CONSUMER DEMAND IN A TIME OF WATER SCARCITYJILL WYANTExecutive Vice President & President, ECOLAB Global Food & Beverage

24 June 2015

Water Crisis Making Headlines

167 Gallons of Water

=

55 Gallons of Water =

39,090 Gallons of Water =

450 Gallons of Water =

700 Gallons of Water =

13 Gallons of Water =

Increased Attention on Water Needed to Produce Everyday Products

Macro Trends Influencing Consumer Behavior

AGING POPULATION

GROWING MIDDLE CLASS

POPULATION GROWTH

RISE OF THE MILLENNIAL CONSUMER

50% MORE PEOPLE by 2050, with most growth in emerging markets

in EMEA, Japan,and China will shift CONSUMER BEHAVIOR; Drive HEALTHCARE

More DISPOSABLE INCOME, more meals away from home

Socially-conscious, less BRAND-LOYAL

$ $$$$$

45% MORE ENERGY 50% MORE FOOD

30% MORE WATER

By 2030 the World Will Need:

2.5%= FRESH WATER

glaciers, ice capsgroundwaterlakes, rivers,

ice/snow

1.72%

.75%

.03%

97.5%= SALT WATER

vs.

Of the earth’s water supply:

Water Inventory

Source: World Water Assessment Programme

20%Industry

10%Domestic

70%Agriculture

Industry is the Second-Largest Fresh Water Consumer

In 2014, the global water crisis rose to a top-three business risk for impact and likelihood

70% of companies surveyed identify water as a substantive business risk

US-based Fortune 500 companies:Global Water Crisis impact upon

80%

60%

affects their decisions on where to locate facilities

affects business growth and profitability within five years

face potential physical challenges

face reputational risks

94%

69%

Business Impact

SOURCES: World Economic Forum2013 CDP Water Report

Bridging Concern with Action: Are US Companies Prepared for Looming Water Challenges?, Pacific Institute and VOX Global 2014 survey of US-based Fortune 500 companies

By 2020, safely return to communities and nature an amount of water equal to what is used in finished beverages and their production

Committed to “zero-discharge” operations as a critical part of a long-term target to build a resource-saving and no-emission management enterprise

Intends to cut water use per pound of product by 20% by 2020, compared to a 2008 baseline

Cut total water intake by 30% by 2020, compared to 2010 baseline

Aims to reduce direct water withdrawal per ton of product by 40% by 2015, compared to 2005 baseline

Goal to reduce water consumption per guest night by 25% by 2020, 30% in water-stressed areas

Further reduce water consumption 20 percent per occupied room by 2020 from a 2007 baseline

Water-use-per-vehicle reduction goal of 30% from 2009 to 2015

2015 goal to improve freshwater efficiency by 5%

2020 target to reduce water intensity by 15% from 2011 levels

20% reduction in fresh water use by 2015, compared with 2006

15% improvement in water use by 2015 as compared to 2011

The Most Forward-Looking Companies Have Aggressive Water Goals

REPUTATIONAL CONSIDERATIONS& Consumer Demand

REGULATORY CHANGES/ INFLUENCES

INNOVATIONLack of water leading to new, effective technology

We’re in 1 Million Customer Locations Across Industries and Geographies

Case Study #1

A range of innovative solutions to help PepsiCo increase its operational water use efficiency.

The savings captured by our solutions add up:

DRYEXXTM

DRY CONVEYOR LUBRICANT

ADVANTISTM

CLEAN-IN-PLACE PROGRAM

3D TRASARTM

COOLING WATER TECHNOLOGY

WATER SAVED WATER USEDsaved in conveyor

lubrication annually at bottling plants

in clean-in-place per year at onePepsiCo plant.

24milliongallons

WATER USED

REDUCE BY

REDUCE UP TO

MORE THAN

175milliongallons

45%

Water Conservation

Case Study #2

Ecolab innovation helped dairy achieve consistent Clean-in-Place performance — and consistently high quality milk

“The safety and quality of our products – as well as our

reputation – are at stake. We always look for ways to

operate more efficiently, but never at the cost of

safety and quality.”

-- Roger Domask, Operations Manager, Kemps Rochester plant

REDUCED WATER CONSUMPTION FOR

CLEANING

REDUCED CLEANING TIME

PRODUCT QUALITY IMPROVEMENT

IMPROVED AVERAGE PASSING

SAVEDCONSERVED

Water Conservation

963,750 gallons of water

1,295 hours

cleaning time

1 point from 2013 to 2014

• Water is inexpensive

• Not yet personal

• Lack of demand for water-saving innovations

Challenges for Change

Water is Undervalued:Prices inverse to risk

Chengdu$0.33

Amsterdam$3.42

Barcelona$3.04

Istanbul$2.04

Addis Ababa$0.15

Johannesburg$0.54

Rio de Janeiro$1.10

Sao Paulo$0.89

Chicago$0.88

Los Angeles$1.85

Dallas$0.79

Monterey$0.88

Mumbai$0.28

Beijing$0.59

Seoul$0.58

Phnom Penh$0.16

Shanghai$0.31

Sydney$2.76

Sources: Aqueduct, WRI, GWI

Water Scarcity Puts Most of the World’s Biggest Economies at Risk

Chicago

Top 10 Largest Populations

Top 10 Fastest Growing Economies

Top 10 Biggest Economies

Cities experiencing water scarcity or current drought

Los Angeles

Mexico City

Rio de Janeiro

Sao Paulo

New York

London Paris

Istanbul

Lagos

Cairo

Mumbai

Delhi

Beijing

Seoul

Tokyo

Shanghai

Osaka

Guangzhou

Sources: Aqueduct, WRI, GWI

Scarcity Impacts: Financial Implications to Business

Revenue X

Cost of Goods Sold X

Operating Profit X

Operating Expenses X

Depreciation X

Ebit X

Interest X

Tax X

Profit After Tax X

Water scarcity increases the cost

of water, which reduces profit

margins.

Water scarcity limits availability of water, leading

to decreased production and loss in revenue.

33 corporations publicly disclosed to investors that water scarcity threatens 1−6% of their annual revenue

1.70%

2.49%

5.74%

5.00%

4.10%

1.80%2.15%

5.88%

0.75% 0.78%

CDP Disclosed Revenue at Risk (2014)

CONSUMER DISCRETIONARY

CONSUMER STAPLES

ENERGY

FINANCIALS

HEALTHCARE

INDUSTRIALS

INFORMATIONTECHNOLOGY

MATERIALS

TELECOMSERVICES

UTILITIES

Impacting Revenue & Profits

saw a in its California-based carrot division profits in early 2015 due in part to drought followed by intense rains

28% drop

U.S. Based Meals Company

Global Agriculture Producerreported a in 2014 Q4 profits as a drought in the U.S. damaged pastures used to raise beef

12% drop

North American Food Companyintroduced an on coffee packs in early 2015 to offset impact of Brazil drought

8% priceincrease estimated that

natural disasters linked to a changing climate cost the company around $400 million annually

Consumer Packaged Goods Manufacturer

Australian Agribusinessreported a 64% drop in 2014 profits due to a prolonged drought• cut grain deliveries by 23%• nearly halved grain exports

on the development of an $81 million bottling plant in Southern India in April 2015 due to resistance from local farmers who cited concerns about strains on local groundwater supplies

decided not to move forwardFortune 500 Beverage Company

Source: Ceres 2015

Introducing a New Way to Factor Water Risks into Business Decisions

Assess Understand Quantify Calculatewater scarcity

risks at site and/or enterprise level

the full value of water to your

business

water risks in financial terms

that make business sense

potential revenue at risk

Actionable quantification of water-related risks in financial terms

Informs efforts to assess and manage water risk

From Operations at Risk to Risk Mitigation

The Solution

Water required > water share = potential revenue at risk

Market price + water risk premium= risk-adjusted water price

The Challenge

Water price does not reflect its full value

Water scarcity makes it harder to access water necessary to operate

Business Implications

Reduced profit margins

Decreased production & loss in revenue

BUSINESS OUTCOME

$

Visibility into Operational Risks

Beverage plant water usage = 5,353,591

Water Cost

Risk Adjusted Water Cost

Potential Revenue at Risk

Likelihood of Revenue Loss

$

LOS ANGELES

RIO

MUMBAI$1.85

$1.11

$.17

$.31

$ $6.33

$ $5.59

$ $4.65

$ $4.79

37%

<1%

96%

17%

BEIJINGLOW

HIGH

MODERATE

MODERATE

INCORPORATE a risk-adjusted cost of water and potential revenue loss into analysis

MAKE THE CASE for proactive water management strategies

IDENTIFY operations/locations at greatest risk

MONETIZE rate of return for water management improvement projects

SELECT where and how to increase production or meet demand in new regions

Use the Water Risk Monetizer to:

Inside a Food & Beverage Processing PlantTurning Information Into Action

Water Impacts the Total Plant

REPURPOSE | REUSE | REDUCE

COOLING SYSTEM EFFLUENT

BOILERWASTEWATER

PLANT PROCESSSOFTENERFILTRATION

INFLUENT

REVERSE OSMOSIS

Complex Connections Across Operations

Original w/6 areas

METERING/MONITORINGTrack water and analyze usage trends. Place water meters on total plant water, critical systems and top 10 consumers of water.

EQUIPMENTSHUTOFFLOST WATER

Water left running while equipment is not, can result in a significant

amount of wasted water

Steam Trap Leak 1/8” at 100 psig =

LEAK PREVENTION

55,460GALLONSof lost condensate

of STEAM TRAPS

fail if not regularly

maintained

15-30%

Opportunities to repurpose water exist throughout the plant:

• once-through systems • collecting homogenized cooling

water• treated plant effluent water

WATERREPURPOSING

CIP OPTIMIZATION

Clean-in-Place Systems account for 20-40% of total water usage in a food or beverage facility.

To optimize CIP systems:• use burst rinsing • utilize rinse recovery• prevent excess rinses

Save up to

30%

UTILITY SYSTEM OPTIMIZATION

Reduction Strategies:

• Increase cooling and boiler water cycles

• Maximize condensate return

• Maintain steam traps

Recycle/Reuse Strategies:

• Re-use production water as boiler & cooling water makeup

• Eliminate once through cooling water on the air compressors/pump seal water with recirculating cooling water    

• Use case washing and homogenizer water as cooling water makeup

WATER

with the 3DTRASARTM

Platform

INFLUENT

REVERSE OSMOSIS

PLANT PROCESSBOILER

SOFTENERFILTRATION

COOLING SYSTEM

WASTEWATER

EFFLUENT

Average*SAVINGS

143,173 m³

226 tons

37,257 GJ

TOTAL$726,663

Averages based on Total Plant Assessments conducted and implemented at 45 food and beverage manufacturing and processing facilities. 

Water Reduction Strategies Can Uncover Huge Savings Opportunities

What is the Value of Water To Your Business?

The Business Questions

?

?

What are the most pressing business risks due to water scarcity?

What strategies are in place to ensure access to the water needed to operate?

Are global growth projections reasonable given water scarcity?

What actions are being taken to reach water reduction goals? How can supplier partnerships help in meeting these goals??

?

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LEARN MORE

• Stop by our I-Zone booth for a demo• Talk to our water experts• Visit us at ecolab.com or

WaterRiskMonetizer.com

Bringing unlimited resourcefulness to the challenge of limited resources.

For more information, visit www.Ecolab.com.