For Cargill, India has to be a success story, not just show stopper: Peter van Deursen
In 2017, India made a minuscule contribution to Cargill Inc.’s $110 billion revenue. Yet, the 153-year old American farm-to-food products company has identified India as an “important and growth” market for the future. Its chief executive officer (Asia-Pacific region) Peter van Deursen said in an interview that the country to needs to encourage free trade and embrace technology to live up to the government’s agenda of doubling farmers’ income. Edited excerpts:
Where does India stand in Cargill’s global scheme of things?
India is a very important market for us in the years to come. But we need to have a long-term view on that. Like we have grown in other parts of the world, such as the Americas, or the UK, it takes time to develop a market. India is still early stage. But we are making it strong. I am very positive about the growth prospect of India, but that will not come overnight. For Cargill, India has to be a success story, not just a show stopper.
How do you plan to make India a success story?
Globally, we want to be the leader in nourishing. What we do in other parts of the world, we also do those in this part of the world. But all these markets are different from a diet point of view, from a solution point of view. You cannot copy-paste what you have done in the US, or the UK or any other part of the world. We need to have a base, and do specifically what the consumers want here, what suits them better. Asia-Pacific is an important growth region for us. About 60% of growth population of the world would be in Asia in the next 10-15 years. If you want to nourish the world, how can you not be in this region to live up to that objective? In Asia-Pacific region, China, India and Indonesia are very important for us. To be relevant in this part of the world, you have to be relevant in all these three countries, and have to be profitable in each of these markets.
Why is Cargill’s growth so slow in India?
I worked in Europe, Americas and Turkey. Each market is different. And, in India, one state is different from another. It’s not just a different country, it’s different even within the country. Plus, India is a consumer market. Indians eat at home. So, you need to have consumer products and most of our products are not directly sold to consumers globally. They are sold business to business. This makes it difficult compared to other markets.
But we do have a sizeable business that is consumer through the edible oil portfolio. In India, it is necessary to be closer to consumers to be successful. And for that, you need to advertise, develop awareness, besides having a product portfolio. We do these (advertising, campaigns) more in India than any other part of the world.
At the same time, we have our business-to-business portfolio, which is not visible to consumers. We need to have a good blend of both. Business-to-consumer business for us today is a good base. We are growing there and we are looking at growth opportunities in that space. We also want to bring products like cocoa and chocolates which we believe would be very appealing to consumers. Besides, we are also present in aqua feed, animal feed, protein, nutrition, health and wellness. The challenge is how can I localize and how far we could go. We are actually at the base of how the Indian society evolves across the entire farm-to-fork value chain.
What makes you believe in India as a growth market for future?
Urbanization, a growing middle class and rising disposable income are among the key things. About 80% of middle class growth worldwide is coming from India. Urbanization has its own effect on consumption pattern, and that is directly linked to a company’s growth, which is in the business of food. With rising income, consumers become more conscious and look for things they believe are good for them. And, what we are doing now is we are building the business for future.
What other challenges do you face?
There’s a little bit of hurdle that we’ll have to overcome. While goods and services tax (GST), efforts to create a level-playing field, reaching out to global food standards, ensuring food security, facilitating foreign investments by government authorities are a few encouraging things, there are issues like nationalism, protectionism and trade barriers between countries. It’s not just India, the whole region (Asia-Pacific) is talking about these things. And these limit growth.
Global trade is good and benefits everyone...
India can be very attractive as a base for exports for Cargill, especially for corn-based products. We are looking at exporting to the region, to markets like Pakistan, Thailand, Indonesia, among others. We need the local government to be more supportive. Free trade between countries, coupled with a more competitive environment for exports, will make farming more attractive because of potential exports and that would support the local government’s idea of doubling farmers’ income.
Do you plan to revise your investment plans for India?
We have announced an investment of $240 million over next 2-5 years. Compared to our global investment plans, it is relatively small. In the longer term, this will go up. Every $6 we invest, $1 comes to Asia Pacific region now. Revenue wise, Asia Pacific accounts for about 20% of our global revenue, China accounts for about 30% of the Asia Pacific revenue while Japan accounts for 15-20%. Typically, we invest 80% of our earnings globally, and investments are decided based on potential return. We can’t invest big money if the returns are too small. We’ll increase footprint step by step.
Cargill built its consumer business through acquisitions. Are you looking for fresh acquisitions?
We had a business that needed to grow. We could have built a brand, but that could have taken a much longer time. Acquisition is a shorter route and that worked for us well. We acquired four brands and the effort now is to consolidate those before we look for anything further. Interestingly, what we do in India is actually close to consumer and the distribution supply chain is evolving fast. This is something that we have been learning, and the model can be taken to other parts of the world, especially to markets like China and Brazil.
What’s your view on genetically modified organisms in food space?
We believe everything should be science based. Technology is required to feed the growing old population and you can’t do that unless you leverage technology. Things need to be safe, science-based, fact-based and not emotional. Give consumers the options to choose from. Consumers take the final decision.
Science and technology needs to play a larger role in agriculture. Genetically modified organism is one part of that. Even issues like impact of climate change on agriculture can only be dealt with by using science and technology.