US markets moving away from antibiotics; our thesis remains intact. In our October 5, 2015, report Antibiotics and Animal Health: Value-Chain Implications in the US, we posited that consumer demand could push food supply chain companies to phase out antibiotics beyond the level required by FDA guidelines. We are seeing this play out as a growing number of producers, restaurants, and supermarkets announce antibiotic policies that are more restrictive than US regulatory guidelines. We believe these actions are accelerating the move away from antibiotics in US markets.

Weak US antibiotic sales evident in Phibro’s earnings. We previously highlighted stand-alone animal health company Phibro Animal Health as a gauge for how this theme is progressing. In its most recent quarter (fiscal 4Q16), Phibro reported that sales of medicated feed additives (MFAs—which contain antibiotics) increased 3%. The increase came after reporting declines in three of the last four quarters. If not for modest growth in the international market, the declines in the US market would be more readily observed. The company also expects MFAs to see a stable to single-digit decline in 2017 versus the prior year. In contrast, Phibro highlighted continued double-digit growth for nutritional specialties and vaccine products that we previously identified as antibiotic alternatives.

Sanderson Farms’ antibiotic policy pushes back on consumer and industry trends. In assessing poultry producers’ antibiotics use policies, we highlighted Perdue Farms (private company) as a leading performer and Sanderson as lagging. Sanderson does not believe the antibiotic-free (ABF) movement is grounded in proper science and ethics, and believes competitors’ efforts are a marketing gimmick aimed at charging higher prices. To this end, the company designed a marketing campaign against ABF chicken at a cost of $2.5 million per month through at least the end of 2016. While Sanderson’s view about strict ABF policies compromising animal welfare is worthy of examination, we question the company’s strategy to combat shifting consumer demand. We believe CEO Joe Sanderson is also hedging his bet by suggesting that the company could transition away from antibiotics quickly. It took Perdue roughly a decade to transition about half of its chickens to “no antibiotics ever,” so we believe Sanderson’s view is overly optimistic.

Growth opportunities in nutritional feed additives and vaccines. Recent company announcements reinforce our view that specialty and nutritional feed additives as well as vaccines have significant potential for growth. Pilgrim’s Pride said that it is working closely with a large agri-bio firm to develop customized probiotics for its chickens. Citing the promising long term outlook for animal health probiotics, Chr Hansen will continue to expand its presence in this area despite near-term headwinds related to the depressed agricultural sector. In July 2016, Evonik acquired the probiotics business of private Spanish feed ingredients company Norel. Evonik believes probiotics will be critical components of a line-up of possible antibiotic alternatives. As aforementioned, Phibro believes it is well positioned to benefit from adding vaccines and nutritional specialties to its product portfolio, and expects continued double-digit growth for these product lines.

Lastly, on September 21, the United Nations confirmed its Global Action Plan on Antimicrobial Resistance. This is only the fourth time a health issue has been taken up by the UN General Assembly (the others were HIV, non-communicable diseases, such as strokes and heart attacks caused by obesity or smoking, and Ebola). The Plan cites the need for ‘effective and enforceable regulation…for antimicrobial medicines in human and animal health.’ We see this Action Plan as a potential catalyst for antibiotic regulation in other major meat-producing companies, and are watching key markets (Brazil, China, and Australia) closely.

Download our report, including important disclosures, here.

Michael Shavel is a Global Thematic Research Analyst at Cornerstone Capital Group. Prior to joining the firm, Michael was a Research Analyst on the Global Growth and Thematic team at Alliance Bernstein. He holds a B.S. in Finance from Rutgers University and is a CFA Charterholder.




With $218 billion spent annually on food that is not eaten, great potential exists to invest today in methods that will pay off by eliminating tomorrow’s losses.

In 2015 Betsy and Jesse Fink, through the support of the Fink Family Foundation and over a dozen other foundations, helped launch a new nonprofit initiative, ReThinking Food Waste through Economics and Data (ReFED). ReFED recently published a monumental new report on food waste, spearheaded by impact investment firm MissionPoint Partners with analysis led by Deloitte and Resource Recycling Systems (RRS). A Roadmap to Reduce U.S. Food Waste by 20 Percent defines the investment potential for the most promising solutions to reduce wasted food; it is available for download along with Key Insights and a Technical Appendix at

The Solutions

The Roadmap’s economic model evaluates and ranks 27 solutions for two essential qualities: diversion potential and potential to create “economic value,” defined as the aggregate financial benefit to society (consumers, businesses, governments, and other stakeholders) minus all investment and costs. Solutions generally fall into one of three categories: prevention, recovery for human consumption, or recycling. Top Roadmap solutions include:

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Pound for pound, prevention presents the highest return on investment and benefit, avoiding 2.6 million tons while generating an annual $8 billion of system economic value. Recovery approaches such as donation-matching software, donation tax incentives and safe donation regulation can create $2.4 billion in economic value every year. Composting and anaerobic digestion can capture a whopping 9.5 million tons from major metro regions alone, with system economic value estimated at an annual $121 million.

While the system economics of recycling solutions are not as competitive on a per-ton basis as seen in the cost curve, the economics for individual recycling facilities can be very profitable. In-sink grinders in households, in addition to other onsite solutions, in large metropolitan statistical areas may take advantage of existing wastewater recovery infrastructure and show potential to divert 1.6 million tons annually.

ReFED’s Marginal Food Waste Abatement Curve

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Source: ReFED Roadmap to Reduce U.S. Food Waste by 20 Percent (

Non-Financial impacts

Benefits like greenhouse gas (GHG) abatement, job creation and resource conservation provide indirect financial benefits. Roadmap solutions abate
18 million tons carbon dioxide equivalent (CO2e), valued at $1 billion ̶ $4 billion.[1] The creation of 15,000 direct jobs, mostly related to recycling and recovery, supports a circular economy and yields significant direct, indirect and induced economic impacts.

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Altogether, Roadmap solutions will demand $18 billion to reduce food waste by 20% over the next decade. These investments will also generate over Financing the Roadmap

$100 billion in economic value to society. This investment will only be made by mobilizing and deploying market-rate, government, and philanthropic capital needed and ensuring it’s channeled to prioritized investments. ReFED calls for the formation of impact investment funds with the sole focus of aggregating funding sources, de-risking new innovations and alleviating barriers standing in the way of projects that have yet to attract capital.

Prevention solutions require primarily self-funded corporate financing, potentially with support from private equity and impact investment that can act to lower internal hurdle rates. Consumer education campaigns and standardizing date labeling, as well as many recovery practices, rely far more heavily on the support of public and philanthropic grants for additional investment. Recovery solutions are in need of nearly $9 billion in investment to return $24 billion over a decade. The biggest opportunity exists for donation tax incentives, with other recovery solutions being best-suited for philanthropic investments through grants and impact investment. Recycling solutions will require a diverse range of financing; capital-intensive projects such as composting and anaerobic digestion frequently rely on private project and corporate finance or private equity, but also look to public dollars in the form of government subsidies, tax incentives and public project finance and grants in order to reduce risk.

Sources of Financing

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Source: ReFED Roadmap to Reduce U.S. Food Waste by 20 Percent (

An Investment in our Future

ReFED’s goal of a 20% (13 million ton) reduction in the short term as part of a larger US goal of 50% (32M tons) by 2030 requires prioritization, time and brainpower. ReFED has specifically called out four critical tools necessary to achieve the Roadmap vision: 1) the right types of Financing, 2) Policy at the municipal, state and federal levels, 3) technological and business model Innovation, and 4) Education for employees and consumers. Two things stand out if this effort is to be successful. First, a general awareness of the benefits and costs should clarify the value of action. Second, the most important outcomes close the loop between food waste and feeding the world — whether preventing waste in the first place, feeding more people through enhanced donation and recovery infrastructure, or creating new fertility-enhancing soil amendments — the end result is the same. We improve the ability of our food systems to feed the world.

JD Lindeberg is President and CFO of Resource Recycling Systems Inc., in Ann Arbor, MI, which consults with government entities, universities, hospitals and private businesses on their recycling programs and materials use.

[1] EPA estimate is $10-55/ton GHG. 2016 paper in Nature Climate Change by Stanford’s Moore and Diaz estimates $220/ton GHG.