Global megatrends and impacts on the food value chain

Management ConsultingApril 2019

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Five global megatrends are reshaping agribusiness

1. Demographic shiftsPopulation growth and aging, rising income

2. Accelerating urbanisationIncrease in urban population, rural-urban migration

3. Shift in global economic powerEmerging countries as economic powerhouses and large food consumers

4. Climate change and resource scarcityIncrease in temperature and in the demand for water and energy

5. Technological breakthroughs Information flow, powerful technologies, shifts in established business models

Megatrends are changing the way of doing business,

generating opportunities, new demands and markets. With the megatrends also arises the “new

consumer”

PwC has looked at how these global megatrends may shape the food value chain in New Zealand and our export markets over the next 30 years

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Demographic shifts

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• The world’s population is expected to reach 9.8 billion in 2050

• The proportion of world’s population aged 60 years or older is projected to increase from 10% in 2010 to 21% in 2050

• The middle class could reach 4.9 billion people by 2030, a 172% increase from 2009.

By 2050 global food production must increase by 70%. Value growth will be driven by growth in the middle class globally

Impacts• The growing elderly population are demanding

healthier, functional foods served in small portions

• The expanding middle class is demanding a wider variety of meat, dairy, health-conscious and other high quality food products

• Millennials are driving changes in consumer preferences towards sustainable and ethical products.

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Sources: FAO (2012 and 2017), UN (2015) and PwC (2015). Adapted by PwC Agribusiness Research & Knowledge Center.

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Accelerating urbanisation

• The global urban population will reach 6.3 billion by 2050

• In 2030 there will be 41 megacities — those with populations of 10 million or more

• Auckland is projected to account for more than 50% of New Zealand’s population growth and reach 2.3 million by 2043.

The proportion of population living in urban areas will increase from 54% to 66% by 2050, creating labour challenges for agriculture

Impacts• Rural areas are likely to experience labour

shortages and a lack of skilled labour in technology-enabled agricultural equipment

• Supply chain challenges involving global inbound and outbound supply chains, managing food waste and increased need for cool chains

• Urban food production, including collective gardens and vertical farming, will emerge as responses to the drive to source locally.

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Source: UN (2012 and 2014) and PwC (2015). Adapted by PwC Agribusiness Research & Knowledge Center, StatsNZ Population projections.

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Shift in global economic power

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• By 2050 the members of E7 will be among the 12 world’s largest economies

• 7 of the 10 countries with the highest GDP projected growth to 2050 are located in Asia

• Trade agreements and investments into the Pacific and Asia are imminent and will grow exports to developing economies

• Over-regulation was the biggest concern for CEOs surveyed around the world according to the latest PwC CEO Survey.

By 2050 the GDP of E7 countries will be 2 times that of G7 countries. These countries will demand premium food products

Impacts• Both international trade and local production will

increase in developing areas due to the increased demand for food in these regions

• Pressure to improve food security and food quality standards will increase trade regulations and legislations – creating challenges for New Zealand exporters.

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Sources: PwC (2015 and 2017). Adapted by PwC Agribusiness Research & Knowledge Center.

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• Global carbon emission is projected to increase 16% by 2030

• Average temperatures are likely to increase by over 2°C over the 21st century, this will cause significant changes to the environment

• The global population is expected to demand 35% more food by 2030

• In New Zealand, food waste costs us $872 million a year. Nearly 123,000 tons of food were thrown away per year.

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Climate change and resource scarcity

The global population will require 50% more energy by 2030. The efficient use of resources will become more important

Impacts• Demand for alternative production models, such

as the circular economy and sharing economy, will grow - delivering value with less resources

• The use of renewable sources of energy and the demand for sustainable food will increase

• Efficient use of resources will be important for New Zealand agribusinesses to meet increased demand and consumer preferences for sustainable products.

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Sources: BBMG (2012), IWMI (2015), NIC (2012), PNUMA and PwC (2015). Adapted by PwC Agribusiness Research & Knowledge Center.

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Technological breakthroughs

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• Over a 30% of CEOs surveyed named “speed of technological change” as a key concern

• Between 2015 and 2025, the number of connected devices (IoT) worldwide is forecast to grow from 15.4 to 75.4 billion

• 90% of all current data has been created in the last two years. Only 0.5% of all data is currently analysed.

Technology will be a key enabler of increased production and efficiency required to meet growing demand for food and resource scarcity

Impacts• The need for IT professionals along the food

production value chain will grow• Growing demand for food and shrinking

agricultural land will drive adoption of new technologies to improve yields

• Technologies like blockchain will bring increased transparency along food value chains, enhancing value for companies and customers

• Convergence of technologies will mean new players will enter the agricultural sector.

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Sources: Goldman Sachs (2016), IHS (2017), PwC (2016 and 2017). Adapted by PwC Agribusiness Research & Knowledge Center.

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Immediate“It want it all and I want it now”

Customised“I like companies which understand my needs”

Value-aligned“What I am buying must be aligned to my values and my personal image”

Imperceptible“Everything needs to work in an integrated way”

Transparency“I need to know exactly what I am buying”

Fun experience“I don’t want to get bored”

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New consumers are driving consumption changesConsumers now expect the same quality of interaction with everyday products and services they buy as they have in other areas of their lives

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Transparency and collaboration across supply chains and supply chain actors will emerge to provide increased trust and efficiency in supply chains

Industry actions include:

End to end supply chain integration

Top down food safety approach

Proactive management of food fraud

Technological enablement

Mapping security of supply

Investments in transparency

Cost and resilience trade offs9

Supply chains will increasingly become integrated

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Carbon footprint baseline“Where are we starting from?”

Climate change and biodiversity“What does being responsible look like in our supply chain?”

Resource scarcity“Are we using our resources efficiently? Is there a win-win for the environment and the bottom line?”

Transparency“How do we know what our suppliers are doing?”

Procurement and partnerships“Are our purchasing decisions in line with our firm’s values?”

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Sustainable supply chains are becoming a strategic advantageSustainability is fast becoming the lens through which a business is judged by its customers, workforce, society, governments and investors

Industry sustainability questions:

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Healthy, functional, sustainable and customised food

Food distribution, availability and transportation

Adding value Food quality and security standards

Digital and disruptive or converging technologies

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New consumer, new reality and new drivers of value

Alternative business models, such as the circular economy and ethical sourcing

Natural resources and reduction in the use of inputs

Local sourcing and place of origin branding

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Urban farming

Vertical urban farming has the potential to deliver food for urban demand with significant environmental benefits.

Digital technologies

The adoption of digital technologies such as drones, sensors and IoT devices will create fully interconnected supply chains.

Cloud services

Data sharing and cloud analytics platforms will provide the agricultural sector new insights on weather, crops, fertilisers, products and customers.

Food safety certification

Opportunities in traceability and integrity of food production including blockchain, automation and other supply chain quality assurance and certifications.

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Opportunities arising for the Agribusiness sector

Sources: Céleres (2014), Exame, Plant Project e Valor (2017). Adaptado por PwC Agribusiness Research & Knowledge Center, PwC NZ analysis.

Eco-innovation

Eco-innovation is an opportunity for agricultural businesses to create a competitive advantage through improving resource efficiency and strengthening brand.

Global customer acquisition

Agricultural companies have more opportunity to engagement directly with customers and improve product differentiation.

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Peter ChambersPartner

021 404 015peter.x.chambers@pwc.com

Joseph BarnaoDirector

021 608 848joseph.f.barnao@pwc.com

Elisha NuttallSenior Consultant

027 354 7426elisha.j.nuttall@pwc.com

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Contact us

PwC has a team of Consulting specialists helping clients in the Agribusiness sector across New Zealand gain efficiencies and navigate challenges in their evolving businesses. Get in touch today.

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