Showing posts with label Nestle. Show all posts
Showing posts with label Nestle. Show all posts

Monday, 6 October 2008

Water Crisis: Another inconvenient truth (IHT)

OPINION

By Peter Brabeck-Letmathe
Sunday, October 5, 2008


At last, many of the world's political leaders have begun to realize that diverting land and food crops to produce biofuels leads to higher food prices. But an equally important consequence of this policy folly is being largely ignored in the public and political debate: Producing biofuels will further deplete the world's already overtaxed water supply.
This is emblematic of a larger and increasingly dangerous disregard for the world's most valuable, irreplaceable and finite natural resource: fresh water.
Seventy percent of all water withdrawal is already used in agriculture, and while all such activity requires water, growing enough soy or corn to create biofuels is especially water-intensive. For example, to produce just one gallon of diesel fuel up to 9,000 gallons of water are required. Up to 4,000 gallons are needed to produce enough corn for the same amount of ethanol. By way of contrast, producing enough food to meet the caloric needs of one person for one day in, for example, Tunisia or Egypt requires about 666 gallons of water, and twice as much in California (caloric needs and intakes vary widely from region to region due to dietary customs).
If all of the biofuel targets and timelines set by governments across the world are met, we can expect water withdrawals for agriculture to increase by up to one-third. Making a dent in the world's energy problems with biofuels will require much more water than the world can afford to give up. There simply isn't enough; water tables are falling throughout the world. While there are substitutes for oil, there are none for water.
The world is facing a water crisis and, consequently, a food crisis that in terms of severity and potential impact far supersedes the current food crisis or the exhaustion of fossil fuels. Either it never occurred to biofuel advocates to ask about the amount of water needed for biofuel production, or they simply chose to ignore this particular inconvenient truth.
According to a report by the International Water Management Institute, by 2025, about one third of the world's population, perhaps as many as 3 billion people, will face water shortages. From an agricultural standpoint, we may be looking at losses equivalent to the entire grain crops of India and the United States by then. According to some estimates, even without biofuels, we will very likely reach the upper limit of available fresh water for worldwide consumption, more than 2.9 billion cubic miles, by 2050. A growing reliance on biofuels would exacerbate an already difficult challenge.
There was a remarkable lack of careful planning in the drive to convert food to fuel. In Europe and the United States, a developer trying to open a shopping center is subjected to an extensive environmental impact assessment. But when politicians decided to promote biofuels, the decisions were not preceded with a comparably thorough analysis of environmental sustainability.
Regardless of how it happened, policy makers neglected the dwindling supply of a resource essential to life in order to replace fossil fuels and fight global warming. This was not a sensible trade-off. There is no question that we have to reduce our consumption of fossil fuels. But biofuels derived from food crops planted exclusively for that use are clearly the wrong solution. While there are substitutes for oil, there aren't any for water.
This scandal is instructive because it was caused, in part, by the general attitude toward water in both the developed and developing world. Water is still treated as a limitless resource in too many communities, and one reason is that it is has no price. States heavily subsidize water usage so that it is sometimes even free for both farmers and consumers. Because it is not assigned a value in the marketplace, there is no incentive for using it efficiently. If water were not free or heavily subsidized, would biofuels still be produced? I doubt it!
The water problem can be solved. It requires much more careful stewardship of water supplies by local and national governments. I, for one, also believe reasonable pricing policies would help by encouraging the use and development of water efficient crops and smart irrigation systems. But even those who disagree with that prescription should be deeply disturbed by the lack of attention paid to water by those who rushed headlong to biofuels as the answer to the world's energy problems. As the international community grapples with how to fight global warming and build a sustainable future, it must stop ignoring a priority that is even more pressing.
Failure to address the water problem will result in food scarcity. Water scarcity is no longer an environmental issue. It is a national and international security issue that can not be ignored.


Peter Brabeck-Letmathe is the chairman and former chief executive of Nestlé.







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Friday, 8 August 2008

Nestle and Sara Lee profits lifted by price increases

CHICAGO: Nestle , the world's largest food company, reported a first-half profit at the top of analysts expectations, aided by price increases that offset rising commodity costs.
A similar strategy also helped U.S. foodmaker Sara Lee post a higher-than-expected profit on Thursday as it raised prices to offset soaring costs for items such as wheat and energy. Sara Lee also forecast profit for the current fiscal year that is higher than some analysts' estimates.
But investors are concerned that, as price increases for well-known brands such as Nescafe coffee are pushed through to the supermarket shelf, more consumers will look to lower- priced items. Reliance on price increases has already pressured the volume of products sold by some companies.
"We believe it would be premature to call this a turning point for the company," JPMorgan analyst Terry Bivens wrote in a note to clients on Sara Lee.
"Going forward, the company will face competitive pressures, pricing elasticity and tougher comps. All of these factors may blunt its volume growth."
Sara Lee shares fell 3.7 percent on the New York Stock Exchange, adding to a nearly 10 percent drop to date in 2008. Nestle shares rose 0.1 percent on the Swiss stock market after trading lower earlier and are down 9.3 percent for the year.Sales volume growth in the first half of the year at Nestle slowed to 3.5 percent from the first-quarter's rate of 4.5 percent.

European foodmakers such as Nestle and Unilever have seen their stocks pressured because of concerns that price increases had gone too far. In contrast, U.S. food companies have in general seen their shares rise in recent weeks as a similar strategy, and cost cuts, succeeded in offsetting commodity costs.
MARKETING DIFFERENCES
U.S. food companies also have been aggressively increasing spending on advertising to boost sales.
But Nestle's marketing and administration spending as a percent of sales declined in the first half of the year.
"Marketing spending was down 120 basis points -- a bigger decline than Unilever's 70 basis points fall, which sent its shares down 10 percent, and this may well be taken negatively for Nestle as some investors may take the view that marketing is being used to make the margin numbers," RBS analyst Julian Hardwick said.
Nestle said net profit rose to 5.2 billion Swiss francs (2.51 billion pounds) in the first six months of 2008, slightly ahead of average analyst expectations of 5.05 billion Swiss francs and at the top of a 4.88 billion to 5.21 billion range.
Underlying sales, which exclude currency effects and acquisitions, rose 8.9 percent, in line with forecasts. But pricing accounted for a higher-than-expected 5.4 percentage points.The maker of Buitoni pasta, Nespresso coffee and Friskies cat food gave a slightly more upbeat forecast, expecting underlying growth in 2008 at least at the 2007 level of 7.4 percent, after previously saying it would "approach" that figure.
Nestle repeated it expects improved earnings before interest and tax (EBIT) margins in 2008.
UNCOMMON CURRENCY
Unlike Nestle, Sara Lee benefited from a weak dollar, as did other U.S. foodmakers with operations outside the United States. Nestle profits were depressed by the strong Swiss franc.
The maker of Sara Lee bread, Ball Park hot dogs and Jimmy Dean sausage posted a fiscal fourth-quarter loss of $695 million, or 98 cents a share, as a result of previously disclosed charges reflecting the reduced value of some bakery operations.
Before one-time items, it earned 28 cents a share, compared with the average analyst estimate of 25 cents a share. Sales from continuing operations rose 12 percent to $3.51 billion.
For fiscal 2009, the company forecast earnings of 90 cents to 98 cents a share, excluding a contingency payment from the 1999 sale of is tobacco business, or $1.12 to $1.20 a share including the payment.Analysts on average forecast $1.03 a share, according to Reuters Estimates, although some include the tobacco payment and some do not. Sara lee said the average estimate of analysts that do not include the payment was 92 cents a share.
http://www.iht.com/articles/reuters/2008/08/07/business/OUKBS-UK-NESTLE-SARALEE.php






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