ATKearney Global Megatrends And AgriBusiness 2015

April 22, 2015

Feeding the Global Middle Class

Global Megatrends and their Implications on the Agribusiness Industry

Johan Gott

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Social and Cultural Economic Demographic Political

Global Megatrends

Science, Engineering

and Technology

Economic Power Shifts

Shifting Consumer

Demographics Resource

Availability

Megatrends for the agribusiness industry

Shifting economic influence

Stability & global

orientation Industrialization

& population concentration

Birth rate, immigration,

aging Well-being and quality

of life

Resource consumption

Custodianship

Innovation, substitutes &

recycling

The global megatrends cut across traditional domains and have direct impact on the agribusiness industry From Domains to Megatrends

Megatrends

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World population continues to expand, with an additional 2 billion people to feed by 2050

Megatrends – Shifting Consumer Demographics

World Population Growth

Source: UN Medium growth projection. Excludes Oceania

The world population is expected to exceed 9 billion by 2050

• World population is projected to grow nearly 10% by 2020 and 35% by 2050

• Feeding nearly 2 billion additional people adequately represents a fundamental global challenge

• According to the UN, most of the growth will occur in 3 regions: Africa, India and Asia (despite China’s leveling growth); these regions of fastest growth include some of the poorest countries in the world

• By 2050, the population of the US and Canada will grow between 0.6% and 0.7%, while Europe and China will decline by 0.06% and 0.09% respectively

Related Insights

Population Projections (billion people)

719 738

Europe Latin America

447 345

USA & Canada

751

590

Africa

1,296 1,341

Rest of Asia

1,692

1,225

India

2,155

1,598

China

2,192

1,022

2010 2050

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The planetary view: the expanding human population is far from evenly distributed across the planet

Source: Reddit,, A.T. Kearney


This concentration of population requires global trade in food

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Hyper-urbanization will continue to gather momentum – altering consumer behavior and supply chains, and eating up fertile land Growth of Urban Consumers

Source: United Nations

Urban consumers are expected to represent nearly 70% of the global population by 2050

• 78% of the inhabitants of the developed world lives in cities, compared to just 47% of those in the developing world. By 2050, these numbers will increase to 86% and 64% respectively

• China now has the world’s largest urban population, with over 600 million citizens living in cities – projected to 900 million by 2050

•  Implications of this hyper-urbanization include: • New patterns of consumer behavior • New supply chain requirements • A growing global urban construction and

infrastructure boom • New strains on water, food and energy

supplies • Growing investment in urban agricultural

capacity

Related Insights

Urban Population Projections (% Population)

Rest of Asia

India

49%

China

77%

31%

52% 51%

66%

82% 87% 89%

58%

73% 79%

82%

39%

Africa Latin America

USA & Canada

Europe

2050 2010


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This also translate to a transition from a ‘unipolar’ to a diversified global economy in the short perspective…

1.  Assumes consensus GDP forecasts for individual countries and that emerging markets’ currencies appreciate vis-à-vis the US dollar Source: DNI, Nalilord

Economic Power Shift

• By 2020, China’s and other emerging markets’ share of global financial assets will reach ~36% from the current ~21%

•  In purchasing power parity terms, China will surpass the United States in 2016-17

• GDP growth rates in India and China are slowing to 5-6% per year, creating new internal economic and political challenges

• The likely continued decline of the dollar’s pre-eminence is expected to coincide with a move to a multi-currency global system

• As China continues to grow in economic and geopolitical power, potentially destabilizing tensions with its neighbors are likely to rise as well

Related Insights

2722

29 24

0

10

20

30

40

50

60

70

80

90

100

9

14

2020

100

19

17

9 9

2010

100

11

10

Estimated global share of wealth1

Other developed Japan

Western Europe Other emerging US China

Shift of economic power to emerging markets is expected to continue

Megatrends – Economic Power Shifts

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…while in the long perspective, this is far from new but rather a return to the old world order

Sources: Angus Maddison, The World Economy: Historical Statistics (Paris: OECD Development Center Studies, 2003), Table 8b, Share of World GDP; Coming of Age: The rich nations no longer dominate global production, The Economist, January 19, 2006; Emerging economies: Climbing back, The Economist, January 19, 2006;


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Growing economies in the developing world translates to growing middle classes, and new ways to consume Middle Class Growth The global “middle class” is expected to more than double by 2030 – led by China and India

• China’s middle class growth will lead in the near-term:

• Second largest middle class (after the US) in absolute numbers at 157M, yet only 12% of population

• By 2030, over 70% of China’s population will have entered the “middle class,”

•  India’s middle class follows: • Small today (5% of population), but set to

expand dramatically •  India could be the world’s largest middle

class consumer market by 2030 • Middle class expansion is driving a shift from

grain based to protein based diet, placing greater strain on the global food supply chain

Related Insights

Source: World Bank, Brookings Institution

Middle Class Population Projections (Millions of People)

664

181

338

138

525

680

313322341

Africa USA & Canada

Europe Latin America Asia

3,228

2030 2009


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Rising incomes have a direct impact on per capita calorie consumption in developing countries

Source: FAO, USDA, A.T. Kearney

Megatrends – Resource Availability

Increased Food Consumption

• Average per capita food consumption will approach 3,000 kcal/day by 2015

• These changes reflect both rising levels of consumption and a dietary shift from grains to protein

• Protein in turn requires significantly higher inputs for the same amount of calories, as 1 kg of meat requires 6.5 kg of grain

• But let us not forget: hunger remains a major issue; in 2015, 450 million people (6% of the world’s population) still lives in countries with very low levels of per capita food consumption (under 2 200 kcal/day )

Related Insights

3,360

2,8982,623

2,293

2,850

3,4903,200

2,9702,820

3,220

India China Africa Latin America Developed Nations

2050 2005

Consumption increases globally – by 2050 developing nations almost reach level of developed nations Per Capita Food Consumption (kcal/person/day)

Increased appetite for meat, especially in East Asia, increases the demand for grain by 100%

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This puts additional stress on resources and the Resource Triad

Hydropower production, Oil sands extraction

70% of water use in agriculture

Energy Land (Food)

Water

Biofuels, Ethanol

The nexus of food, water and energy will put

significant pressure on resource availability


The Resource Triad

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Global demand for energy is expected to grow by as much as 50% by 2030, mainly driven by emerging markets

Source: EIU


Global Demand for Energy

• World dependence on fossil fuels is expected to decline from ~80% today to 60-70% in 2035

• New technologies may soon allow some current net oil importers to become energy independent

• The US is expected to reach energy independence by 2030 as a result of the rapid development of its shale oil (light oil) resources and extraction capabilities

• Europe, China, India and Japan will continue to be net importers for the foreseeable future

• This divergence in energy costs and external energy resource dependence will have significant long-term economic and geopolitical consequences

Related Insights

1,837

2,214

586690691

2,416

1,835

2,206

856932

1,300

3,742

India China USA Europe Latin America

Africa

2030 2010

Developing nations lead the new demand for primary energy Primary Energy Demand by region (Mtoe)

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By 2050, over one half of the world population—4.8 billion people—will be exposed to severe water scarcity

The planetary view: available freshwater is scarcer than we think and usage is growing at a unsustainable rate


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Big challenges ahead – but also great opportunities

Economic Power Shifts

Shifting Consumer Demographics

Shrinking Resource Availability

•  Economic and geopolitical power will continue to shift to the East •  Emerging markets have experienced stunning growth, however are

expected to slow over the next 5-10 years •  The United States is likely to rebound in the near-term, leading to a more

balanced distribution of growth globally •  Growth is Europe is expected to remain low for the foreseeable future

•  The global population continues to grow, with a growing divergence between aging in the world’s wealthiest nations and youth bulges in some of the poorest developing countries

•  Immigration partially exempts the US and Canada from the challenges of aging

•  The world will face growing challenges in reliably meeting the demand for 3 interdependent resources: water, energy and food

•  Corporations, govts. and consumers will have to adapt, innovate and collaborate to create resilient supply chains amidst growing price and supply volatility

Selected Megatrends – An Overview

Megatrends - conclusion

Challenges – and opportunities

•  The world faces a challenge to stretch its resources to satisfy the demands of a growing and increasingly affluent population

•  Opportunity for those who can provide sustainably produced, high quality food to the growing global middle class

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Americas Atlanta Calgary

Chicago Dallas

Detroit Houston

Mexico City New York

San Francisco São Paulo

Toronto Washington, D.C.

Asia Pacific Bangkok Beijing

Hong Kong Jakarta

Kuala Lumpur Melbourne

Mumbai New Delhi

Seoul Shanghai

Singapore Sydney

Tokyo

Europe Amsterdam Berlin Brussels Bucharest

Budapest Copenhagen Düsseldorf Frankfurt

Helsinki Istanbul Kiev Lisbon

Ljubljana London Madrid Milan

Moscow Munich Oslo Paris

Prague Rome Stockholm Stuttgart

Vienna Warsaw Zurich

Middle East and Africa

Abu Dhabi Dubai

Johannesburg Manama

Riyadh

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ATKearney Global Megatrends And AgriBusiness 2015

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