|By Marketwired .||
|March 5, 2013 12:01 AM EST||
BOSTON, MA -- (Marketwire) -- 03/05/13 -- Chinese and Indian consumers are living well and eating well. And that could spark a global crisis. The consumer boom in China and India will touch off global inflation and could lead to food and water riots if investment, policy, and technology don't keep pace.
Without smart, quick action by the private sector and government alike, surging Chinese and Indian demand for premium foods will lead to commodity volatility, runaway food prices, and worldwide water shortages as the "boomerang effect" brings the unexpected impact of Asian growth to U.S. shores.
That's the conclusion of research by The Boston Consulting Group (BCG). The main findings are presented in "The Boomerang Effect," a Perspective that is being released today, and "The $10 Trillion Prize: Capturing the Newly Affluent in China and India" (Harvard Business Review Press, October 2012), a recent book by BCG consultants Michael J. Silverstein, Abheek Singhi, Carol Liao, and David C. Michael.
The Perspective is part of BCG's Game-Changing Program to help leaders and their companies capitalize on the opportunities created by the seismic shifts in the global economy.
"Chinese and Indian consumers are celebrating their newfound wealth by eating like Americans: they're shifting their diets from grain to meat," Silverstein said. "Their wealth is a good thing. It creates new markets and new opportunities. But it can also lead to global traumas: highly inflated food prices across the U.S., as well as dangerous worldwide shortages of key natural resources, especially water.
The Boomerang Effect Brings Surprising Outcomes from Asia to the U.S.
"This is an example of what we call the boomerang effect -- a set of hard-to-foresee outcomes that come home to roost as a result of developments far away," Silverstein said. "We have seen it before. In the early 1990s, direct investment in China led to a flood of cheap goods and permanent shifts in the U.S. labor market. This time, it's different. The Chinese and Indian middle-class consumers have developed new food preferences that will lead to hypercompetition for commodities such as feed, corn, and water. Climate change is already creating droughts worldwide and bringing the threat of famine, food riots, and water wars in Asia. This new surge in consumer demand will worsen the strain in Asia and the U.S. as well."
But the boomerang effect doesn't necessarily lead to chaos, Silverstein added. "Crisis can always lead to opportunity. Smart investments and policies can limit the impact of inflation and shortages."
Step by Step: How Changing Food Tastes in China and India Could Spark Crisis
According to BCG, there are only a few steps between booming wealth and changing tastes in China and India and global crisis:
- Wealth -- and consumption -- is skyrocketing in both India and China. By 2020, there will be 2 billion economically able Chinese and Indian consumers -- 1 billion of them new to the middle class. In both nations, lifetime consumption patterns are changing radically. Chinese born in 2009 will consume 38 times more than those born in 1960. Indians born in 2009 will consume 13 times more than those born in 1960.
- Doing well means eating well, and that means eating meat. Consumers in China are celebrating their wealth by abandoning their traditional diets, shifting from grain toward chicken and pork. Chicken and pork accounted for 4 percent of daily calories in China in 1960; by 2020 they could account for as much as 28 percent. The surge in demand is forcing China to become a net importer of chicken and pork.
- For meat, you need livestock. For livestock, you need feed. Feed is in short supply. Demand for chicken and pork means demand for feed grain -- lots of it. It takes 2 kilograms of feed to produce 1 kilogram of chicken and 6 kilograms of feed to produce 1 kilogram of pork. In 2010, 99 percent of China's corn production went for feed -- a figure that also represents 20 percent of global corn production for that year. The result is that China is no longer self-sufficient when it comes to corn. China's corn imports will increase from 1.7 million tons in 2010 to 15 million tons in 2015 -- the equivalent of U.S. exports of 600 million bushels.
- Put a strain on the global feed supply? You're going to pay for it. All the figures above mean that China's corn consumption will have significant global impact, and prices will surge well beyond current levels. Global corn consumption is projected to rise 3.2 percent per year from now through 2020. That means a 40 percent increase in overall consumption. And that means corn prices could increase as much as 57 percent from 2010 through 2020.
- Expensive corn means expensive food -- including here at home. Demand for corn in China drives up beef prices in the U.S. Feed is 55 percent of the cost of raising cattle. And grain is 60 percent of the total cost of feed. So a 57 percent increase in the cost of feed by 2020 could lead to a 20 percent increase in beef prices. That hits home. A Big Mac, which cost about $3 in 2003 and goes for just over $4 today, could, by 2015, easily cost $5 -- or even more.
- There's no meat without feed and no feed without water. To grow feed grain, you need large quantities of water. China's shift to meat consumption leads to a tenfold increase in the need for water. And the water supply is already in crisis. Worldwide, water consumption is already ahead of sustainable supply and is growing at 2.2 percent a year. In China and India (which depends on China for much of its water), water supplies are strained by drought. India could have 600 million people without water in 25 years.
- The water crisis brings it all back home. Water is a problem in the U.S., too. It is becoming difficult to irrigate land there, and a new dust bowl is a real possibility. Water restrictions are already in place in Western states, and the price of water in some U.S. cities is already equivalent to those in Israel. U.S. water riots aren't out of the question. But short of that, scarce water means costlier food. The last dust bowl -- from 1931 through 1936 -- killed off 30 percent of corn production and drove corn prices up 115 percent. Right now, U.S. food exports to China require an 18 percent annual increase in water consumption. Higher corn prices, the result of drought alone -- leaving out other factors -- could double the price of chicken by 2018.
Getting Ahead of the Crisis: Policies Can Help, and Companies Can Prosper
Is the worst-case scenario inevitable? Not necessarily, Silverstein said. "Famine and food riots are a reality in India, and water wars between China and India are a genuine risk. But innovation can help. Smart policy decisions can mitigate the worst effects and create opportunities for companies that are sharp and nimble."
BCG lists the following among the private- and public-sector initiatives that could help:
- Microirrigation that delivers water directly to plant roots could increase the efficiency of water use by 50 percent.
- Innovations in seed technology, including genetically modified organisms, can mean higher food production with no increase in water consumption.
- New policies that price water at market rates, could, said Silverstein, "lead to more efficient water use, as it already has in Israel."
"The boomerang effect doesn't have to end in riots and fewer hamburgers for Americans," Silverstein said.
For more information, please go to www.bcgperspectives.com/10trillionprize.
Follow Michael Silverstein on Twitter @MJSilverstein.
A copy of the report can be downloaded at www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 78 offices in 43 countries. For more information, please visit bcg.com.
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.
The BCG Game-Changing Program
We are living in an age of accelerating change. The old ways are rapidly becoming obsolete and new opportunities are opening up. It is clear that the game is changing. At The Boston Consulting Group, we are optimistic: we think that the fundamental drivers of growth are stronger than they have ever been before. But to capitalize on this trend, leaders need to be proactive, to challenge the status quo, to make bold moves -- they need to change the game, too. The decisions they make now, and over the next ten years, will have an extraordinary and enduring impact on their own fortunes as well as on those of their organizations, the global economy, and society at large. To help leaders, and to mark our fiftieth anniversary, BCG is pulling together the best ideas, insights, and ways to win -- to own the future. This publication is part of that endeavor.
The Boston Consulting Group
Global Media Relations Manager
Tel +1 617 850 3783
Fax +1 617 850 3701
Tintri VM-aware storage is the simplest for virtualized applications and cloud. Organizations including GE, Toyota, United Healthcare, NASA and 6 of the Fortune 15 have said "No to LUNs." With Tintri they manage only virtual machines, in a fraction of the footprint and at far lower cost than conventional storage. Tintri offers the choice of all-flash or hybrid-flash platform, converged or stand-alone structure and any hypervisor. Rather than obsess with storage, leaders focus on the business app...
Feb. 27, 2017 10:15 PM EST Reads: 616
Addteq is one of the top 10 Platinum Atlassian Experts who specialize in DevOps, custom and continuous integration, automation, plugin development, and consulting for midsize and global firms. Addteq firmly believes that automation is essential for successful software releases. Addteq centers its products and services around this fundamentally unique approach to delivering complete software release management solutions. With a combination of Addteq's services and our extensive list of partners,...
Feb. 27, 2017 10:00 PM EST Reads: 1,286
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and sh...
Feb. 27, 2017 09:15 PM EST Reads: 4,168
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
Feb. 27, 2017 08:30 PM EST Reads: 840
Big Data, cloud, analytics, contextual information, wearable tech, sensors, mobility, and WebRTC: together, these advances have created a perfect storm of technologies that are disrupting and transforming classic communications models and ecosystems. In his session at @ThingsExpo, Erik Perotti, Senior Manager of New Ventures on Plantronics’ Innovation team, provided an overview of this technological shift, including associated business and consumer communications impacts, and opportunities it m...
Feb. 27, 2017 08:00 PM EST Reads: 7,959
WebRTC is about the data channel as much as about video and audio conferencing. However, basically all commercial WebRTC applications have been built with a focus on audio and video. The handling of “data” has been limited to text chat and file download – all other data sharing seems to end with screensharing. What is holding back a more intensive use of peer-to-peer data? In her session at @ThingsExpo, Dr Silvia Pfeiffer, WebRTC Applications Team Lead at National ICT Australia, looked at differ...
Feb. 27, 2017 07:45 PM EST Reads: 7,370
For organizations that have amassed large sums of software complexity, taking a microservices approach is the first step toward DevOps and continuous improvement / development. Integrating system-level analysis with microservices makes it easier to change and add functionality to applications at any time without the increase of risk. Before you start big transformation projects or a cloud migration, make sure these changes won’t take down your entire organization.
Feb. 27, 2017 07:45 PM EST Reads: 1,614
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
Feb. 27, 2017 07:30 PM EST Reads: 2,258
SYS-CON Events announced today that IoT Now has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
Feb. 27, 2017 07:15 PM EST Reads: 1,975
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, discussed the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports.
Feb. 27, 2017 07:00 PM EST Reads: 2,600
SYS-CON Events announced today that WineSOFT will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Based in Seoul and Irvine, WineSOFT is an innovative software house focusing on internet infrastructure solutions. The venture started as a bootstrap start-up in 2010 by focusing on making the internet faster and more powerful. WineSOFT’s knowledge is based on the expertise of TCP/IP, VPN, SSL, peer-to-peer, mob...
Feb. 27, 2017 07:00 PM EST Reads: 2,203
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain.
Feb. 27, 2017 06:45 PM EST Reads: 2,253
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
Feb. 27, 2017 06:30 PM EST Reads: 2,137
Have you ever noticed how some IT people seem to lead successful, rewarding, and satisfying lives and careers, while others struggle? IT author and speaker Don Crawley uncovered the five principles that successful IT people use to build satisfying lives and careers and he shares them in this fast-paced, thought-provoking webinar. You'll learn the importance of striking a balance with technical skills and people skills, challenge your pre-existing ideas about IT customer service, and gain new in...
Feb. 27, 2017 06:15 PM EST Reads: 521
WebRTC sits at the intersection between VoIP and the Web. As such, it poses some interesting challenges for those developing services on top of it, but also for those who need to test and monitor these services. In his session at WebRTC Summit, Tsahi Levent-Levi, co-founder of testRTC, reviewed the various challenges posed by WebRTC when it comes to testing and monitoring and on ways to overcome them.
Feb. 27, 2017 06:15 PM EST Reads: 8,314