Global Consumer Trends and the Opportunity for American Agriculture - Dr. Mark Lyons, Global Vice President & Head of Greater China, Alltech, from the 2017 NIAA Annual Conference, U.S. Animal Agriculture's Future Role In World Food Production - Obstacles & Opportunities, April 4 - 6, Columbus, OH, USA. More presentations at http://www.trufflemedia.com/agmedia/conference/2017_niaa_us_animal_ag_future_role_world_food_production

1. Global Consumer
Trends and the
Opportunity for
American
Agriculture
Dr. Mark Lyons
Global Vice President
& Head of Greater China

2. Changes Today

3. Changes Today

4.  Chairman Xi will meet with President Trump at
Mar-a-lago, Florida, the United States from April 6 to 7
 This will be the first meeting between Xi and Trump
since Trump.
 China says “aim is to improve mutual understanding”.
Trump says he will “tackle” Xi on North Korea and
trade
China-U.S. trade in goods amounted to US$519.6 billion in 2016, an increase of 207 times
compared with that of 1979 when the two countries set up diplomatic ties.
Highlights of US-China discussions this week

5. China’s Great Urban Shift:
300 Million+ Into Cities
188 Cities Bigger than Chicago

6. 400Mbrought
outofpovertyCHINA

7. Rise of a new middle class
-urban, young, globally minded, empowered

8. China in
2017
China is going through a
period of transition
There has been tremendous development in the
country over the past 20 to 30 years resulting in
significant improvement in people’s lives, wealth.
This also, however, has resulted in increased costs.
We have now seen the end of inexpensive China

9. The End of “CHEAP CHINA”
2008-2013 % variation
+62%
LaborCNY/hr in China
+70%
Raw material
Cool price
+10%
Energy
+45%Transportation
Diesel price China, RMB/liter
+59%Real estate
Increasing
Regulations
Level of regulation
e.g. environment protection

10. Chinawasthe
factoryoftheworld
•Now is it…
•The bank？
•Biggest market opportunity？

11. This has resulted in an overall economy
that is shifting from an
export market to a
consumption market

12. Number of Chinese
going overseas

13. 2040- China’s average life
expectancy eclipses 100

14. Mainland China's middle class will account for more than a third of its population by 2030,
which would take consumer spending to levels currently seen in the European Union,
according to The Economist Intelligence Unit.
30%
About 35% of the Chinese population will have more than US$10,000 of annual disposable
income by then, up from about 10% today, says the the data analytics firm.
35%
$10,000
10%
The Rise and Rise of the Middle Class

17. 2017 | GLOBAL FEED SURVEY2017 | GLOBAL FEED SURVEY
World Feed Production Exceeds
1 billionMetric Tons

18. 2017 | GLOBAL FEED SURVEY
• Feed represents 70% of the cost of production of meat
(pork, beef & chicken), milk & eggs
Feed Prices Critical Factor in
Competitiveness of Animal Protein Sector

19. 2017 | GLOBAL FEED SURVEY
Regions Africa, 39.5
Asia Pacific
367.6
Europe, 249.4
Latin America,
157.5
Middle East,
27.1
North America,
191.1

20. 2017 | GLOBAL FEED SURVEY
Top 10 Countries Produce almost 2/3 of Feed

21. 2017 | GLOBAL FEED SURVEY
Asia-Pacific Region Leads
• Asia region #1
• 5% growth
• China largest market
367.7 mmt

22. Consumer
Demands:
1. Food Safety
2. Environmental
protection
3. Traceability

23. “No.1 Document”
China will protect farmland and
lend more to farmers to narrow
a wealth gap between rural and
urban areas
Agricultural modernization
Strictest Food safety law
Ecological agriculture

24. 4 Trends
Self sufficiency
Quality improvements
Scale
Environmental
protection

25. Larger scale of all farms, not just dairy, promoted since
the 2007/2008 Melamine Crisis

26. 1980-2013 2014-2020 2020-2040
Fragmentation More Integrated Integrated & Segmented
20,000 +
Feed Mills
< 6,000
Feed Mills
+
Farming
< 5,000
Food Chain +
Segmentation

27. Source: Department of Animal Husbandry, MOA 数据来源：中国农业部畜牧业司
Chinese Hog and Sow Inventory
中国生猪与能繁母猪存栏
Sow and hog inventory continue
decreasing and reached 10-year
low in December 2016
Sow:
36.61 million head
Hog:
367.74 million head
The Great China Sow Herd Thinning Continues in 2016….

28. Produced more than 80 million tons of meat (World’s NO.1).
Total volume of livestock manure in China:
3 billion tons of sewage including waste water caused by cleaning slaughter house
and 800 million tons of straw.

29. 2015
Fujian
2015
Zhejiang
September 2014
Louxing District
2016
June 2016 Nanchang
End of 2016
Beijing
End of 2017
Liaoning
End of 2017
Shandong
Shaanxi 陕西
End of 2017
Yongchuan
End of 2017
Guizhou
End of 2017
Guangxi
End of 2017
End of 2017
Guangdong
End of 2017
Henan, Anhui, Jiangsu
Shanghai
End of 2016
2017 FARM CLOSURE PLAN
Sichuan

30. The
Green Revolution
of China

31. No environmental impact of agricultural
residues within 5 years

32. Our guiding principle – ACE
We’re committed to the health,
safety and benefit of the:
A – Animal
C – Consumer
E – Environment

34. China pork importation is accounting for about 50%
of the world's pork trade, mainly from US and EU
American Pork to China is a huge success – $1 billion in trade
last year, double the level in 2015, more to come in 2017 –
helped by 3 large slaughter facilities coming on line.
Overall China pork import numbers:
Year 2014 2015 2016
Pork import 1,383,182 1,593,076 3,093,245
Pork import reached record high in 2016, china became
the biggest pork importation country. It is estimated that
port importation will keep at high level for relatively long time

35. $millions
Source: Global Trade Atlas. Data include sales to Hong Kong
Pushing U.S. Pork Exports to China to Record $1.1 Billion in 2016
2nd biggest US export market to Mexico, Strong sales expected to continue in 2017
0
200
400
600
800
1000
1200
2000 2002 2004 2006 2008 2010 2012 2014 2016

36. Chinese Demand for Safety, Quality Help Drive U.S. Pork Sales
Source: Department of Animal Husbandry, MOA 数据来源：中国农业部畜牧业司

37. Chinese poultry market
is an opportunity
 2016 overall Frozen Chicken Import =
569,132 Metric Tons =1.23 Billion USD
 Mainly from:
 Brazil
 Thailand
 Turkey
 It is estimated capital consumption for poultry
is 14kg till 2020
 China population = 1.4 billion

38. Scale and scope of Chinese Poultry industry

39. 60 billion birds in the world…
20% in China
CHINA BIRD POPULATION
8.8B Broiler
1.2B Layer/Breeders
4B waterfowls
21.72% 18.08%
34.56%
33.60% 33.62% 33%
4.58% 4.64%
17.05% 22.90% 24.65% 25%
0%
20%
40%
60%
80%
100%
2002 2005 2008 2012 2013 2014
Structure of Chinese layer Industry (%)
<1999 2000-9999 >10000
Large (over 50 K birds)
Small scale farms (<1 0 K birds)farm
Mid Scale (20-50 K birds)farm

40. Why not the USA?
Partnerships?
Chinese market access to the
US market
WIIFM
Branding

41. Invented in China
创新中国

42. Smiling Curve
Patent Engineering Manufacturing RetailLogistics

43. China Curve
Patent Engineering Manufacturing RetailLogistics

45. Classification level: Strictly Confidential, Confidential, For internal Use Only, Public
Supplier check
Store good receiving
check
DC receiving check Store: WIFI, terminal machine
Supplier DC Receiving Store Consumer
METRO Traceability System Framework
Web
APP
WeChat
Terminal
www.starfarm.com.cn
iOS: StarFarm /METRO
Android: iStarfarm /METRO
Metro official account
METRO shopping 
Food TS tracing
METRO store terminal
machine
Page 51
APP

46. Classification level: Strictly Confidential, Confidential, For internal Use Only, Public
METRO Cash & Carry, China
Member of METRO GROUP 52
COOPERATED PROJECT IN 2016
Suppler:
 Implement the solution;
 Document the process
Markets:
 Sourcing the product;
 Sell the product to clients
Technique partner:
 Provide technique solution;
 Training and flow up
System solution: ：
 Project control;
 Assessment and improvement action plan;
 Monitor and report

47. What’s next?
Source: The Food Institute’s Daily Brief
Shifting
consumer
preferences
for food

48. product and
brand advocate
“prosumer”
Rather than simply
“consuming”
products, people
are proactively
exhibiting their
beliefs, ethics,
standards &
aspirations
through their
purchases

49. Today we've announced that by
mid-2018, all Quarter Pounder
burgers at the majority of our
restaurants will be cooked with
fresh beef.
@McDonalds. Mar 30 2017
.@McDonalds So you’ll still
use frozen beef inMOSTof
your burgers inALLof
your restaurants?
Asking for a friend.
Replying to @McDonalds. Mar 30 2017

51. Classification level: Strictly Confidential, Confidential, For internal Use Only, Public
“Get off this treadmill that’s
taking you nowhere. Going
tit for tat and adding
features, augmentations,
and gimmicks to beat the
competition has the
perverse result of making
you like everyone else.”
Youngme Moon
Escapeing the Compeditive Herd
BEING DIFFERENT: IT MEANS WE HAVE TO TAKE
SOME RISKS

52. Golden era of 1940s-1950s, progress in antibiotic
discovery subsequently slowed down.
Increase in resistance
Antibiotics:
End of the road?

53. Global Picture Thai doctors are seeing a
worrying growth of antibiotic-
resistant infections - warning of a
"collapse of the modern
medical system"
if urgent action is not taken.

54. CDDEP, 2015
“A high percentage of antibiotics can pass
through animals into the environment:
up to
of an antibiotic dose can be
excreted in their urine
75
and up to
in their feces.”
%
90%

55. 5 D is r uptions C hanging Food Globally

59. 1) Keep your core values, but
localize
2) Bring something unique
3) Go early
What to do?

60. 2017 | GLOBAL FEED SURVEY
• Fastest growing at 21%
• 18.7 mmt
• Primarily pig & broiler
The Rising Star of Vietnam

61. Vietnam Feed Output Rises with Growing Economy
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
0
500
1000
1500
2000
2500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Feed output (r)
Per capita GDP (l)
MMT$/capita
2016-2021 implied Myanmar potential feed demand growth: 9 million tons
2016 Myanmar GDP 2021 Myanmar GDP

62.  55million consumers
 3 million middle class expected to
reach 15 million by 2025
 53% under age of 30
 GDP per capita: $1,432
 2016 GDP gain: 7.9% fastest in
world
Myanmar Snapshot

63. “The only real prison
is fear,
and the only real
freedom is
freedom from fear”
- Aung San Suu Kyi

64. MYANMAR FEED INDUSTRY
Animal agriculture inventory:
Broilers – 116 million
Layers – 9 million
Pigs – 1.7 million
Dairy – 2,000 head
Myanmar Feed Production (mmt)

65.  3 million consumers (750,000 middle class)
 50 million animals raised under a traditional pastoral
production model
 Small, emerging modern production led by layers, dairy, pigs.
Low productivity/efficiency
 Feedstocks: local wheat, imported SBM, corn, premixes and
concentrated feed
 Large egg and meat imports from Russia and others due to
high costs in Mongolia
Mongolia Snapshot

66. Welcome to Mongolia Монгол Улсад тавтай морилно уу

67. -Animal agriculture inventory:
Layers – 761,000
Broilers – 150,000
Pigs – 33,000
Dairy – 1,000
Mongolia Snapshot

69. Sel-Plex enriched egg in Mongolia
Mongolia is severely deficient in selenium
that is critical for disease prevention and
brain function. It can be easily added to
animal diets to enrich meat, milk, and eggs
SelPlex Se-enriched eggs introduced
nationwide
One egg can meet the daily Selenium
requirement

70. 2017 | GLOBAL FEED SURVEY
Nigeria
Algeria
Tunisia
Kenya
Zambia
Africa: The Fastest Growing Region
Regionally
13%
30%
39.5 mmt

71. Case Study Ireland

72. Quota
System

73. Irish Market Snapshot
• 1.4M dairy cows
• Moved upmarket due to the quota system
• Focus on whey protein production to baby formula (now 19% of global trade)
• Origin Green Project to unify branding of Ireland as high quality,
environmental and sustainable

74. AIDAN COTTER
CHIEF EXECUTIVE
BORD BIA
28 JANUARY 2009
Growing the success of Irish food & horticulture

75. • First and only national, third-party-verified sustainability
program for agriculture, food and drink.
• Developed through Bord Bia (Irish Food Board) in 2012
Goal: To differentiate Irish food and drink from all other
supply sources globally.
What is Origin Green?

76. Origin Green: Ireland Brands its Food
Supply Chain
Bord Bia Areas for Action Origin Green’s Ambition
• Every farm and every food
manufacturing business demonstrates
commitment to sustainable food
production
• Measure carbon footprint for the entire
industry
• Take steps to reduce that footprint

77. Branded Supply Chain
Sustainability Targets
Everything is
tracked and
measured for
success.

78. Origin Green Ambassadors
• Ten young people
• Placed in HQ of the largest food
firms in the world
• Learning about sustainability in
world’s best firms
• Educating the biggest food buyers
in the world about Origin Green

79. - In 2016, food and drink exports reached a new record
high of $12.2 billion.
- 13% increase in international markets
- 95% export participation rate in program
- 90% of all beef, 70% of all dairy producers
- Brands Kerrygold and McDonald's massive growth
- 2015: Access to China market
Did it work?

80. Fixed Mindset
Intelligence is a fixed trait
Growth Mindset
Intelligence is a malleable
quality, a potential that can
be developed
Mindset

81. Smartest and most talented people
最聪明和最有才能的人
not the most successful
并非是最成功的人

82. I’m not good at ____________ …
我还不够好
THE POWER OF YET
“YET”的力量
I can’t do ___________ …
我还未能完成
I tried but it didn’t work …
我试过了，然而还是
未能成功
yet
yet
yet

83. Join us May 21–24, 2017, in Lexington, Kentucky.
ONE.alltech.com

84. Alltech.com @AlltechAlltechNaturally
Thank you.
@mpl17