Top Editors ... The World’s Top 100 Food & Beverage Companies: following the healthy path to success

Title: The World’s Top 100 Food & Beverage Companies: following the healthy path to success
Date: 28/11/2007
Autor: By Claire Rowan – Managing Editor

Health and wellness is a key driver of activity for many at the top of this year’s Top 100 listing and together with activities in emerging markets represents a dynamic growth area for the industry in the future

Consumer health and nutrition; sustainability, CSR (corporate and social responsibility) & ethical trading; and developments in emerging markets have been the key issues for the industry during the past year. The leading players have also continued to consolidate and focus on their core activities while seeking new partnerships throughout the world in their bid to retain their top slots.
For the first time in the CIES – The Food Business Forum’s Top of Mind Survey, consumer health and nutrition took the top position in 2007, which reflects how this issue has become a long-term priority for leading retailers and manufacturers alike. Of all the respondents questioned in this year’s survey, over a third ranked it as their greatest concern for the future of the food sector. Critically, the health and nutrition debate is no longer just about obesity, but extends into product content and healthcare.
Reflecting this in its number one position, Nestlé has adopted a strategic focus on nutrition, health and wellness, which, according to Peter Brabeck, chairman and CEO, has provided the company with the impetus necessary to create further new growth platforms for the company in all product categories.
“Nutrition is worth some 100 billion Swiss francs (€61 billion) in general. This is a very promising area of business, which is why we have opted to reinforce our position through an active strategy of acquisitions of which Uncle Tobys, Jenny Craig and Novartis Medical Nutrition are just a few examples,” said Mr Brabeck, who also highlighted the more recent acquisition of Gerber. “In combination with our own internal growth, the purchase of Gerber will boost our sales of specialised nutrition to over 10 billion Swiss francs (€6 billion), making us the undisputed global leader in this field.”
PepsiCo, with which Nestlé was rumoured to have discussed a merger earlier in the year, has also channelled significant resource into strengthening a ‘health and wellness’ image for itself. In line with this, the company introduced a new position – that of director, global health policy, PepsiCo – and appointed Derek Yach, a former representative of the director general at the World Health Organisation.
“This move is in keeping with our commitment to develop the world’s most balanced portfolio of convenient food and beverage choices, and to ensure we’re meeting consumer needs for health and wellness,” said Indra Nooyi, president & CEO, PepsiCo. “With health and wellness as our primary growth opportunity, we are investing in senior talent who will actively engage external partnerships and government and non government organisations to arrive at policies that positively impact our strategy.”
Unilever, at No 5, is continuing its dramatic corporate reshaping following recent difficult growth years. It is also focusing keenly on health as one of its platforms for future success. Already, during the past two years, Unilever has removed 25,000 tonnes of fat, 10,000 tonnes of sugar, and 2,000 tonnes of sodium from its product range; and identified ‘Vitality’ as the key driver of the business, along with ‘developing core’, ‘cutting edge technology’ and ‘developing and emerging markets’.
“Consumers all over the world want vitality and our brands will play their part in creating this ‘vital’ world. We are confident that this will result in growth for the core,” said Vindi Banga, president, Foods, Unilever, who explained that even within mature sectors of the food market there existed ‘vitality hotspots’, and thereby opportunities for growth.
“Consumers are more aware of the role that good food can play in maintaining health and yet the vast majority of foods offer no health benefits at all. However, healthier foods – with health benefits – are already worth €35 billion and are growing at three times the average of the market,” said Mr Banga. “Our objective is to move the bulk of our portfolio into healthier food segments and thus into higher growth space.”
To this end, Unilever has segmented the food industry into four distinct strata: the first and bottom level is made up of all products that ‘do not distinguish themselves in terms of health’; the second (Positive Choice) includes those products that offer light versions: low fat/low sugar; the next level up (Inherent Goodness), is made up of products that have an inherent goodness message, such as tea with its natural antioxidant content; and at the top level (Functional Health) includes those products that are fortified to benefit specific target health areas such as heart health, gut health etc.
Although any restructuring can risk negative impacts on a company’s workforce (see p8 for more news), Unilever is confident of its refocused vision, and it is within the top three strata it has identified that it plans to focus its newly structured activities for the future.
“This is a vast opportunity and we have carefully selected the areas where we will play to win,” said Mr Banga. In particular, the company will focus on five key ingredients: tea, milk, oils, fruit & vegetables, and soy, which it will extend across its brand portfolio in the core health areas of weight management, immunity & strength, heart
health, beauty, and brain function.

Developing & emerging markets
Developing and emerging (D&E) markets already represent a third of Unilever’s business and are expected to provide half the company’s growth.
“We know that we can rapidly build our business by leveraging the same global brands and categories that we focus on elsewhere and our sales from D&E countries have risen from 37% to 41% of our turnover in just two years,” said Patrick Cescau, group chief executive, Unilever.
The company has forged new partnerships with locally dominant players to optimise performance in specific countries. Just recently, in Brazil, Unilever entered into an agreement with Perdigao to create a joint-venture to drive sales of its Becel and Becel pro-activ heart-health brands, which will be operated under licence by Perdigao.
Through this arrangement, Unilever will concentrate more heavily on the R&D, innovation and communication needed for the brand, while utilising Perdigao’s extensive chilled distribution network to optimise the supply chain.
Heineken, which saw its net profits grow organically by over 12% in 2006, is also turning to lucrative joint ventures and acquisitions in order to secure its long term growth in developing regions. During the past year, it has focused its attention particularly at Indo-China, where it entered a joint venture agreement with Asia Pacific Breweries in Asia; acquired brewing assets from Fosters in Vietnam as well as the Quang Nam Brewery in Central Vietnam, and acquired a further business in the developing market of India. The company is committed to tapping into the growth in developing markets like China, the Far East, Latin America and Russia, which it believes will drive a large part of the anticipated 3% increase in volume of the world beer market in the coming year.
“It is our aim that wherever we choose to compete, we should put ourselves in a winning position. For us, that means being the number one or two player in the markets that we believe are important for our future,” said Jean-Francois van Boxmeer, chairman & CEO, Heineken, who pointed out that the premium beer market was expected to enjoy twice the growth of the total market, and performed well in both developed and emerging markets alike. “In 2006, we achieved the best annual growth figures for the Heineken premium brand for many years. In particular, this growth has been driven by the USA where the introduction of Heineken Premium Light has made a major contribution to overall performance.”
Yet, as with all the other major players this year, Heineken is keen to stress that one of the biggest challenges facing an international business is achieving a balance between the sustainability of business performance and the sustainable development of the communities in which they operate. It is actively seeking to reduce its environmental
footprint, promote the ‘enjoy Heineken responsibly’ campaign, and implementing a ‘Heineken Supplier Code’ to encourage CSR (corporate social responsibility) activities among its suppliers. Such moves by Heineken illustrate the more prominent ranking for CSR overall within the CIES – The Food Business Forum’s Top of Mind Survey. ‘The much higher ranking of CSR is one of the most striking features of this year’s survey. While food and retail have been at the heart of society issues for many years, the surge in interest in health and the environment have brought CSR to the fore in overall strategy,’ states the report.
According to Michael White, CEO, PepsiCo International and vice chairman of PepsiCo, speaking at this year’s CIES – The Food Business Forum’s World Food Business Summit in China: “Consumers today, in both developed and developing markets, see their spending decisions as a way to make a difference in the world and to make a statement about what they believe. Companies are also being held to a higher standard, as advocacy groups expect to show greater leadership in addressing social and environmental issues as well as nutrition,” he said. “In emerging markets especially, it is vital to build trust.
Addressing sustainability in a thoughtful way has therefore become integral to growing a business.”
PepsiCo attributes its recent robust growth in Asia’s emerging markets to an approach it refers to as ‘Performance with a Purpose, which is defined as delivering superior financial performance at the same time as reaching out to communities in a holistic fashion and addressing a range of societal needs, from public health to education to natural resource scarcity. The company sponsors projects delivering water to parched rural areas in China, and has spearheaded irrigation in the Mongolian desert. In Russia, PepsiCo has empowered local farmers to increase their yield and income by teaching harvesting techniques that use less water.
Danone, which has also been building on its ‘healthy’ image and success in emerging markets, this year set up a Social Responsibility Committee within its Board of Directors.
“Corporate responsibility is in our genes and has influenced our business strategy for the past 40 years,” said Franck Riboud, CEO of Group Danone, who explained that the company operates a dual approach, aiming for both business success and social progress. “I stress the word ‘both’ because what is involved is a truly integrated approach, and not looking after business on the one hand and social responsibility on the other. Without that integration, corporate responsibility and sustainability wind up in the hands of a few specialists with a marginal place in the business and no leverage to effectively influence its operation. We have long been convinced that a demanding approach to CSR can be a source of strength for the business.”
Danone’s successful investment projects in Bangladesh, China, Indonesia and other countries (see FBI Sept 06); Nestlé’s activities in Pakistan, Brazil and elsewhere together with its water saving projects (the volume of water the company has saved in its operations now exceeds the volume it sells); and Unilever’s public/private investment initiatives in Africa are just a tiny taste of the food industry’s wider CSR activity. As Fairtrade products alone rose by 46% last year, developments such as these will clearly boost not only the wide world in which the Top 100 players operate but will also continue to drive growth for those companies ready to make a genuine commitment.