José Lopez
Executive Vice President
Operations, Nestlé S.A.

CHF 107.7 billion in sales make us the leading food, nutrition, health and wellness company in the world. Sales growth in 2007 alone was CHF 9.1 billion which is more than sale of many companies in the top thirty global food players. To achieve these numbers, around one billion consumers decide to buy our products every day.

One of the reasons for these positive results is the transformation of this company from an agro-industry into a research and development based nutrition health and wellness company. The second reason is the operational transformation, as often mentioned by our Chairman Mr Brabeck, changing the supertanker into an agile fleet of independent ships. With this we have shaped the company for the challenges of the 21st century.

But transformation is not a one-time shot; we have to constantly adapt to new situations. And when you accelerate a company the way we do, you must look beyond the next few years. This concerns the positioning of the company in the future as well as the analysis of potential risks. And as a leader, we do not just analyze risk, we also do something about it. This is particularly true for the global water shortage, no doubt one of our most important and most complex challenges in the years to come.

As Executive Vice President of Operations, my responsibilities take me across the totality of our value chain. Responsible for sourcing raw materials worth about CHF 20 billion in 2007, we concentrate our efforts on understanding the key drivers of milk, coffee and cocoa. Our spend in cereals, which increased from about CHF 1 billion in 2005 to about CHF 2 billion  in 2008, due to product mix change and higher cereal prices, remains marginal in a total market estimated at USD 600 billion.

The scope of my duties also covers our 480 factories in 86 countries, many of them in rural areas where our presence is an essential component of local economies. I am also responsible for the supply chain, highly sensitive to the challenges being discussed here today. I am therefore honored to form part of this highly qualified panel on the subject of  “What Role for Biofuels”.

There is no doubt that we have to reduce the consumption of fossil fuels; there are many ways. First, by being more efficient and avoiding waste, also by transforming biomass into energy and using other alternative sources such as wind, solar and geothermic energy; strengthening research in nuclear again for even safer fission and maybe one day fusion energy. Increasing energy prices are raising hopes to see renewable sources reaching their economic justification, and as a businessman I am personally optimistic of future trends.

But we should avoid oversimplification. There are two parts to the word 'biofuel'. “Bio” (or “Agro” as translated in French language “Agrocarburants”), and “fuel”. Each one of these two particles behave differently according to their specific effect on economic, environmental, political and social conditions. My view is that to achieve the right balance among all these complex issues we need to use water as the revealing fluid that will create the necessary contrast in dealing with such complexities.

Let me quickly propose some facts and figures on how energy, food and water are interconnected. For a start, there are a number of links between water and energy. For example, let’s look at desalination and biofuels. Depending on the technology, we need between 2.5 and 25 liters of oil to produce 10m3 of fresh water. Another link with biofuels is to say that farmers will have to withdraw 1 liter of water to grow 1 calorie. If food is being converted into fuel then 10m3  of fresh water will be about just enough to grow the food used for producing between 1 and 5 liters of biofuel or ethanol. This may be of little concern for somebody living in some parts of Western Europe, but it is no longer regions with abundant rains that have set ambitious targets for biofuels, it is the USA, China and India and in a number of these countries water shortage is already a very serious issue.

So, in 2008 some people are simultaneously transforming energy into fresh water and others use large amounts of water to produce energy. But the most important point is that in Europe, and here I talk mainly about southern Europe, water for irrigation is more or less supplied for free, often subsidized.

Among the many losers of present biofuel policies and subsidies:

- the environment
- basic food supply, especially for the poor

In conclusion, the complexities linked to both components of “biofuel” lead to continuous trade-offs and compromises. There is a good reason to believe that the weakest are damaged most. Ultimately water and food are more valuable than energy.

What Role for Biofuels ? The question holds the answer. An uncertain role.