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Trade houses are getting increasingly involved – and competitive – in helping their clients use their ingredients for new products or to reformulate existing ones. Cargill, for instance, opened a new Culinary Experience Hub at its R&D center in Belgium. An official from ADM’s Wild Flavours branch said the group was also working on helping companies formulate products and bringing them to market fast enough to capitalise on new trends. The new products tend to have an increasingly short life span, he said. In Thailand, ADM’s Human Nutrition is launching a plant-based high protein drink as an alternative to dairy. 

Tate & Lyle, too, opened a new headquarters in Brazil’s Sao Paulo to help customers in South America with product formulations. The company wants to capitalise on upcoming legislation in Peru and Chile that will require clearer labels on packaging. The company reported adjusted operating profits of GBP 183 million (USD 234 million) for the Apr-Sep period, up 3% on year, thanks to a good performance from speciality ingredients and a 43% growth in natural sweetener sales. 

One ingredient that Nestle is trying to cash in on is microalgae – it is vegan, healthy and has a low carbon footprint. The company has partnered with the Dutch ingredients group Corbion to incorporate microalgae-based ingredients into plant-based products whilst maintaining a palatable taste. 

The craze for plant-based alternatives is far from over, with Burger King announcing the Rebel Whopper burger, its biggest product launch in Europe. The vegetarian burger will be the same price as its meat alternative, unlike in the US where it is usually more expensive. Its other plant-based burger, the Impossible Whopper, was one of the chain’s most successful launches. 

Food supplements were among the most popular products sold during Alibaba’s Singles’ Day this week, which saw a record CNY 268 billion (USD 38 billion) in sales, six times more than Black Friday sales in the US. Local analysts pointed out, however, that the sales growth dropped to a 5-year low of 26% as Chinese consumers are reducing their spending amid a slowing economy. 

Mondelez, meanwhile, is looking at capitalising on current health trends by increasing the share of so-called “portion-controlled packs” by 2025 to 20%, from 15% currently. These are packs with 200 calories or less. A survey it commissioned found that people, especially Millennials, were increasingly snacking throughout the day instead of eating bigger meals. At the same time, however, the company continues to see demand for more indulgent snacks.

The Business for Inclusive Growth (B4IG) had its first board meeting this week. The coalition includes giants such as Unilever and Mars and more recently Michelin. It has raised USD 1.4 billion for its initiatives that focus on fighting inequality, such as supporting small farmers to boost yields. The CEO of Danone, which is leading the initiative, said companies needed to change the way they do business. The head of Olam took it one step further and argued that businesses must stop blaming governments and the lack of regulation. He called on food companies to make their ecological footprint public as a starting point for real change to happen. 

One company walking the talk is McDonald’s, analysts said. The group will be buying enough renewable energy in Texas to power some 2,500 stores and reduce emissions by 700,000mt of greenhouse gas. This is part of their target to reduce emissions by 36% by 2030. In India, meanwhile, Nestle said it had collected and disposed of enough plastic to make its KitKat and Maggi brands plastic-neutral by the end of the year. 

Last but not least, Wilmar International saw a net profit of USD 447 million in the Jun-Sep quarter, up from USD 406 million last year and beating market expectations thanks to a 24% growth in its tropical oil business. It also benefited from discontinued operations in Brazil while the sugar division saw a pre-tax profit of USD 80 million, up 9% on year. Louis Dreyfus’ Brazilian sugarcane business Biosev didn’t do so well. The company reported a loss of BRL 304 million (USD 73 million) in the last quarter, nearly twice as high as in the same period last year, due in part to BRL 339 million (USD 81 million) spent on servicing its debt which was affected by the weaker Real.

The Brazilian President repealed a decree which prevented sugarcane cultivation in sensitive areas such as the Amazon or Pantanal. Researchers warned that this could harm the chances of exporting cane products like ethanol to the EU or Japan where the environmental footprint is closely monitored. The sugar industry had previously lobbied against the move but recently suggested that deforestation concerns would be handled by new policies, such as the Forest Code and RenovaBio.

Experts estimate that 80% of the forest fires in Brazil are started to make space for cattle ranches, despite the fact that the three largest meatpackers pledged to only buy cattle from deforestation-free areas. As a result, journalists are now reporting cases of “cattle laundering”, where farmers move cows around to remove links to illegally deforested land.

Despite the strong rise in deforestation, Brazil emitted only 0.3% more greenhouse gases in 2018 when compared to 2017 thanks to the growth in clean energy sources such as ethanol and wind power. Nonetheless, some areas are witnessing dense smog and pollution because of the fire. In New Delhi, crop burning is one of the major reasons why the smog problem became so bad planes could not land and schools were closed. Ethanol, and other advanced biofuels produced from crop waste, could be a good solution to address the pollution, although the lack of funding is seen as a major obstacle. 

Conservation International said it would accelerate its program to plant cocoa plantations and other trees to restore some of the burnt Amazon areas. Commodity groups such as Olam and Mondelez pledged to pay a premium for the cocoa collected under the program. The cocoa grown in the Ivory Coast and Ghana, meanwhile, has recently become more expensive as the price for next season will include a Living Income Differential (LID) premium. Switzerland’s Barry Callebaut said it would pass on the premium to its customers, adding that most other players would probably do the same as the two countries account for 70% of the supply. 

Indonesia attempted to stop deforestation by banning new palm oil plantations for three years last September. However, the Roundtable on Sustainable Palm Oil (RSPO) said it was impossible to measure the success of the ban because of a lack of transparency. 

A study conducted by Maersk and Lloyds Register identified alcohols like ethanol and methanol as some of the most promising renewable fuels to help the maritime industry reduce their emissions, along with biomethane and ammonia. The COO of Maersk commented that most of the innovation will have to come from growing the production of these fuels to commercial scale. Maersk Tankers recently announced a partnership with Cargill and Mitsui to study ship decarbonisation. 

Nestle announced that 70% of its car fleet in Mexico used hybrid engines to reduce their carbon footprint, and that they were struggling to reach 100% only because of a lack of hybrid trucks and vans. Nestle, along with Pepsi and Coca-Cola, has been moving towards using aluminium cans to address concerns about the mounting plastic pollution. But the Coca-Cola CEO argued that the most environmentally-friendly solution in the long-run was actually to collect and recycle more plastic bottles. The group will not look to a strategic shift away from plastic, he added. 

Investors have been encouraging sustainable firms for years but a new breed of investors is now looking at going a step further by shorting companies with a lack of sustainable credentials, something Bloomberg dubbed “The Green Short”. Morphic Asset Management, for one, is short on Coca-Cola Amatil, an Australian bottler, because it is not doing enough for the environment and to tackle the obesity crisis. 

An in-depth analysis by Politico suggested a reason why the food industry is having a hard time dealing with a rise in obesity and diabetes: the US government has been shrinking the amount of money it invests in nutrition research. As a result, the science on what is healthy food is inconsistent and even contradictory at times. Experts are calling for the creation of a National Institute of Nutrition to help the sector focus on healthier foods. 

Finally this week, we recommend watching this montage of Australian farmers reacting to the recent heavy rain in New South Wales. While 100mm fell over the past weekend, some experts warn that more rain will be needed to fully recover from the drought.

The global demand for livestock and feed is expected to recover in 2020 when China will have gone through 5-months production worth of meat in cold storage – a direct result of the African Swine Fever (AFS) culling. The analysis by S&P Global Ratings argued that this will help the bottom line of trade houses which have been hurt by the AFS as well as the US-China trade war, especially companies with strong exposure to US origination. In the absence of any major consolidation, agricultural trading groups are expected to continue to look at divesting unprofitable assets, as is already the case for Bunge and ADM for their sugar and ethanol business units. 

BP and Bunge are still waiting for antitrust approvals from three countries, including China, for their joint venture which they hope to finalise this year. Bunge reported a loss of USD 1.5 billion for the third quarter, compared to a profit of USD 365 million the previous year. This includes a USD 1.7 billion charge following the merger of its Brazilian sugarcane business with BP. Good results in South America and in its edible oil segment were insufficient to offset the damages caused by the ongoing US-China trade conflict. In the hope of a resolution in the conflict and higher prices, US farmers have been withholding crops, especially soybeans. The CEO forecast that annual earnings would drop as much as 20% compared to last year. 

Another country where farmers are holding on to their crop is Argentina where producers are eagerly waiting for the newly elected President to explain his policies on agriculture, especially exports. There is a concern that he will increase taxes on grain exports and even bring back export quota limits. Farmers told Reuters that a return to these populist measures would hurt revenues, adding that the last time quotas were implemented wheat and corn planting collapsed. Some say the country could implement a dual exchange rate to help agriculture exports compete thanks to a weaker currency. 

In neighbouring Brazil, Cargill is pushing for the soybean industry to capture more of the value chain and focus on exporting processed products such as meal and soy oil. The call was echoed by the country’s vegetable oil association which pointed out that, ironically, the share of soybean exports stood at 81% of soybean products exported in 2017, compared to 13% back in 1981, when 87% of exports was in the form of meal. In Europe, meanwhile, Cargill announced it was putting USD 35 million in a product line to produce soluble fibres which can reduce sugar content in confectionery products by 30% without affecting the taste or texture. 

Olam Cocoa launched its Cocoa Compass initiative this week which sets targets aligned with UN Sustainable Development Goals. Among the commitments, Olam is aiming to eradicate child labour and deforestation by 2030. It will also work towards improving farmers’ incomes and has agreed to pay the Living Income Differential (LID) premium of USD 400/mt on 100,000mt of cocoa it bought from Ghana and the Ivory Coast. In the US, meanwhile, several industry groups, including Coca-Cola, are warning that the Ninth Circuit Court’s decision to hold Nestle liable for slavery in cocoa plantations in Ivory Coast could actually discourage companies from trying to tackle the issue.

A Greenpeace plastic waste collecting initiative in two areas in Thailand found that most of the waste came from single-use plastic from food packaging and that close to 20% of it was produced by five multinationals: Coca-Cola, Nestle, Ajinomoto, Mondelez, and Unilever. Italy is trying to deal with the issue by proposing to tax plastic in its 2020 budget at a rate of around USD 1/kg. A source told Reuters that the tax, if approved, would bring in over USD 1 billion and would help offset a cut in income tax. Unsurprisingly, beverage companies are opposing the proposal saying it would hurt their bottling operations, especially considering that the budget also includes a sugar tax. 

On the subject of bottling, The Guardian reported this week that conservation groups continue their fight to stop Nestle from accessing water in California’s Strawberry Creek. They accuse the group of depleting water levels and hardly paying for it while selling the bottled water at a profit. At the heart of the fight is a debate about who should control freshwater supply on public land, with Nestle’s former CEO arguing that it needs to be privatised. 

An analyst at Forrester Research forecast that the global food delivery market will likely go through major consolidation in 2020. Although the largest firms managed to raise significant funds in 2019, none reported a profit. Uber, DoorDash and Amazon are seen as the most likely to make acquisitions in the market. 

As China is busy eating through its stocks of meat, Russia quietly became Europe’s biggest importer of cows. This is the direct result of Russia’s policy to modernise its dairy sector, incentivised by the ban on imports of foreign dairy products. As of 2018, the country was 20% shy of being self-sufficient, mainly because a third of milk consumption is still supplied by low-yielding household cows. By 2027, however, Russia hopes to export to China and other Asian countries.

Nestle reported a 3.7% growth in organic sales over the first three quarters of the financial year.  Strong global Purina PetCare sales and demand for Starbucks products in North America helped offset disappointing sales for beverages, especially in the water segment. As a result, the CEO said Nestle Waters was being restructured so that it could be managed locally, instead of globally as is currently the case. The restructure should help identify consumer trends and higher-margin products amid an increasingly competitive market. 

The focus on increasing the group’s “local responsiveness” will take place across all segments thanks to a new strategy and business unit, the CEO said, adding that “In a period of rapid change in our industry, it will be more important than ever to recognize key trends early and to act on them fast.” Nestle will be looking actively to acquire more businesses aligned with this new strategy, the group said. It may also spend USD 20 billion in 2020-22 in share buybacks, thanks in part to the USD 10 billion generated from the sale of its skincare business earlier this month. Looking forward, a company official forecast that the world population will have to reduce its consumption of sugar, salt and meat to switch to vegetables and cereals as a result of the limited resources combined with the obesity epidemic. 

Danone lowered its 2019 growth forecast slightly after disappointing quarterly results in part due to cool summer temperatures in Europe which led to lower sales in its Waters Europe segment. Overall, however, sales grew 3.7% in the quarter, up from 3% last year, thanks to a strong growth in the specialised and early-life nutrition units which grew by 10%, mostly driven by the demand from China. 

The group’s investment arm, Danone Manifesto Ventures, bought a minority shareholding in organic plant-based food company Forager Project. This is part of its goal to increase revenue from plant-based products to USD 5.7 billion by 2025, from USD 1.9 billion currently. In Asia, meanwhile, the company launched a ‘One Person, One Voice, One Share’ initiative which aims to get employees involved in the Danone 2030 roadmap – designed to be in line with the UN’s Sustainable Development Goals.

Cargill launched a new platform, Feeding Intelligence, to help keep ranchers on top of the information, news and technology that impact their business. The group is streamlining its animal feed business in the US, resulting in the closure of two plants in New York in North Carolina. On the other hand, it will invest USD 225 million to expand and upgrade its soybean crushing assets in Ohio. 

In India, Cargill successfully removed 225mt of annual plastic packaging by replacing paper labels with mould-labeling on its edible oil bottles and reformulating the plastic it uses so that 90% of it is recyclable. On the sweetener side, Cargill announced that it was able to make the first liquid ingredient stevia. Stevia previously could not be used to make a concentrate, which limited its ability to function in beverages and energy drinks. 

Olam is in the process of acquiring the California-based almond company Hughson Nut Inc (HNI) as part of its aim to have a vertically integrated almond supply chain and add to its existing businesses in Australia and Vietnam. In Nigeria, meanwhile, shareholders gave the green light to Olam’s offer to buy the remaining shares in Dangote Flour Mills for USD 331 million. Olam also announced it has been granted a USD 1.5 billion revolving credit facility in addition to the USD 525 million sustainability loan it secured earlier this month. 

In Brazil, the agriculture minister said that COFCO was planning on investing in four sugar mills in the country. She urged the group to also invest in railway and ports to ease export logistics. 

In an unusual twist, Cote d’Ivoire and Ghana are threatening to scrap existing sustainability certification programs for cocoa if buyers don’t contract next year’s crop at a premium of USD 400/mt over October 2020 futures. Sources quoted by Bloomberg say that while most buyers have, in theory, accepted the premium many have yet to contract the crop as they don’t know how to hedge that premium. The West African countries call the premium a “living income differential” (LID) to offset the collapse in world prices and argue that it is more effective in helping farmers than sustainability certification premiums. However, some have pointed out that the LID, too, has failed to be passed on to farmers. Regardless, Nigeria and Cameroon are looking to follow suit while Peru could impose a minimum price.