Dr. David HughesEmeritus Professor of Food MarketingEmeritus Professor of Food Marketing

“Fuelling Food in WA: How Will We Eat When Oil Runs Low?”

University Club, Perth, WA

October 3rd, 2008

Oil Depletion and Food Distribution: Some Comments

Price Range for Oil Over Next 3 Years?

• Maybe US$75 per barrel

• Or US$275!

The One Lakh Car - US $2300.00

Location of World’s Oil Reserves, Top Ten Location of World’s Oil Reserves, Top Ten Countries. (End 2007, barrels billion)Countries. (End 2007, barrels billion)

Source: BP

Corn prices set a series of all-time highs in 2008Corn prices set a series of all-time highs in 2008

USA Maize/Corn Use for Ethanol in MMTUSA Maize/Corn Use for Ethanol in MMT

Source: www.paulaho.com

Ethanol Plants Flourish in the USA, 2007/08Ethanol Plants Flourish in the USA, 2007/08

Source: www.paulaho.com

Let he who is blameless cast the first stone!Let he who is blameless cast the first stone!

• “Obesity is the most important nutritional disease in affluent

countries” The Lancet (Editorial), 1974

• in many European countries, +50% overweight and +30% obese (2002 data)

• overweight kids increasing; +30% in Greece, Italy, Spain and Portugal

• convergence in European diet over past 40 years – Mediterranean countries intake of sugar, saturated fats, cholesterol up, but down in the North

• EU-15 Kcal/person/day up 22% 1961 to 2001

Source: International Obesity Task Force

Evolutionary Path of the Modern Food System

• Increasing global sourcing• Move away from local production• Loss of seasonality and move to 52 week availability

for fresh foods• Premium fresh foods air freighted• Shoppers use cars to ferry food products• Supermarkets rationalise supply base and seek

mega-providers from far afield• Dietary changes – from indigenous staples to wheat;

meat protein from grain fed animals; more processed products

Increase pork consumption by 1 kg per capita in China and …….

• Requires an additional 1.3 million tons of pork• Requiring 5.2 million tons of feed grain (corn)• Which will mainly be imported

Source: ERS, USDA

Share of Household Expenditure on “At Share of Household Expenditure on “At Home” Food & Non-Alcoholic BeveragesHome” Food & Non-Alcoholic Beverages(select countries; 2006)(select countries; 2006)

What Sort of Food Industry Future?

• 2007/08 food price inflationary period just a blip (like 1973/74) – business as usual by 2010

• Medium-term imbalance in supply and demand – best solution to high food prices is high food prices; situation normal (as 1975-2005) by 2012

• New era with focus shifting to greater sustainability, more local, much greater emphasis on environmental aspects, mix of high tech., and improved traditional practices

• “We’re buggered!” – Malthusian worst case scenario, with social chaos, national hoarding

“ “We conclude that government cannot meet its own We conclude that government cannot meet its own targets on health, environment and sustainability .... and targets on health, environment and sustainability .... and fair trade without a concerted effort to harness the power fair trade without a concerted effort to harness the power and influence of supermarkets behind the UK’s public and influence of supermarkets behind the UK’s public policy goals.”policy goals.”

UK Department of Transport news release, September 11th, 2008

• “Transport Minister .. Announced a (A$150) million boost to the Sustainable Distribution Fund to help the freight industry reduce costs and cut emissions - …. Money targetted at increasing the use of rail and water transport”.

The Tesco $1 Billion Green Pledge: The Tesco $1 Billion Green Pledge: “Going Green is Just Good for Business”“Going Green is Just Good for Business”• Leahy (CEO) “Promote a revolution in green

consumption by bringing environmentally friendly goods to the mass market”.

• products labelled with carbon counters• “Green” loyalty cards for organic, fair trade,

biodegradable, energy efficient products• reduce produce air-freighted from 3% to 1% of sales• more energy efficient products in “Value” range• cut energy use in-store and distribution by 50%• truck fleet to run on 50% bio-diesel• establish Sustainable Consumption Institute at

Manchester University

Sustainable Technology Fund

What’s Wal*Mart up to on Environmental What’s Wal*Mart up to on Environmental Issues? Issues?

• environmental task forces across the business in concert with suppliers

• most effort to-date focused on:- energy use in stores- fuel economy re. truck fleet (inc. aerodynamic re-design, banning engine idling, improved tire design- reduced packaging (5% reduction by 2013)

For Wal*Mart, “going green” is a matter of

delivering competitive advantage for its business

Changes at the Household Level?

• Energy efficiency growing concern of household heads - insulation, cooking technology, transport

• Home delivery of “drudge” shopping – ingredients, meal components, and meals

• Continued increase in demand for local/regional foods

• Home energy self-sufficiency moves (e.g. solar power, electric cars)

• Community self-sufficiency initiatives for food and energy, serious recycling, shared transport

• Carbon consciousness goes main stream

Role of Government: Leadership?• Increase taxation on fossil fuels• Carbon taxes on polluters/energy inefficient• Tax breaks on energy-saving products• Increased funding for commercialisation of pilot

renewable energy schemes• Energy saving awareness education• Tariff reduction to reduce net carbon impact of

imported foods/ingredients• Joined up policies on agriculture, food security,

energy, health, environment and sustainability – creating a vision of a sustainable food system

Post Farm Gate Food Industry Initiatives

• Driven by need for cost reduction and pressure from key stakeholders (e.g. retailers, special interest groups, government)

• Carbon neutrality seen as competitive weapon (e.g. New Zealand wine industry)

• Acknowledgement that business growth is contingent on “going green” – status quo not sustainable

• Like health and well-being, it’s a journey – some companies are in the fast lane, some in the slow lane, some are yet to start!

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