emerging risk in agribusiness · 2017-08-30 · about aon aon plc (nyse:aon) is a leading global...
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Emerging Risk in AgribusinessAugust 22, 2017
Chip Lerwick | Aon Risk Solutions
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American Cheeseburger
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How Many Ingredients are There in a Cheeseburger?
TomatoGrown in Puerto Rico
BunWHEAT grown in Kansas, milled in Missouri, baked in the state where purchased
MayonnaiseBlended in Ohio from EGGS produced in Virginia, VEGETABLE OIL produced in Illinois from CORNgrown in Iowa, LEMON JUICE produced in Florida, SALT mined in Utah, and SPICES from the Caribbean
KetchupBlended in California from TOMATOES grown in California, VINEGAR from the Philippines, and SPICES from all over the world
Sesame SeedsGrown in New Mexico and packaged in Arizona
LettuceGrown in Arizona
CheeseMade in California from MILK produced in OregonBeef
CATTLE born in Mexico, raised in Texas, transported to feedlot in Kansas and slaughtered in Nebraska, mixed with trim from Argentina, Canada
BaconPIGS from Canada, shipped to Iowa, slaughtered in Missouri
PickleGrown in Arkansas, pickled in Mississippi with SPICES from around the world
MustardBlended in New York from MUSTARD SEED grown in Canada, SPICES from around the globe, and VINEGAR from Virginia
Illustration of vast diversity in food supply chain. Sources shown are only one possibility of origination point.
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OnionGrown in Utah
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baking sodawheat glutencalcium propionateenzymes
bleached wheat flour mono- and diglyceridesmalted barley flour diacetyl tartaric acid estersthiamine ethanolriboflavin sorbitol niacin polysorbate 20folic acid potassium propionatereduced iron sodium stearoyl lactylatewater corn starchcorn syrup ammonium chloridesesame seeds ammonium sulfatesoybean oil calcium peroxideyeast ascorbic acidsalt azodicarbonamidecalcium sulfatecalcium carbonatecalcium silicatesoy flour
milk milkfatwater creamsodium citrate saltsodium phosphate sorbic acidartificial color soy lecithin acetic acid starchenzymes
Special Saucesoybean oil picklesdistilled vinegar water egg yolks HF corn syrupsugar onion powdercorn syrup spicespice extractives saltxanthan gum mustard branprop. glycol alginate sodium benzoatepotassium sorbate garlic powder hydrolyzed proteins mustard seedcaramel color paprikaturmeric calcium disodium
cucumberswatervinegarsaltcalcium chloridealumnatural flavoringspolysorbate 80turmeric
lettuce
Source: DHS/National Center for Food Protection and Defense
80+ Ingredients
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USDA inspected beefsaltpeppercottonseed oilsoybean oil
onions
tomatoes
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Global Dynamics4
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Global Dynamics
• As developing countries grow their demand for food will increase dramatically and the result is new markets for food & agribusiness firms
– Rising Incomes = Demand for Convenient, Packaged Foods & Meat
• China has 20% of the Population, but Only 8% of Arable Land & 7% of fresh water
• India has 17% of the Population, but Only 13% of Arable Land
• China is the largest exporter - and the largest consumer of many agricultural products
• There are more foreign firms registered to produce food for the U.S. than there are within our borders
• Supply System Complexity/Dependence
Hana Ševčíková and Jen Christiansen; SOURCES: “WORLD POPULATION STABILIZATION UNLIKELY THIS CENTURY,” BY PATRICK GERLAND ET AL., IN SCIENCE EXPRESS. PUBLISHED ONLINE SEPTEMBER 18, 2014 (2014 projections); “THE END OF WORLD POPULATION GROWTH,” BY WOLFGANG LUTZ ET AL., IN NATURE, VOL. 412; AUGUST 2, 2001 (2001 projections)
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Industry Change Drivers
• Heightened Consumer Awareness & Demand• Globalization & Increased Supply System Complexity• Regulatory Challenges• Increasing Recalls and Rising Cost• Sustainability/Corporate Conscience• Intensified Media Attention• Science & Technology
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Heightened ConsumerAwareness & Demand
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Consumers are Concerned About Food and Transparency
66%Areas of Concern• Getting sick• Chemicals in food/packaging• Pesticide residues• Carcinogens in food• Food additives & ingredients
2016 Food & Health Survey International Food Information Council
CONSUMERS PRIMARILY HOLD FOOD COMPANIESRESPONSIBLE FOR TRANSPARENCY
2015 Consumer Trust Research
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Labeling Poses Risk
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Globalization & IncreasedSupply System Complexity
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• Currently 15-20% of all food consumed in the U.S. is imported, including 85% of seafood, 39% of fruits/nuts
• Major import growth will come from developing countries (Mexico, Brazil, South Africa, India, Thailand & China)
• 80% of imports come from companies that send 11 or fewer shipments per year to the U.S.
Source: USDA, Economic Research Service calculations based on data from U.S. Dept. of Commerce, U.S. Census Bureau, Foreign Trade Database; and USDA National Agricultural Statistics Service, various reports
300 – >200,000 - 150
Imports Will Continue to Increase
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Imports – Challenge Food Safety, Defense andCorporate Reputations
• 10% of all imports to the U.S. are for FDA regulated products
– 212,183 registered foreign food facilities (YE2015)
• FDA inspected 1,323 foreign food facilities in 2014
• 150 different countries (Inspections occurred in 50 countries)
• Nearly 50% come from facilities that send only one shipment per year
• $114 Billion of food imported in 2015
– Less than 2% of shipments inspected
– Over 300 domestic ports of entry
• 90% of seafood comes from outside the U.S.
• Approximately 50% of fruits & fruit juice is imported
• 30% of wine and sugar is imported
• 95% of coffee/cocoa/spices are imported
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Complex Supply Systems Complicate Traceback
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Regulatory Challenges
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Current:• Product labeling, marketing & nutrition facts• Cuts to U.S. Federal Crop Insurance (Farm Bill)• Prop. 65 – changes coming• Affordable Care Act & Overtime Rule Update• Menu labeling • State ballot issues-Minimum wage, soda tax, etc.
FSMA:• Publication of 7 Foundation Rules Completed• Focus on supply system & control• Foreign Supplier Verification Program• HARPC = HACCP+• Sanitary food transport• Enhanced records access• Intentional & economically motivated adulteration
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Enforcement: Inspections and sampling “Dear Manufacturer” letters ‘Voluntary’ recalls Injunctions In rem action / seizure Criminal prosecution by DOJ Park Doctrine: fines and prison time possible
with no mens rea required. United States v. Park, 421 U.S. 658 (1975).
Challenging Regulatory Environment
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Increasing Recalls and Rising Cost
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0
5,000
10,000
15,000
20,000
25,000
0
100
200
300
400
500
600
700
800
# of
Illn
esse
s
# of
Out
brea
ks
Series2 Series1Outbreaks Cases
Hazards in food cause an estimated 48 million illnesses. Roughly translated this means 1 in 6 Americans will develop a food borne illness.
CSPI Outbreak Alert - based on CDC data 2004 - 2013
Contamination Events are Likely
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Contamination Events are Expensive
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Intensified Media Attention
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Social Media Impact
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Financial Impact on Shareholder Value
Winners
Losers
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Sustainability / Corporate Conscience
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2016 Food & Health Survey International Food Information Council
Consumers are Thinking About Sustainability
73%
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The Threat is Real
Sustainability IndexEnergy and Climate: Reduce energy costs and greenhouse gas emissionsMaterial Efficiency: Reduce waste and enhance qualityNatural Resources: High quality, responsibly sourced raw materialsPeople and Community: Responsible & ethical production
Global Water Stress: 2030
Source: OECD24
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Food Waste’s Absurd Cost
Food Supply Chain:Sources of food wastage
1. Agricultural production
2. Postharvest handling & storage
3. Processing4. Distribution5. Consumption6. End of life
Food Life Cycle:Sources of environmental impacts
1.6 billion tons$750 billion
30%
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Science and Technology
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Science & Technology
• Nano Food and Packaging
– Titanium dioxide
– Smart packaging for food safety
• Seed
– Coated
– GMO
• Agricultural Biologicals
– Bio Pesticides
– Bio Herbicides
– Bio Fertilizers
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• Precision Ag
– Precision planting
– Drones
– Cloud based systems
• Chemical
– Herbicides
– Pesticides
– Fertilizer
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Biography
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Chip LerwickManaging Director – Resident Sales Director8182 Maryland Avenue, Suite 1500St. Louis, Missouri 63105Office +1.314.854-0781Mobile [email protected]
Responsibilities
Chip is the Resident Sales Director for Aon St. Louis with responsibility for new business development across all risk and health & benefits solutions. As a member of the Aon St. Louis leadership team, Chip not only supports Producers, Account Executives and Consultants in business development but all colleagues in delivering on our Aon United mission.
Chip has consultative business assessment and solution development skills with particular emphasis in the food and agribusiness industry. With a successful track record of working with food and agribusiness clients in agriculture, livestock production/processing, feed ingredient, food processing and distribution, Chip brings the necessary experience to credibly serve colleagues, prospects and clients in addressing industry needs.
Experience
Chip has 20+ years of experience in business development and sales management working with middle market to Fortune 25 companies with a proven track record delivering results through the alignment of key resources and capabilities to meet business objectives.
Education
Chip earned his Bachelors from Webster University
PersonalChip lives in St. Louis, MO with his wife and two kids. Cycling, skiing, mountains and outdoors are great passions. Chip serves on the Board of Directors for Pedal the Cause and on the Danforth Leadership Council at the Donald Danforth Plant Science Center
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About AonAon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United.
© Aon plc 2017. All rights reserved.
The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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