World’s top beverage brand goes vertical
In the interests of securing an assured supply, it seems big food businesses globally could be moving towards vertical supply chain ownership models, with the US-based Coca-Cola Company recently announcing a US$2 billion investment in orange groves in Florida.
Partnering with citrus companies Cutrale Citrus Juices and Peace River Citrus Products, the Coca-Cola Company says the investment will enable growers to plant 25,000 acres of orange trees.
In the US, the Coca-Cola Company owns two juice brands, Minute Maid and Simply, which offer more than 100 juice varieties between them. The Company says it currently buys nearly a third of oranges grown by Florida groves, and that it will purchase all the fruit from the new groves.
This kind of investment in agriculture from big food business might be the kind cautiously welcomed by the United Nations Food and Agriculture Organisation (UN FAO). In October 2012, a report from the UN FAO, ‘The State of Food and Agriculture’, found that a growth in private investment in agriculture, whether from farmers or business, would be vital to ensure world agricultural production could continue to meet world food needs. But the report also suggested that private investment would need to be carefully managed by Government policy.
An earlier report from the UN FAO in 2009 estimated that an additional investment in agriculture of US$209 billion globally would be needed to meet demand for agricultural products by 2050.
The Coca-Cola Company has played an active role in the Florida citrus industry since purchasing Minute Maid in 1960. Currently, the Company operates 26 facilities in Florida, employing 6,100 people. The Coca-Cola Company says it has invested more than $400 million over the last five years in its operations throughout the State of Florida.
Citing a 25-year study conducted by the Florida Department of Citrus, the Coca-Cola Company said the initiative will add more than 4,100 direct and indirect jobs to the Florida economy.
“Citrus is synonymous with Florida, but the industry has faced many challenges in recent years, particularly the growing threat of citrus greening,” said Adam Putnam, Florida Commissioner of Agriculture. “With Coca-Cola’s generous investment towards 25,000 acres of new orange groves in Central Florida, the citrus industry and our State’s entire economy will benefit,” he said.
In Australia the food sector is arguably dominated by the major supermarkets, rather than brands. However, any long-term investment in agribusiness supply such as dairying or mushroom production now requires a strong and close relationship with a supermarket as well as a long term supply contract from the supermarket.
In April 2013, supermarket group Coles signed long-term milk supply deals with two Australian dairy co-operatives, Murray Goulburn Co-operative Co. Limited (Murray Goulburn) and Norco. Rival Woolworths also announced in March 2013 that it would deal more directly with farmers, signing supply deals with dairy farmers in the Manning Valley in New South Wales.
In 2012, Perfection Fresh entered into mushroom supply investment tied into a long-term Coles supply contract.