CONSUMER DEMAND IN A TIME OF WATER SCARCITY

Transcription

1 CONSUMER DEMAND IN A TIME OF WATER SCARCITY JILL WYANT Executive Vice President & President, ECOLAB Global Food & Beverage 24 June 2015

2 Water Crisis Making Headlines

3 Increased Attention on Water Needed to Produce Everyday Products 13 Gallons of Water = 450 Gallons of Water = 55 Gallons of Water = 700 Gallons of Water = 167 = Gallons of Water 39,090 Gallons of Water =

4 Macro Trends Influencing Consumer Behavior POPULATION GROWTH 50% MORE PEOPLE by 2050, with most growth in emerging markets $ $$ $$$ GROWING MIDDLE CLASS More DISPOSABLE INCOME, more meals away from home AGING POPULATION in EMEA, Japan, and China will shift CONSUMER BEHAVIOR; Drive HEALTHCARE RISE OF THE MILLENNIAL CONSUMER Socially-conscious, less BRAND-LOYAL

5 By 2030 the World Will Need: 45% MORE ENERGY 50% MORE FOOD 30% MORE WATER

6 Water Inventory Of the earth s water supply: 97.5% = SALT WATER vs. 2.5% = FRESH WATER glaciers, ice caps groundwater lakes, rivers, ice/snow 1.72%.75%.03%

7 Industry is the Second-Largest Fresh Water Consumer 20% Industry 70% Agriculture 10% Domestic Source: World Water Assessment Programme

8 Business Impact In 2014, the global water crisis rose to a top-three business risk for impact and likelihood 70% of companies surveyed identify water as a substantive business risk Global Water Crisis impact upon US-based Fortune 500 companies: 94% face potential physical challenges 80% affects their decisions on where to locate facilities 69% face reputational risks 60% affects business growth and profitability within five years SOURCES: World Economic Forum 2013 CDP Water Report Bridging Concern with Action: Are US Companies Prepared for Looming Water Challenges?, Pacific Institute and VOX Global 2014 survey of US-based Fortune 500 companies

9 The Most Forward-Looking Companies Have Aggressive Water Goals By 2020, safely return to communities and nature an amount of water equal to what is used in finished beverages and their production Goal to reduce water consumption per guest night by 25% by 2020, 30% in water-stressed areas 15% improvement in water use by 2015 as compared to 2011 Cut total water intake by 30% by 2020, compared to 2010 baseline Aims to reduce direct water withdrawal per ton of product by 40% by 2015, compared to 2005 baseline 20% reduction in fresh water use by 2015, compared with goal to improve freshwater efficiency by 5% Further reduce water consumption 20 percent per occupied room by 2020 from a 2007 baseline 2020 target to reduce water intensity by 15% from 2011 levels Intends to cut water use per pound of product by 20% by 2020, compared to a 2008 baseline Committed to zero-discharge operations as a critical part of a long-term target to build a resource-saving and no-emission management enterprise Water-use-per-vehicle reduction goal of 30% from 2009 to 2015

10 We re in 1 Million Customer Locations Across Industries and Geographies REPUTATIONAL CONSIDERATIONS & Consumer Demand REGULATORY CHANGES/ INFLUENCES INNOVATION Lack of water leading to new, effective technology

11 Water Conservation Case Study #1 A range of innovative solutions to help PepsiCo increase its operational water use efficiency. The savings captured by our solutions add up: DRYEXX TM DRY CONVEYOR LUBRICANT MORE THAN 175 million gallons ADVANTIS TM CLEAN-IN-PLACE PROGRAM REDUCE UP TO 45% 3D TRASAR TM COOLING WATER TECHNOLOGY REDUCE BY 24 million gallons WATER SAVED saved in conveyor lubrication annually at bottling plants WATER USED in clean-in-place WATER USED per year at one PepsiCo plant.

12 Water Conservation Case Study #2 Ecolab innovation helped dairy achieve consistent Clean-in-Place performance and consistently high quality milk The safety and quality of our products as well as our reputation are at stake. We always look for ways to operate more efficiently, but never at the cost of safety and quality. -- Roger Domask, Operations Manager, Kemps Rochester plant REDUCED WATER CONSUMPTION FOR CLEANING CONSERVED 963,750 gallons of water REDUCED CLEANING TIME SAVED 1,295 hours cleaning time PRODUCT QUALITY IMPROVEMENT IMPROVED AVERAGE PASSING 1 point from 2013 to 2014

13 Challenges for Change Water is inexpensive Not yet personal Lack of demand for water-saving innovations

14 Water is Undervalued: Prices inverse to risk Chengdu $0.33 Amsterdam $3.42 Chicago $0.88 Barcelona $3.04 Beijing $0.59 Los Angeles $1.85 Dallas $0.79 Monterey $0.88 Istanbul $2.04 Addis Ababa $0.15 Rio de Janeiro $1.10 Mumbai $0.28 Phnom Penh $0.16 Seoul $0.58 Shanghai $0.31 Sao Paulo $0.89 Johannesburg $0.54 Sydney $2.76 Sources: Aqueduct, WRI, GWI

15 Water Scarcity Puts Most of the World s Biggest Economies at Risk Top 10 Largest Populations Top 10 Fastest Growing Economies Top 10 Biggest Economies Cities experiencing water scarcity or current drought Chicago Los Angeles New York London Paris Istanbul Beijing Tokyo Seoul Osaka Shanghai Rio de Janeiro Mumbai Mexico City Sao Paulo Lagos Cairo Delhi Guangzhou Sources: Aqueduct, WRI, GWI

16 Scarcity Impacts: Financial Implications to Business Revenue X Water scarcity limits availability of water, leading to decreased production and loss in revenue. Water scarcity increases the cost of water, which reduces profit Cost of Goods Sold Operating Profit Operating Expenses Depreciation Ebit Interest Tax Profit After Tax X X X X X X X X margins.

17 CDP Disclosed Revenue at Risk (2014) 33 corporations publicly disclosed to investors that water scarcity threatens 1 6% of their annual revenue 5.74% 5.00% 4.10% 5.88% 1.70% 2.49% 1.80% 2.15% 0.75% 0.78% CONSUMER DISCRETIONARY CONSUMER STAPLES ENERGY FINANCIALS HEALTHCARE INDUSTRIALS INFORMATION TECHNOLOGY MATERIALS TELECOM SERVICES UTILITIES

18 Impacting Revenue & Profits U.S. Based Meals Company 28% drop saw a in its California-based carrot division profits in early 2015 due in part to drought followed by intense rains Global Agriculture Producer reported a 12% drop in 2014 Q4 profits as a drought in the U.S. damaged pastures used to raise beef Fortune 500 Beverage Company decided not to move forward on the development of an $81 million bottling plant in Southern India in April 2015 due to resistance from local farmers who cited concerns about strains on local groundwater supplies Consumer Packaged Goods Manufacturer estimated that natural disasters linked to a changing climate cost the company around $400 million annually North American Food Company introduced an 8% price increase on coffee packs in early 2015 to offset impact of Brazil drought Australian Agribusiness reported a 64% drop in 2014 profits due to a prolonged drought cut grain deliveries by 23% nearly halved grain exports Source: Ceres 2015

19 Introducing a New Way to Factor Water Risks into Business Decisions Assess Understand Quantify Calculate water scarcity risks at site and/or enterprise level the full value of water to your business water risks in financial terms that make business sense potential revenue at risk

20 From Operations at Risk to Risk Mitigation The Challenge Business Implications $ The Solution Water price does not reflect its full value Water scarcity makes it harder to access water necessary to operate Decreased production & loss in revenue Reduced profit margins Water required > water share = potential revenue at risk Market price + water risk premium = risk-adjusted water price BUSINESS OUTCOME Actionable quantification of waterrelated risks in financial terms Informs efforts to assess and manage water risk

21 Visibility into Operational Risks LOS ANGELES $1.85 $ $ % MODERATE RIO MUMBAI $.17 $ $ % HIGH $1.11 $ $5.59 <1% LOW BEIJING $.31 $ $ % MODERATE $ Water Cost Risk Adjusted Water Cost Potential Revenue at Risk Beverage plant water usage = 5,353,591 Likelihood of Revenue Loss

22 Use the Water Risk Monetizer to: INCORPORATE a risk-adjusted cost of water and potential revenue loss into analysis MAKE THE CASE for proactive water management strategies IDENTIFY operations/locations at greatest risk MONETIZE rate of return for water management improvement projects SELECT where and how to increase production or meet demand in new regions

23 Turning Information Into Action Inside a Food & Beverage Processing Plant

24 Water Impacts the Total Plant Complex Connections Across Operations INFLUENT REVERSE OSMOSIS FILTRATION SOFTENER BOILER PLANT PROCESS WASTEWATER COOLING SYSTEM EFFLUENT REPURPOSE REUSE REDUCE

25 Original w/6 areas

26 METERING/ MONITORING Track water and analyze usage trends. Place water meters on total plant water, critical systems and top 10 consumers of water.

27 EQUIPMENT SHUTOFF LOST WATER Water left running while equipment is not, can result in a significant amount of wasted water 15-30% of STEAM TRAPS fail if not regularly maintained LEAK PREVENTION Steam Trap Leak 1/8 at 100 psig = 55,460 GALLONS of lost condensate

28 WATER REPURPOSING Opportunities to repurpose water exist throughout the plant: once-through systems collecting homogenized cooling water treated plant effluent water

29 CIP OPTIMIZATION Clean-in-Place Systems account for 20-40% of total water usage in a food or beverage facility. To optimize CIP systems: use burst rinsing utilize rinse recovery prevent excess rinses

30 UTILITY SYSTEM OPTIMIZATION Save up to 30% WATER with the 3DTRASAR TM Platform Reduction Strategies: Increase cooling and boiler water cycles Maximize condensate return Maintain steam traps Recycle/Reuse Strategies: Re-use production water as boiler & cooling water makeup Eliminate once through cooling water on the air compressors/pump seal water with recirculating cooling water Use case washing and homogenizer water as cooling water makeup

31 Water Reduction Strategies Can Uncover Huge Savings Opportunities Average* SAVINGS INFLUENT REVERSE OSMOSIS 143,173 m³ 226 tons FILTRATION SOFTENER BOILER 37,257 GJ PLANT PROCESS TOTAL $726,663 WASTEWATER COOLING SYSTEM EFFLUENT Averages based on Total Plant Assessments conducted and implemented at 45 food and beverage manufacturing and processing facilities.

32 What is the Value of Water To Your Business?

33 The Business Questions?? What are the most pressing business risks due to water scarcity? What strategies are in place to ensure access to the water needed to operate??? Are global growth projections reasonable given water scarcity? What actions are being taken to reach water reduction goals? How can supplier partnerships help in meeting these goals?

34 LEARN MORE Stop by our I-Zone booth for a demo Talk to our water experts Visit us at ecolab.com or WaterRiskMonetizer.com 34

35 Bringing unlimited resourcefulness to the challenge of limited resources. For more information, visit