How does food industry work now?

"Big food, it seems, has a sweet tooth. On August 14th Mars, a packaged-food giant best known for its chocolaty fare, announced it would gobble up Kellanova, maker of Pringles and Pop-Tarts, for $36bn. It is not the only company betting big on calorific goodies. Last November Smucker’s, a purveyor of jams and peanut butters, completed its $6bn acquisition of Hostess Brands, maker of Ho Hos and Twinkies.

Filling bellies is a lucrative business. The West’s ten most valuable packaged-food and soft-drink companies have a combined market capitalisation of around $1trn. Their average operating margin last year was a plump 17%; grocers typically make just 2-4%. Consumers have continued to feast on the cheap calories served up by these firms despite the recent bout of inflation. Last year the group’s sales grew by 5%, on average. Rising demand in the developing world is bolstering growth. Around half of Coca-Cola’s revenue already comes from outside Western markets. HSBC, a bank, reckons that global food demand will increase by more than 40% between now and 2040.

Yet the industry also faces threats. The impact of its products on the health of those who consume them has long concerned shoppers and policymakers alike. Consumers may now indulge in them less as weight-loss drugs become cheaper and more convenient. What is more, a growing body of research suggests that it may not only be an excess of sugar, fat and salt that causes health problems, but also the heavy processing used to whip up cheap nibbles. Both threats could reshape the industry—and transform what the world ingests.

The roots of today’s food industry stretch back to 19th-century innovations such as pasteurisation and canning that helped make food plentiful, convenient and safe. Today a humble bag of crisps is manufactured in an assembly line where spuds are sliced, fried, drenched in seasoning, preservatives and colouring agents, then sealed in a bag with nitrogen to keep them from going stale. The process takes around 30 minutes.

Such tasty products have contributed to the surge in obesity in recent decades. According to the UN Food and Agriculture Organisation, the average daily calorie intake of people in the rich world has risen by a fifth since the 1960s, to 3,500 calories, well in excess of what their bodies need. By the end of this decade nearly half the world’s population is expected to be obese or overweight.

Consumers who have found it difficult to alter their diets may at last be able to do so thanks to new blockbuster weight-loss drugs including Wegovy (from Novo Nordisk, a Danish pharmaceutical company) and Zepbound (from Eli Lilly, an American rival). For now, the hefty price tag and inconvenience of weekly injections mean only a sliver of the population in rich countries is taking these medications. But uptake is expected to rise as competition lowers prices and pill versions hit the market.

Patients taking the drugs have reported that they crave calorific food less. Analysis by Grocery Doppio, a research firm, finds that users lower their spending on groceries by 11% on average, with spending on snacks and confectionery falling by more than half. Morgan Stanley, a bank, reckons 7-9% of Americans could be taking weight-loss drugs by 2035, resulting in reductions in overall demand ranging from 3% for cereal to 5% for ice cream (see chart 1).

Big food may well take these developments in its stride. The industry has a record of launching new products that cater to weight-watching consumers. Coca-Cola first launched Diet Coke in 1982, and has released various other sugar-free alternatives since then. Most food and beverage companies now offer products with reduced sugar, fat or salt. According to Mintel, a market-research firm, the number of new health-conscious snacks launched annually rose by 2% between 2015 and 2020, compared with a decline of 1% for traditional snacks. Some companies, such as Mondelez, an American snack giant, now offer smaller portion sizes.

Indeed, a number of food companies see weight-loss drugs as a growth opportunity. In May Nestlé, the world’s biggest such firm, said it would launch a new frozen-food brand, Vital Pursuit, targeted at users of the drugs, who still need to ensure they get adequate quantities of protein and other nutrients despite consuming smaller quantities of food. Mark Schneider, the company’s boss, says Nestlé is already preparing for a “lower-calorie, higher-nutrient future”. Last year the business set a target of growing sales of “more nutritious” products by 50% before the end of the decade. Other packaged-food businesses such as Conagra and General Mills also have products that are targeted at users of slimming jabs.

Upstarts may try to steal their lunch, but incumbents should be well-placed to cater to consumers seeking out nutritious low-calorie options. It takes just six to nine months to develop and launch a new product, notes Mr Schneider. Deep ties with supermarkets and other retailers make it easy for big firms to get products onto shelves once they are ready. Vast marketing budgets can be deployed to raise awareness among consumers.

The threat from a crackdown on processed foods, if it materialises, will be trickier to deal with. In 2009 Carlos Monteiro, a Brazilian scientist, sorted food into four buckets based on their degree of processing. The first covers unprocessed items such as fruit and vegetables. The last, called ultra-processed foods (upfs), covers items such as breakfast cereal and crisps, as well as protein bars and fake meats, which contain significant amounts of ingredients not typically found in a home kitchen. Since the 1990s the share of UPFs in diets worldwide has been rising. According to one study, they now account for around half of the calorie intake in America, Britain and Canada (see chart 2). Many studies have linked the consumption of large amounts of upfs to weight gain and various health issues, although some do not disentangle the effects of heavy processing from the large doses of fat, sugar and salt that are often found in these foods.

Something to chew on

The research is nascent and not everyone is convinced. Arne Astrup, a researcher at the Novo Nordisk Foundation in Denmark, believes that the definition of UPFs is too woolly. But policymakers in some countries are already taking action. In November last year Colombia imposed a tax on a range of UPFs. Dietary guidelines in Belgium, Brazil, Canada and elsewhere recommend avoiding the products. Mr Monteiro has called for health dangers to be labelled on UPFs, as many countries have done with cigarettes.

The industry’s approach to upfs so far has ranged from scepticism to suspended judgment. Ramon Laguarta, the chief executive of PepsiCo, said in January that he doesn’t believe in the term; Mr Schneider says Nestlé is following the debate “very closely”. The stakes are high. If pressure from governments ratchets up, the food industry will have to do more than tweak its recipes or roll out some new product lines. Companies would have to completely overhaul their manufacturing processes. Ditching additives could make products more expensive to produce and shorten their shelf life, cutting into profits. Big food has so far managed to thrive even as concerns have swirled around consumers’ health. With upfs, it could face its most daunting challenge yet." [1]

1. Appetite for change. The Economist; London Vol. 452, Iss. 9411,  (Aug 24, 2024): 52, 53.

Bideno sankcijos visur padidino kainas ir sugriovė jo galimybes likti Baltuosiuose rūmuose. Kodėl jos nepaveikė Rusiją taip, kaip tikėtasi?

 

 "RUSIJA PLANUOJA dešimtmečias Vakarų sankcijų, neseniai sakė aukštas Užsienio reikalų ministerijos pareigūnas Dmitrijus Birichevskis. Įrodymai rodo, kad tai gali būti ne per didelė problema. Ekonomika auga protingai, metinis prieaugis 4 proc. antrąjį ketvirtį, praeitą - net 5,4 proc., nepaisant vieno griežčiausių kada nors įvestų sankcijų režimų. Kaipgi taip?

 

 Norėdami sužinoti, pažiūrėkite į Kazachstaną. Praėjusiais metais Centrinės Azijos respublikos technologijų pramonė triumfavo. Nuo tada, kai prasidėjo konfliktas Ukrainoje, Europos įmonėms buvo uždrausta parduoti daugumą technologijų produktų Rusijoje; anksčiau jos buvo didžiausios šios šalies technologijų tiekėjos. Tačiau atrodo, kad mažytė Kazachstano technologijų pramonė, apie 50 įmonių, kurių gamybos pajėgumai 2021 m. sieks 100 mln. dolerių, užpildė spragą. Jos eksportas į Rusiją išaugo nuo 40 mln. dolerių 2021 m. iki 298 mln. dolerių 2023 m. Žinoma, ne viskas buvo taip, kaip atrodė. Elektronikos importas iš Europos taip pat padidėjo nuo 250 mln. EUR (273 mln. dolerių) iki 709 mln. Ar kazachų firmos stebuklingai išsiplėtė, ar Rusijos firmos rado aplinkinį kelią pas savo senuosius Europos tiekėjus? Tu būk teisėjas.

 

 Kazachstanas yra viena iš kelių šalių, kuriose prekyba su Rusija ir Europa paslaptingai klesti nuo Ukrainos įvykių pradžios. Kitos yra Armėnija, Azerbaidžanas, Gruzija, Turkija ir kitos keturios Centrinės Azijos šalys. Eksportas iš Europos Sąjungos į šias šalis 2023 m. padidėjo 46 mlrd. eurų, ty 50 % daugiau, nei 2021 m. Tai prilygsta trims ketvirtadaliams Europos eksporto į Rusiją sumažėjimo nuo 2021 m. iki 2023 m.

 

 Sankcijos kartu su karine pagalba yra pagrindinis Vakarų indėlis į Ukrainos pastangas, tačiau, skirtingai, nei tolimojo nuotolio raketos, jos kol kas nesudavė didelio smūgio. Per dvejus su puse metų Rusijos ekonomika laikosi gerai. Sunku pasakyti, kurios Europos įmonės tiesiog gerai prisitaiko prie naujų apribojimų, o kurios apeina sankcijas. Tačiau dažniausiai prekyba per trečiąsias šalis padidėjo tarp produktų, kurie dabar yra labai ribojami. Europos politikos formuotojai žūtbūt siekia uždaryti  nutekėjimą, tačiau tai reiškia, kad reikia griežtai elgtis su kai kurių spygliuočiausių Europos kaimynų vyriausybėmis.

 

 Trys gijos slypi už prekybos tarpininkavimo bumo. Pirmoji – prekyba draudžiamomis prekėmis, kuri aiškiai pažeidžia sankcijas. ES priėmė 14 sankcijų paketų, paskutinį kartą – birželio 24 d. Ji draudžia įmonėms, gaminančioms bet ką, kas gali būti panaudota mūšio lauke, eksportuoti į Rusiją. Tai apima puslaidininkius ir dronus, taip pat rutulinius guolius ir mikrobangų krosneles. Nepaisant to, daugiau, nei pusėje mūšio lauko įrangos, kurią Rusija įsigijo 2022 m. vasario–rugpjūčio mėnesiais, yra Europoje arba Amerikoje pagamintų komponentų, teigia Londono ekspertų grupė „Royal United Services Institute“.

 

 Pavyzdžiui, sparčiausiai iš ES į Kazachstaną ir Armėniją augo chemijos, elektronikos ir mašinų eksportas – visoms produktų grupėms taikomos griežtos sankcijos. Nuo 2021 m. iki 2022 m. mašinų eksportas į Kazachstaną iš ES padvigubėjo, o 2023 m. išaugo dar 23 % ir pasiekė 6,4 mlrd. eurų. Armėnija 2023 m. iš Europos importavo dvigubai daugiau cheminių medžiagų, penkis kartus daugiau IT aparatinės įrangos ir keturis kartus daugiau elektronikos, nei 2021 m. Dar yra prekės, kurios kontrabanda gabenamos per sienas, kurios nepatenka į oficialią prekybos statistiką.

 

 Pakeliui į Rusiją siuntos gali praeiti per kelis tarpininkus. Kai kurie Turkijos ir Centrinės Azijos eksportuotojai iš tikrųjų neįsivaizduoja, iš kur atkeliavo jų siunčiamos prekės. Bet kiti puikiai žino. Praėjusiais metais Amerika įvedė sankcijas Rusijos konglomerato „Mayak“ organizuotam Europos firmų tinklui, gabenančiam uždraustą įrangą per Uzbekistaną ir Armėniją. Birželio mėnesį ji atskleidė du skirtingus Europos įrankių gamintojų tinklus, gabenančius į Rusiją: vieną per Turkiją Rusijos valstybinei bendrovei „Ostec“, o kitą per Kirgiziją – Rusijos aviacijos ir kosmoso įmonei „Newton-ITM“.

 

 Antroji netiesioginės prekybos augimo priežastis yra ta, kad Rusija nuo 2022 m. uždraudė sunkvežimiams įvažiuoti tiesiai iš ES. ES leidžia į Rusiją eksportuoti kai kuriuos produktus, pavyzdžiui, žemės ūkio prekes, tačiau dabar jie turi važiuoti aplinkiniais maršrutais. ES dėl to pernelyg nesijaudina: dėl to transportas pabrangsta, o tai atgraso nuo prekybos su Rusija, bet leidžia išgyventi nuo jos labai priklausomoms įmonėms. Oficialūs skaičiai rodo, kad iš Europos į Kazachstaną atplukdoma žemės ūkio produkcija nuo 2021 m. iki 2023 m. padvigubėjo.

 

 Trečiąją tendenciją Europai sunkiausia sustabdyti. Jis atsirado dėl gamybos bumo trečiosiose šalyse. Trečiųjų šalių įmonės kai kurias medžiagas ir dalis importuoja iš Europos, o tai nebūtinai pažeidžia taisykles. Sankcijų vykdytojai dar tik turi paliesti kai kurių eksporto produktų, tokių kaip tekstilė, žaliava geležis ir žaliavinis plienas.

 

 Bet net ir ten, kur leidžiama prekyba, gauti atlyginimą be sunkumų  yra problema. Beveik visi sandoriai su valstybine Rusijos įmone yra uždrausti. Europos bankams uždrausta bendrauti su dauguma Rusijos bankų. Pagrindiniai Rusijos bankai yra užblokuoti nuo SWIFT – tinklo, kurį bankai naudoja bendraudami tarpusavyje. Įmonės turi vengti verslo su 2200 įmonių ir finansininkų, įtrauktų į ES juodąjį sąrašą.

 

 Turkija buvo viena didžiausių buitinės technikos tiekėjų Europai, prieš prasidedant konfliktui. Amerika mano, kad Turkijos įmonės dabar gamina dronus ir mikroelektroniką Rusijai. Pasak Turkijos užsienio reikalų ministerijos pareigūno, kai kurių ginklų metalai gali būti išlydyti Europoje. Nuo 2021 m. iki 2023 m. Kazachstano biuro įrangos importas iš Europos išaugo tris kartus iki beveik 1 mlrd. dolerių. 2023 metais investicijos Kazachstane išaugo 11 proc., o tai paskatino Rusijos įmonės.

 

 Panašu, kad Centrinės Azijos ir Kaukazo ekonomikos gauna naudos iš konflikto. Kartu penkių Vidurinės Azijos respublikų ekonomika 2023 m. išaugo 6 %, o 2022 m. – 4 %, o Armėnijos ekonomika išaugo 8 %, nuo 5 % 2022 m. Per vieną naktį išaugo klestintis logistikos sektorius, o kroviniai kasmet auga 20 proc.

 

 Europos politikos formuotojams visa tai yra bloga žinia. „Tikėjomės tam tikro nutekėjimo, – sako vienas pareigūnas, – bet ne tokio masto, apie kurį dabar žinome. Gruodžio mėn. 12-asis ES apribojimų etapas pirmą kartą buvo nukreiptas į Armėnijos ir Uzbekistano įmones. Nuo to laiko biurokratai pagrasino daugiau sankcijų trečiosioms šalims ir į jas eksportuojantiems europiečiams, tačiau ėmėsi veiksmų tik prieš kelias firmas. Kiekvienai, į juodąjį sąrašą įtrauktai, įmonei kita registruojama kitur.

 

 Realiam sprendimui reikėtų pasitelkti Kaukazo ir Vidurinės Azijos vyriausybes. Tai neįvykdomas užsakymas. Regiono politikai vertina jų artumą Rusijai ir dažnai asmeniškai pelnosi iš taisyklių laužymo. Vis dėlto europiečiai galėtų jiems pasiūlyti gėrybių. Armėnija neseniai pradėjo uždarinėti įmones, prekiaujančias su Rusija, kai ES suteikė jai 270 mln. EUR pagalbos, paskolų ir sutarčių.

 

 Arba Europos Sąjunga galėtų naudoti lazdas, o ne morkas. Ji galėtų išplėsti eksporto draudimus į trečiąsias šalis arba apriboti jų bankus. Tai gali kelti pavojų Europos likusiems dujų šaltiniams Azerbaidžane ir pakenkti Europos įmonėms. Kyla klausimas, ar ES mano, kad griežtesnio sankcijų režimo nauda Ukrainai to verta. Dabartinis požiūris rodo, kad taip nėra.“ [1]

 

1.  Any which way you can. The Economist; London Vol. 452, Iss. 9411,  (Aug 24, 2024): 22, 23.

Biden's sanctions increased prices everywhere and ruined his chances to remain in White House. Why didn't they work on Russia as expected?

"RUSSIA IS PLANNING for decades of Western sanctions, a senior foreign-ministry official, Dmitry Birichevsky, said recently. The evidence suggests that might not be too much of a problem. The economy is growing smartly, at an annualised rate of 4% in the second quarter, after a whopping 5.4% the quarter before, despite one of the toughest regimes ever imposed. Trade continues to flourish. How come?

For a clue, look at Kazakhstan. Last year, the Central Asian republic’s tech industry appeared to pull off a triumph. Since the conflict in Ukraine began, European firms have been banned from selling most tech products in Russia; they were previously the country’s biggest tech suppliers. But Kazakhstan’s tiny tech industry, some 50 firms with a production capacity of $100m in 2021, seems to have filled the gap. Its exports to Russia rose from $40m in 2021 to $298m in 2023. Of course, all was not as it seemed. Electronic imports from Europe also increased, from €250m ($273m) to €709m. Did Kazakh firms magically expand, or have Russian firms found a roundabout route to their old European suppliers? You be the judge.

Kazakhstan is one of several countries where trade with Russia and Europe has been mysteriously booming since Ukraine’s events. Others include Armenia, Azerbaijan, Georgia, Turkey and the other four countries of Central Asia. Exports from the European Union to these countries increased by €46bn in 2023, up 50% from 2021. That was equivalent to three-quarters of the drop in Europe’s exports to Russia from 2021 to 2023.

Along with military aid, sanctions are the West’s main contribution to Ukraine’s effort, but unlike long-range rockets, they have so far failed to deal much of a blow. Two and a half years in, Russia’s economy is holding up well. It is hard to tell which European firms are simply adjusting well to the new restrictions and which are circumventing sanctions. But as it happens the biggest boosts in trade flowing through third countries have been among products that are now heavily restricted. European policymakers are desperate to close the leaks, but that means getting tough on the governments of some of Europe’s most prickly neighbours.

Three strands lie behind the boom in intermediated trade. The first is trade in banned goods, which clearly flouts sanctions. The EU has adopted 14 packages of sanctions, most recently on June 24th. They ban firms making anything that could be used on a battlefield from exporting to Russia. That includes semiconductors and drones, but also ball-bearings and microwave ovens. Even so, more than half of the battlefield equipment that Russia acquired between February and August 2022 contains components made in Europe or America, according to the Royal United Services Institute, a think-tank in London.

For example, the most rapid growth in exports from the EU to Kazakhstan and Armenia has been in chemicals, electronics and machinery, all product groups under heavy sanctions. Machinery exports to Kazakhstan from the EU doubled from 2021 to 2022, and then rose another 23% in 2023 to reach €6.4bn. Armenia imported twice the chemicals, five times the IT hardware and four times the electronics from Europe in 2023 as it did in 2021. Then there are the goods that are smuggled across borders, which fall outside the official trade statistics.

Shipments can pass through several middlemen on their way to Russia. Some exporters in Turkey and Central Asia genuinely have no idea where the goods they are shipping came from. But others know very well. Last year America imposed sanctions on a network of European firms organised by Mayak, a Russian conglomerate, to transport forbidden equipment through Uzbekistan and Armenia. In June, it uncovered two different networks of European toolmakers shipping to Russia, one via Turkey for Ostec, a Russian state-owned company, and one via Kyrgyzstan for Newton-ITM, a Russian aerospace firm.

The second reason for rising indirect trade is that Russia has barred lorries from entering directly from the EU since 2022. The EU allows the export of some products to Russia, such as agricultural goods, but they must now take circuitous routes. The EU is not too worried about this: it makes transport more costly, which discourages trade with Russia but lets firms that heavily depend on it survive. Agricultural products flowing from Europe into Kazakhstan doubled from 2021 to 2023, official numbers show.

The third trend is the hardest for Europe to stop. It comes from a manufacturing boom in third countries. Third-country firms import some materials and parts from Europe, which does not necessarily break the rules. Sanctioneers have yet to touch some exports, such as textiles, raw iron and raw steel.

But even where trade is allowed, getting paid without breaking financial sanctions is a problem. Almost every transaction with a state-owned Russian firm is banned. European banks are barred from interacting with most Russian ones. Major Russian banks are locked out of SWIFT, the network that banks use to communicate with one another. Firms must avoid doing business with 2,200 firms and financiers who are blacklisted by the EU.

Turkey was one of the biggest suppliers of household appliances to Europe before the conflict started. America reckons Turkish firms are now making drones and microelectronics for Russia. Metals for some munitions may be smelted in Europe, according to a Turkish foreign-ministry official. Kazakhstan’s imports of office machinery from Europe tripled to almost $1bn from 2021 to 2023. That was probably partly due to a surge of new offices and factories. Investment in Kazakhstan rose by 11% in 2023, buoyed by Russian firms.

The economies of Central Asia and the Caucasus seem to be benefiting from the conflict. Collectively, the economies of the five Central Asian republics grew by 6% in 2023, up from 4% in 2022, while Armenia’s economy expanded by 8%, up from 5% in 2022. A booming logistics sector has cropped up overnight, and cargo is growing by 20% each year.

For Europe’s policymakers, this is all bad news. “We expected some leakage,” says one official, “but not on the scale we now know about.” In December, the EU’s 12th round of restrictions targeted firms in Armenia and Uzbekistan for the first time. Bureaucrats have since threatened more sanctions on third countries and Europeans exporting to them, but have taken action only against a few firms. For each firm added to the blacklist, another is registered elsewhere.

A real solution would require enlisting the help of the governments of the Caucasus and Central Asia. That is a tall order. Regional politicians value their closeness to Russia and often profit personally from rule-breaking. Still, the Europeans could offer them goodies. Armenia recently started to shut down firms trading with Russia, after the EU awarded it €270m in aid, loans and contracts.

Alternatively, Europe could use sticks rather than carrots. It could extend export bans to third countries or restrict their banks. That could jeopardise Europe’s remaining sources of gas in Azerbaijan and hurt European firms. The question is whether the EU thinks that the benefit to Ukraine of a tighter sanctions regime is worth it. Its current approach suggests it doesn’t." [1]

1.  Any which way you can. The Economist; London Vol. 452, Iss. 9411,  (Aug 24, 2024): 22, 23.