Resource productivity is a critical metric for long-term performance and profitability,
but most companies are working off too little information, says Lux Research
BOSTON, MA – October 28, 2015 – Kellogg and PepsiCo led food and beverage makers, respectively, in efficiency of water use, an important metric for the long-term profitability and sustainability of resource-intensive businesses, according to Lux Research. However, the consumer packaged goods (CPG) sector as a whole needs better information in order to avoid resource risks.
Lux analyzed 4,000 companies and focused on 18 that lead the CPG sector and reported sustainability numbers on variables such as water usage, energy consumption and waste generation. Kellogg generated more than $1,200 of revenue per kiloliter (kL) of water used, compared with an average of $600/kL for all diversified food companies. Diversified beverage companies averaged under $400/kL with PepsiCo the best in its class at about $600/kL.
“Using resource productivity as a new metric for measuring system performance and targeted investments is critical to longer-term profitability in this age of sustainability,” said Ory Zik, Lux Research Vice President of Analytics and a co-author of the report titled, “Scarcity and Materiality: Benchmarking Resource Productivity in Food and Beverage.”
“Converting inputs into energy and water equivalents will help establish baselines and benchmarks, but improved reporting on a more granular level is essential to measure impact from the whole ecosystem and in setting corporate strategy,” he added.
Lux Research analysts evaluated resource efficiency in consumer packaged goods, besides creating a new functional metric to weigh the full impact to the ecosystem in an era of increasing resource scarcity. Among their findings:
- Brewers lag other beverage makers, showing importance of product-level data. Compared to diversified beverage companies at $600/kL, makers of alcoholic beverages realized an even lower $250/kL, led by Heineken at over $300/kL. Different product classes inherently use different amounts of water, making reporting at the business unit or product level necessary for true comparisons.
- Energy usage is another vital metric. Both food and beverage companies average about $12,000 in revenue per megawatt hours (MWh) of electricity used. The best in class in this sector is the J.M. Smucker Co., growing from about $14,000/MWh in 2010 to about $18,000/MWh in 2013 – likely due to infrastructure improvements started in 2010.
- Full risks remain unassessed. Most companies only report partial information on resource use, and may remain unaware of the full risks they face. For example, a beverage company with a water use ratio of 3:1 in its own operations may find its ratio ten times or more higher if it takes the entire supply chain into account, implying much higher risks. Furthermore, because water is such a local issue –the value of a liter of water in California is different than in upstate New York – companies cannot quantify their resource risks unless they use accurate geospatial analytics.
The report, titled “Scarcity and Materiality: Benchmarking Resource Productivity in Food and Beverage,” is part of the Lux Research Food and Nutrition Intelligence and the Water Intelligence services.