets”.

Three recent examples highlight how quickly brands can become damaged goods. The first is Bell Pottinger, which was ironically one of the world’s top public relations companies. Caught up in claims that it stirred up racial tension in South Africa, the company is now fighting for survival. Clients have deserted them and the company might soon cease to exist as a result of the scandal.

The second example involves smallholder encroachment on tropical rainforest and national parks in Ivory Coast and Ghana. Mighty Earth, an NGO, claims (almost certainly correctly) that “dirty” (unsustainable and/or illegal) cocoa is finding its way into the supply chains of Mars, Nestle, Hershey’s, Godiva, and other major chocolate companies. The brands were quick to respond.

The third example is a recent New York Times article that blames Nestlé (again) and the other processed food companies for increased obesity in Brazil.

Negative media coverage such as this can cause significant damage to brands, and take decades to recover.

The fact that brands have become so valuable—and capture so much of the value in today’s food chains—is not great news for farmers and commodity merchandisers faced with meagre profit margins. But at the same time the value that is inherent in those brands increases the leverage that civil society has over the big food companies. And to the extent that this encourages the food companies to be even more ethical and sustainable, it is probably good news for the planet.

Bunge makes its move

Bunge hit the news this week when the company announced that it was buying 70 per cent of IOI Loders Croklaan BV from IOI Corp for close to one billion dollars. Loders Croklaan BV is one of the leading global suppliers of specialty oils and fats to the processed food industry. It has manufacturing operations in the Netherlands, the US, Malaysia and Canada.

Malaysia’s IOI Group bought Loders from Unilever in November 2002. Since then, the unit has grown from three to seven processing plants and earnings have quadrupled. According to a filing with the Malaysian Stock Exchange, IOI Group will record a gain of about 2.5 billion ringgit ($595 million) from the sale.

Bunge Ltd said that it was buying the stake as part of a strategy to invest in higher-margin businesses such as food ingredients and natural flavourings. The company denied that the purchase was a defensive move against being taken over themselves.

A couple of weeks back I wrote about the various strategies that different trade houses are following in an attempt to improve margins: Glencore is concentrating on logistics, Cargill on processing, and ADM on ingredients. I added, rather cheekily, that Dreyfus is trying a little bit of everything while Bunge was wondering whether they might be worth more as part of a bigger organisation.

The fact that Bunge’ share price fell on the Loders announcement seemingly confirmed that the stock market had been wondering the same thing. However, there was also a suggestion that the fall in the share price might have at least been partly related to the fact that Bunge was increasing their exposure to palm oil.

Some investors may be worried about the worsening economics of the industry. Palm oil stocks are soon forecast to top two million tonnes, and crude palm oil prices are down twelve per cent so far this year. Perhaps more importantly, palm oil is the one commodity that everyone loves to hate.

In 2016 the Round Table for Sustainable Palm Oil (RSPO) temporarily excluded IOI Group from membership over concerns regarding its palm oil purchases from third party suppliers. The issue attracted a lot of media attention at the time and all the major food companies cancelled their purchase contracts with the group. (Cargill held out for a while, arguing that they could make more of an impact by continuing to work with the supplier, but in the end they also caved in under media pressure.)

The RSPO reinstated IOI Group in August 2016 and the food companies slowly and reluctantly resumed sourcing their palm oil from them. In a statement at the time Unilever said, “We are pleased to see the progress IOI has made so far, in particular, on third party suppliers, independent verifications, and increased transparency.”

Greenpeace, one of the more aggressive civil society operators, said that over the years IOI has produced “a string of commitments about ending the destruction (of forests), but none of them were properly implemented and failed to make a difference on the ground.” However, they added that losing big customers “put IOI under enormous pressure and was instrumental in bringing about (a) change in direction”.

As you might expect there was considerably more media coverage when the RSPO excluded IOI Group from membership than when they let them back in. This is partly standard media bias: bad news sells more advertising than good news. But it also standard civil society bias: bad news (about evil companies destroying rain forests) encourages more donations than good news (about companies working to protect them).

Bunge’s purchase of Loders reduces the chances that they will be taken over themselves, and it is understandable that the stock market was disappointed by the news. However, it is not certain that a bidder would have in any case placed a high value on the company given its exposure to the Brazilian sugarcane sector at a time of low prices for both sugar and energy.

By making this move Bunge has done two things. First, they have increased their exposure to the world’s lowest cost—but most controversial—vegetable oil. Second, they have taken a strategic step along the path from trading to processing, and from commodities to ingredients. These moves are risky, but so often in business the biggest risk is not to move at all.