Bunge Jumps in to Pakistan, India, China

Bunge, the third biggest US agribusiness company after Archer-Daniel-Midland and Cargill, is buying Chicago-based Corn Products International Inc. for $4.2 billion in stock to add corn-based sweeteners as demand increases for soft drinks and processed foods in China, India and Pakistan, according to US media reports. This acquisition enlarges Bunge's international footprint in emerging economies to drive its growth.

Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Credit Suisse analyst Robert Moskow said in a note on this deal. Corn sweeteners are used in soft drinks and processed foods instead of traditional cane or beet sugar because of their lower cost and higher concentration. A single 12-ounce can of soda has as much as 13 teaspoons of sugar in the form of high fructose corn syrup, according to San Francisco Chronicle. China, India and Pakistan have all seen double digit annual growth in consumption of soft drinks and processed foods for several years. Last year, PepsiCo growth in US and Europe was less than 3% but PepsiCo International sales were up 22%, an impressive increase fueled by double-digit growth in China, Russia, Pakistan and the Middle East.

According to the Wall Street Journal, corn and soybeans are the two biggest crops grown in North America and the two companies already are selling ingredients to many of the same players in the food and brewing industries. For Bunge, the combination will give it a bigger presence in several developing countries where a growing middle class is demanding more Western-style foods. Corn Products has extensive corn milling operations throughout South America. The company also operates in Mexico, Pakistan, South Korea and Thailand, among other places.

Corn Products was established in 1906 through a combination of U.S. corn-refining companies. The company processes corn in South America and has operations in Asia and Africa. In April, the company said first-quarter profit advanced 29 percent to $64.3 million, according to Bloomberg.

Processed foods and soft drink companies are often blamed in the United States for dramatic increases in obesity and diabetes, particularly among children. Some even accuse them of being merchants of death, not unlike the big tobacco companies. Many health experts argue that the issue is bigger than more calories. The theory goes like this: The body processes the fructose in high fructose corn syrup differently than it does old-fashioned cane or beet sugar, which in turn alters the way metabolic-regulating hormones function. It also forces the liver to kick more fat out into the bloodstream leading to heart disease.

While the presence and growth of Bunge, Pepsi and other food giants are likely to create more jobs in emerging economies such as India and Pakistan, the price for this opportunity is likely to be the danger of greater health problems associated with fats and corn sweeteners in processed foods and soft drinks.

Similar or even greater health threats are coming from the major expansion of tobacco giant Philip Morris in emerging economies. As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal. Philip Morris is currently building a major new plant in Pakistan.

Globalization offers many benefits, including access to good jobs and better living conditions in the emerging economies. However, globalization also brings with it all the ills that have been witnessed in the West, including environmental deterioration and life-style diseases such as diabetes, heart-disease, various forms of cancer etc. The challenge for Pakistan, and other countries like it, is to learn from the mistakes of the West. Instead of just repeating such mistakes, Pakistan, India and China must find ways to extract the benefits while minimizing the cost of modernization.

Comments

Riaz Haq said…
Here's an excerpt from CBS 60 Minutes story on Givaudan, the largest flavoring company in the world:


When you chug a sports drink or chew a stick of gum, you probably don't think of science. But there is a precise science - and a delicate art - behind what you're tasting. Morley Safer reports on the multibillion dollar flavor industry, whose scientists create natural and artificial flavorings that make your mouth water and keep you coming back for more.

The following is a script of "The Flavorists" which aired on Nov. 27, 2011. Morley Safer is correspondent, Ruth Streeter, producer.

As the Thanksgiving weekend comes to a close, you may feel as overstuffed as that turkey you ate. And if you're overweight - and the chances are, you are, it's probably because you eat too much, too much of the wrong stuff. Most of the wrong stuff we eat comes in a bottle, a can, or a box - food that's been processed - much of that food has been flavored.

The flavoring industry is the enabler of the food processing business - which depends on it to create a craving for everything from soda pop to chicken soup. It is Willy Wonka and his chocolate factory as a multibillion dollar industry; an industry cloaked in secrecy. But recently Givaudan, the largest flavoring company in the world, allowed us in to see them work their magic.

[Jim Hassel: So definitely an aroma, the mandarin, dancy tangerine. Real mild though. Not in your face.]

These are "super sniffers," "super tasters"...

[Andy Daniher: And more bitter.]

...on the prowl. The special forces - first responders to the call for the next best taste.

[Andy Daniher: The mandarin notes are fantastic.]

They are braving the wilds of a citrus grove in Riverside, California, where Jim Hassel - whose nose and palette are legendary - leads a Givaudan team on a taste safari. Big game hunters in search of the next great taste in soft drinks. Their inspiration? The greatest flavorist of them all: Mother Nature.

Jim Hassel: Seeing everything that's available really just drives the whole creative process.

Morley Safer: Like an artist going to Rome or something?

Hassel: Correct. Correct.

Safer: But the ultimate purpose is to sell more soft drinks or whatever?

Hassel: That's what we're in the business of, selling flavors....

http://www.cbsnews.com/8301-18560_162-57330816/the-flavorists-tweaking-tastes-and-creating-cravings/?tag=currentVideoInfo;videoMetaInfo
Riaz Haq said…
Here's a Business Recorder report on Philip Morris in Pakistan:

Amongst the two multinational tobacco companies in Pakistan, Philip Morris Pakistan Limited (formerly known as Lakson Tobacco) stands at number two to Pakistan Tobacco Company.

Philip Morris Pakistan Limited is a public listed company on the Karachi and Lahore Stock Exchanges and is an affiliate of Philip Morris International Inc (PMI).

The company is involved in the manufacture and sale of cigarettes for Pakistan's domestic market.

It currently operates three cigarette factories with primary and secondary facilities and one tobacco leaf threshing plant, all located in various parts of the country.

It also runs an extensive tobacco leaf agronomy program in the tobacco growing areas of Khyber Pakhtoonkhwa.

The company is also involved in CSR where it is engaged in undertaking various initiatives in the education, environmental sustainability and disaster relief sectors to give back to the community it operates in.

Brand Portfolio Philip Morris Pakistan has a portfolio of ten brands for the domestic market.

Of the main ones, it markets and sells both international brands like Marlboro and Red & White, and locally owned brands like Morven Gold, Diplomat, K2.

Highlights 2011 has been a challenging year for Philip Morris so far like the rest of the FMCGs due to the weakening economic situation fuelled by power crisis and rising inflation.

Moreover, the performance of the company is highly affected by the illicit cigarette market that accounts for almost a 20 to 25 percent market share.

The detrimental impact of the non-tax paid industry extends to not only the company but to the legitimate industry as a whole and also the government as it reduces government revenue.

Being a cigarette manufacturer and importer, the company has high taxes and duties expenditure.

The company's sales tax and excise duty as a percentage of its gross turnover for the 9MCY11 stood at a little above 61 percent as compared to 60 percent same period CY10.

The company saw weaker sales of 2,847 million cigarettes mainly attributed to the adverse impact of the non-tax paid tobacco industry.

Overall, compared to 9MCY10, the nine months ending September CY11 has shown declined profitability.

Its contribution to the national exchequer went down from 16,330 for 9MCY10 to 16,178 million for 9MCY11.

The company faces tough competition from not only the unaccounted for sector but also its peer and the biggest rival in the industry, Pakistan Tobacco Company, an associate of British American Tobacco Company

Profitability Gross turnover experienced a decline of 3.9 percent from Rs 25.7 billion for 9MCY10 to Rs 24.7 billion in 9MCY11.

The decline in gross revenue is not only due to the tough economic environment, high government taxes and illicit trade but also due to the successful launch by PTC of its brand, Capstan which alone has a market share of 14 percent.

Though the sales tax and excise duty were considerably less for the nine months CY11, the gross profit was seriously injured by a surge in the cost of sales by 9.8 percent for the 9MCY11 compared to the same period CY10.

This is mainly because of rising energy costs, security related expenses and high inflation.

GP margins had a steep decline to 23.7 percent for the 9 months of 2011 compared to 35.5 percent for same period CY10.

As if to compensate to some extent, the distribution and marketing expenses demonstrated a fall of approximately 12 percent for periods in comparison.

The company recorded a loss after tax of Rs 284 million with an NP margin of -2.8 percent compared to the profit after tax Rs 767 million for the same period in 2010.

This was primarily due to an increase in the finance costs by approximately 270 percent.....


http://www.brecorder.com/component/news/single/592/0/1260461/

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