Why Natural Resources Insights Matter For Business Strategy PDF

WHY NATURAL RESOURCES INSIGHTS MATTER
FOR BUSINESS STRATEGY

INTRODUCTION
NATURAL RESOURCES ANSWER CRITICAL
BUSINESS QUESTIONS
ADAPTING TO NATURAL RESOURCES
CHANGE: CASE STUDIES
CONCLUSION
INTRODUCTION
Scope
 Natural Resources indicators are of key importance for business strategies Disclaimer
as they represent both risks and opportunities. Environmental threats and Much of the information in this
briefing is of a statistical nature and,
the need for sustainability are shaping how companies do business as well while every attempt has been made
as how consumers show brand loyalty. It is vital that businesses track and to ensure accuracy and reliability,
Euromonitor International cannot be
adapt to the changes in nature and energy resources in order to capitalise held responsible for omissions or
on new opportunities and prevent any potential risks. This Strategy Briefing errors.
Figures in tables and analyses are
will explain why understanding natural resources data and analysis is calculated from unrounded data and
crucial for critical business decisions, and includes case studies of may not sum. Analyses found in the
briefings may not totally reflect the
companies that are adapting to such changes in order to succeed. companies’ opinions, reader
discretion is advised.
Business operations are

shaped by natural resources
and environmental indicators
which present both risks and
opportunities by impacting the
supply chains and
manufacturing process as well
as consumer demands. It is very
important for businesses to
understand the surrounding
environment to develop a
sustainable business model and
target consumer needs very
closely. No long-term strategy
would be complete without a
clear understanding of the
factors driving natural resource
changes.
© Euromonitor International ECONOMIES AND CONSUMERS : WHY NATURAL RESOURCES INSIGHTS MATTER FOR PASSPORT 3
BUSINESS STRATEGY
INTRODUCTION
Key findings
Competition for scarce The supply and demand of natural resources present risks in the form of
resources potential disruption to supply chains, falling brand loyalty and increased
competition for finite resources leading to commodity price hikes. On the other
hand, sustainable business models can save costs, preserve and protect the
planet’s endangered resources and build on a brand’s reputation.
Monitoring commodity The fluctuation in commodity prices has important business implications as it
prices can impact profit margins. Natural Resources commodity price forecasts help
to make budget allowances.
Consumer demand for Consumers are increasingly leaning towards green brands, in line with the
sustainability New Consumerism, which sees consumers reassessing their priorities with
conscious consumption increasingly replacing conspicuous consumption.
Due diligence and Before expanding in an existing market or entering a new one, it is necessary
marketing strategy to know the availability of resources to avoid additional costs arising from
resource constraints.
Understand change This Strategy Briefing identifies eight key natural resources themes that are
expected to stay relevant in the long-term and are important for understanding
operational and environmental risks. These include water risks, climate change
and commodity price volatility.
Case studies Many companies have already adjusted their models to become more
sustainable and the case studies provide examples of how they have done so.
Businesses that are prepared for these shifts will be best-placed for long-term
success.
BUSINESS STRATEGY
INTRODUCTION
Natural Resources facts
Decline in Forest Land Total Number of

‘000 sq km Threatened Mammal
2011-2016 Species in 2016
The circular
152 economy is gaining 3,298
traction
World CO2 Emissions

from the Consumption
and Flaring of Fossil
Fuels 2011-2016
33
bn tonnes
Growth in Final
Consumption of
32
Source: Euromonitor International from Energy Information Solar, Wind and
Administration of the US Government, International Energy Other Renewables
Agency, FAOSTAT, World Resources Institute, UN
in China 2011-2016
31
2011 2016 156%
BUSINESS STRATEGY
INTRODUCTION
Natural Resources: 8 key themes
Global Water Risks The Circular The Green Energy Resource Security
Economy Boom
Commodity Price Climate Change Pollution Food Waste

Volatility
BUSINESS STRATEGY
INTRODUCTION
Why Natural Resources are important for consumer goods companies
• Assess the supply and demand of raw materials and potential risks to the
1 supply chain
• Help with budget planning in relation to commodity price forecasts with the
2 help of the Commodity Price Model
• Strategise brand positioning and help create targeted marketing messages

3 based on sustainability and CSR goals
• Identify market opportunities in relation to environmental trends

4
• Benchmark company emissions and waste against wider trends and climate
change targets
5
BUSINESS STRATEGY
INTRODUCTION
BUSINESS QUESTIONS
CONCLUSION
NATURAL RESOURCES ANSWER CRITICAL BUSINESS QUESTIONS
Passport Natural Resources answers questions on market potential
How can we
size and
segment Which countries
What is the
opportunities How should we provide export Is tourism
potential for a
based on adapt product potential for affected by
new
environmental design to meet energy/waste susceptibility to
environmentally-
indicators within future demand? treatment/clean natural disaster?
friendly product?
an existing energy?
territory or new
markets?
BUSINESS STRATEGY
How can we size and segment based on environmental indicators?
 Passport Natural Resources

contains a wealth of data broken
down by agriculture, climate,
PepsiCo Sales Distribution by Countries: 2015
energy, mineral resources and
water. This can help to provide
interesting insight into market
potential and can help segment
markets by specific consumer
needs influenced by the
surrounding environment.
 In 2014, Russia ranked lowest of
countries with available data in
terms of water quality. Russia offers
good scope for bottled water
companies such as PepsiCo which
derives its presence in the country
from juice and cola carbonates.
Given that consumers do not trust
the quality of water and the bottled Source: Euromonitor International Competitor Analytics
water market is fragmented,
implying low competitive barriers,
PepsiCo can benefit from Russia’s
market potential in bottled water.
BUSINESS STRATEGY
Passport Natural Resources answers supply chain questions
Are
reserves for
raw
How should
materials Are the
What are we price What
running out Are we regulatory Are we
the our future impact
and should getting the frameworks prepared
potential launches does
we consider best enough to for the
risks in based on climate
alternative deal/price protect the impact of
the the change
sources to for raw environment natural
supply projected have on
prevent materials? and natural disasters?
chain? cost of business?
disruptions reserves?
resources?
in the
supply
chain?
BUSINESS STRATEGY
What are the potential risks in the supply chain?
Sugar Price Forecast: 2016-2021  Passport Natural Resources’

19 commodity price data can help
US cents per pound
18 manage risks in the supply chain

17 including a potential rise in the price of
16
ingredients.
15
14  Sugar and palm oil are extensively
13 used in food items but palm oil is also
12 used in personal care ranges.
11  As per Euromonitor forecasts, both the
10
2016 2017 2018 2019 2020 2021
price of sugar and palm oil are
expected to drop in 2018 and then
remain steady until 2021.
Palm Oil Price Forecast: 2016-2021
660  Companies such as Nestle, Coca-Cola
640 and Unilever, which rely on both these
US$ per metric ton
620 ingredients extensively, are able to

600 make budget allowances for other
580 activities as savings from these
560 commodities could be used elsewhere.
540
Equally, in the event of a price hike, it
520
is important to be prepared in advance
500
2016 2017 2018 2019 2020 2021 so as to minimise risks and avoid any
likely disruptions in the supply chain.
Source: Euromonitor International from International Monetary Fund (IMF )
BUSINESS STRATEGY
Passport Natural Resources answers CSR questions
Are there any

potential
Which
How does our dangers to our
countries
carbon footprint What kind of reputation and
should we
measure in CSR programs are we risking
prioritise for
relation to the should our our brand
our
overall country company adopt? loyalty by
sustainability
performance? ignoring the
programs?
environmental
indicators?
BUSINESS STRATEGY
What kind of CSR programs should our company adopt?

Population with Access to Improved  The Natural Resources page can provide interesting
Drinking Water Source: 2016 insights in developing targeted CSR programs through
100.0
data on water, biodiversity, pollution and agriculture to
name a few.
90.0
 Access to improved drinking water is a major social
80.0 challenge particularly in emerging countries where
70.0
distribution infrastructure is still being developed, but
interestingly even a developed region such as North
% of total population
60.0 America cannot claim 100% population access to

50.0 improved drinking water. Middle East and Africa has the
lowest penetration of drinking water on account of water
40.0
stress as well as underdeveloped infrastructure. Coca-
30.0 Cola, the global leading soft drinks company, has
community programmes which aim to improve access
20.0
to safe drinking water in the Middle East and Africa and
10.0 Asia Pacific.
0.0  Data on biodiversity illustrates the number of
threatened species across different countries. This is of
particular importance for oil exploration companies and
furniture and food manufacturers relying on forests and
water resources. Failing to address the issue could
have widespread repercussions including a fall in brand
Source: Euromonitor International from World Bank loyalty and government penalties.
BUSINESS STRATEGY
INTRODUCTION
BUSINESS QUESTIONS
CONCLUSION
ADAPTING TO NATURAL RESOURCES CHANGE: CASE STUDIES
Economy Boom

Volatility
BUSINESS STRATEGY
Global water risks case study: Implications for laundry detergents
 Unilever has a high level

of exposure to countries
such as India which face a
water shortage. The
company aims to use this
to its advantage, looking
to develop less water-
dependent laundry
detergents, but the
challenge is in reducing
the amount of surfactants,
the cleaning agent which
creates foam, without
affecting product efficacy.
The company has
Source: Euromonitor International from UN AQUASTAT
introduced laundry
 According to the World Economic Forum, water scarcity has been classed as detergents which have
the no.1 long-term risk. This affects a wide range of industries including more cleaning power and
agriculture, energy and fast moving consumer goods. Businesses are can take larger wash
concerned with water for three key reasons: it is required in the manufacturing loads, in the process
process, the consumption of some products such as laundry detergents and saving water by reducing
personal care products require water, and finally water risks also offer the number of wash
commercial opportunities. cycles.
BUSINESS STRATEGY
The circular economy case study: Initiatives for home and garden
 The circular economy has been gaining traction as a Waste Recycled by Type in
viable alternative business model which can help to Developed Countries: 2011-2016
preserve raw materials and prevent potential threats to
the supply chain. It is the antithesis of the current ‘build,
buy, bury’ model, consisting of a system in which Textile
everything is reused and nothing is wasted.
 The cost-saving options in the circular economy form a
key pull factor for businesses. There are also
reputational benefits as consumers increasingly base Metal
their purchasing decisions on brands’ green credentials.
The circular economy closely resonates with The New
Consumerism, which sees consumers reassessing their
priorities with conscious consumption increasingly Plastic
replacing conspicuous consumption.
 IKEA is among the leading businesses to implement
the concept of the circular economy. The company has
been inspired by rationing finite resources to prevent Paper and
cardboard
disruption to the supply chain and changing behaviour
of the younger generation. The company’s goals
include using recycled, recyclable and renewable 0.0 23.0 46.0
materials, buying back used IKEA products and selling
them at no profit and finally, investing in renewable % period growth
energy. Source: Euromonitor International from Eurostat
BUSINESS STRATEGY
The green energy boom case study: Retailers use scale to drive
renewable energy
 Green energy has seen strong growth between 2011 and 2016, with China
leading the way. As it becomes imperative for businesses and governments to
lower their carbon footprint as well as reduce their reliance on fossil fuels,
which are finite in supply, there is a growing interest in renewables.
 In the USA, Walmart is the largest generator of solar power, installing 105
megawatt solar panels on the roofs of 327 stores and distributions centres, said
to be enough to power 200,000 homes. L’Oréal has announced plans to
become a “carbon balanced” company by 2020. Google’s aim is to derive all its
power from renewable sources, thus investing in wind power, solar power and
biofuel. Up until 2016, the company committed to purchase 2.5 gigawatts of
renewable sources and invested US$2.5 billion in renewable energy.
Final Consumption of Solar, Wind and Other Renewables in
China and the USA: 2011-2016
Mn Tonnes of Oil Equivalent
30
20
10
0
2011 2012 2013 2014 2015 2016
China USA
Source: Euromonitor International from International Energy Association (IEA) Photo Credit Solar Panel: Ricketyus
BUSINESS STRATEGY
Resource security case study: International tobacco manufacturers

to be affected by fall in production
Top 3 Crops with a Negative  The rapid rate of consumption means that finite resources are
Absolute Growth: 2011-2016 fast depleting. This implies business risks on multiple counts.
First of all, depletion of resources can halt the production
process on account of disruptions in the supply chain.
Furthermore, limited supply is likely to push the cost of
Sugar Beet
production up and reflect in the form of higher prices. Finally,
resource depletion can trigger government regulations through
higher tax rates to discourage extraction.
 Natural Resources agricultural data shows that the production of
tobacco declined between 2011 and 2016. This is going to
Tree Nuts impact the multinational tobacco manufacturers as can be seen
in with British American Tobacco (BAT), which has been losing
market share to local players since their prices are more
competitive. The threat of rising prices in lieu of falling production
of tobacco can endanger the position of the likes of BAT.
Tobacco
British American Tobacco: 2010-2015
11.5
% market share
11.0
-10,000 -5,150 -300
10.5
‘000 Tonnes 10.0
2010 2011 2012 2013 2014 2015
Source: Euromonitor International from UN Food and Agriculture
Organisation (FAOSTAT) Source: Euromonitor Tobacco
BUSINESS STRATEGY
Commodity price volatility case study: Energy companies preparing for a

rise
 Commodity prices have been subject to
frequent fluctuations with major implications
for businesses. For example, the falling oil
price is good for the manufacturing industry
given the lower cost of production, but
particularly favourable for the automobile
industry.
 The Natural Resources page provides
commodity price forecasts as well as the
Commodity Price Model which not only shows
the price forecast up to 2030 but allows users
to tweak assumptions to match their
expectations.
 The price of natural gas, is projected to
increase alongside inflation, as shown in the
commodity price model. Manufacturers would
benefit from lowering their exposure to natural
gas. Minsheng New Energy, a unit of China's
private investment group Minsheng
Source: Euromonitor International Commodity Price Model Investment, is building a US$2.3 billion solar
farm in the north western Ningxia region to
reduce exposure to the fluctuating energy
price.
BUSINESS STRATEGY
Climate change case study: Auto industry looks to lower carbon footprint
CO2 Emissions from the Consumption and Flaring of  Climate change poses a number
Fossil Fuels: 2011-2016 of sustainability challenges
including a threat to the food
33.0
supply chain. CO2 emissions
32.8
from the consumption and flaring
of fossil fuel is leading to global
32.6 warming. This is posing a
danger to both the agricultural
32.4 and fishery communities in some
countries. Furthermore, climate
Bn of tonnes
32.2
change has seen a growth in the
32.0 frequency of natural disaster
including tsunamis, flooding and
31.8 droughts.
 To reduce its carbon footprint
31.6
and help combat the impact of
31.4 climate change, General Motors
is one of the leading auto
31.2 companies that has committed
to use 100% renewable
31.0
2011 2012 2013 2014 2015 2016
electricity across global
operations by 2050.
Source: Euromonitor International from Energy Information
Administration of the US Government, International Energy Agency
BUSINESS STRATEGY
Pollution case study: Opportunities for skin care product development
PM10 Emissions by Region: 2016  Amid rapid growth in urbanisation,

automobiles and industrialisation, air
80
pollution is an ever growing problem
70 across the world, but more so in the
developing and emerging countries.
Micrograms per Cubic Meter
60 Middle East and Africa toppled Asia

Pacific in 2016 to lead in terms of PM 10
50
emissions, a particulate matter which is
40
10 micrometres or less in diameter. Asia
Pacific, however, closely trails behind.
30  Asian consumers have traditionally been
concerned about the negative impacts of
20
pollution on their skin, but the growing
10 concentration of PM 10 in the Middle
East also indicates that this is likely to
0 future consumer demand.
Middle Asia Latin Western Eastern North Australasia
East and Pacific America Europe Europe America  Beauty and personal care companies
Africa
have launched a range of products
Source: Euromonitor International from EEA, Eurostat, OECD
primarily in the skin care category that
claim to protect from pollution. Skeyndor
is a skin repair cream with high dosage
of anti-oxidants which can help combat
Photo Credit: Skeyndor Cosmética Científica the impact of pollution.
BUSINESS STRATEGY
Food waste case study: France leads the way
French Volume of Waste Treated at  Food waste is a topic that is surfacing as part of a
Landfill vs. Methane Emissions: 2011- sustainability discourse. Food waste and starvation
2016 reflect a gap in the system impeding an even food
10,000 83,000 distribution.
82,500
 France is the first country to have banned
9,500
supermarkets from throwing away and destroying good
Methane Emissions ‘000 tonnes of CO2 equivalent

82,000 quality unsold food approaching best before dates. The
81,500
French government’s goal to halve the amount of food
9,000 waste by 2025 follows pressure from anti-poverty
81,000 campaigns in the country. This move is also expected
Landfill ’000 tonnes
8,500 80,500
to reduce pressure on landfill from municipal waste.
Food waste that ends up in landfill is environmentally
80,000 damaging given that it discharges methane, a
8,000 greenhouse gas responsible for global warming.
79,500
79,000
7,500
78,500
7,000 78,000
2011 2016
Landfill Methane Emissions
Source: Euromonitor International from OECD and World Bank Photo credit: Jbloom
BUSINESS STRATEGY
INTRODUCTION
BUSINESS QUESTIONS
CONCLUSION
CONCLUSION
Top 10 Passport Natural Resources datasets
1. Agricultural Output Index
2. Agricultural Yields
3. Total Precipitation
4. Commodity Prices
5. Energy Efficiency
6. Final Consumption of Solar, Wind and Other Renewables
7. Water Productivity
8. Climate (including precipitation, max and min temperature)
9.Waste Recycled
10. CO2 emissions
BUSINESS STRATEGY
CONCLUSION
Economy Boom

Volatility
BUSINESS STRATEGY
CONCLUSION
Passport Natural Resources gives you the tools to succeed
Research Strategy
Due diligence to Formulate

prevent sustainable
unnecessary business
costs policies
Assess the best Adapt product

price for raw development
materials
Evaluate best Develop

ingredient targeted product
sources positioning
Target
Assess community
government programs and
regulations CSR
Benchmarking Budget planning
BUSINESS STRATEGY
ABOUT THE AUTHOR
Oru Mohiuddin
Strategy Analyst
Experience more...
This research from Euromonitor International is part of a global Learn More
strategic intelligence system that offers a complete picture of the To find out more about
commercial environment. Also available from Euromonitor Euromonitor International's
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WHY NATURAL RESOURCES INSIGHTS MATTER

FOR BUSINESS STRATEGY

Business operations are

Natural Resources facts

Decline in Forest Land Total Number of

World CO2 Emissions

Natural Resources: 8 key themes

Commodity Price Climate Change Pollution Food Waste

Why Natural Resources are important for consumer goods companies

• Strategise brand positioning and help create targeted marketing messages

• Identify market opportunities in relation to environmental trends

Passport Natural Resources answers questions on market potential

How can we size and segment based on environmental indicators?

 Passport Natural Resources

Passport Natural Resources answers supply chain questions

What are the potential risks in the supply chain?

Sugar Price Forecast: 2016-2021  Passport Natural Resources’

18 manage risks in the supply chain

620 ingredients extensively, are able to

Passport Natural Resources answers CSR questions

Are there any

What kind of CSR programs should our company adopt?

60.0 America cannot claim 100% population access to

Natural Resources: 8 key themes

Commodity Price Climate Change Pollution Food Waste

Global water risks case study: Implications for laundry detergents

 Unilever has a high level

Resource security case study: International tobacco manufacturers

Commodity price volatility case study: Energy companies preparing for a

Pollution case study: Opportunities for skin care product development

PM10 Emissions by Region: 2016  Amid rapid growth in urbanisation,

60 Middle East and Africa toppled Asia

Food waste case study: France leads the way

Methane Emissions ‘000 tonnes of CO2 equivalent

Landfill Methane Emissions

Top 10 Passport Natural Resources datasets

1. Agricultural Output Index

6. Final Consumption of Solar, Wind and Other Renewables

8. Climate (including precipitation, max and min temperature)

10. CO2 emissions

Natural Resources: 8 key themes

Commodity Price Climate Change Pollution Food Waste

Passport Natural Resources gives you the tools to succeed

Due diligence to Formulate

Assess the best Adapt product

Evaluate best Develop

Benchmarking Budget planning

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