Efficient water use | Alcoholic drink manufacturer Diageo Plc. is pleased the root can be sourced locally
SYDNEY, Australia (Reuters) — Wine and beer lovers face an uncertain future.
Climate change is a distant consideration for many global businesses, but grapes and grains are on the front line.
The good news for those who like a tipple is that alcoholic drink makers are among businesses leading the way in devising technology to mitigate and adapt to climate change.
Gradual paucity of water for grapevines and barley is high on the agenda of companies, including the world’s second-largest listed vintner by market value, Treasury Wine Estates Ltd., and the world’s biggest alcoholic drink maker, Diageo Plc.
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“It’s something we are focused on,” said Stuart McNab, Treasury’s chief supply officer.
“It’s treating water as a scarce and precious resource.”
Alcoholic drink makers have faced drought and water shortages in recent years in the United States, Britain and Africa and both drought and flooding in Australia.
Treasury, whose brands include Penfolds, Beringer, Wolf Blass and Rosebank, is testing watering pipes laid beneath the soil because rising temperatures mean too much water is lost above ground through evaporation.
The Commonwealth Scientific and Industrial Research Organization (CSIRO) projects an increase of .3 to 1.7 C by 2030 in Australia’s wine regions, including the Barossa where Treasury is trying out the irrigation technology.
The increase is likely to reduce grape quality by 12 to 57 percent, according to CSIRO.
Diageo is also focused on water efficiency, with 23 of its global sites located in areas that it classifies as water-stressed, or where demand for water exceeds the amount that is available.
Thirteen of those sites are in Africa, where Diageo is looking at new ingredients that require less water to brew beer.
Diageo, which generates 20 percent of sales from beer, launched a brew in Ghana in 2012 made from cassava, a potato-like root plant that needs less water than traditional beer crops.
SABMiller PLC, the world’s second largest brewer, started using cassava after overcoming rotting with a mobile processing plant.
“For us, this hits all of our sweet spots in terms of getting a great product to market,” said David Cutter, Diageo’s president of global supply and procurement.
“It increases our raw material sourcing locally and we are looking at doing that more and more across Africa.”
The London-based drink maker aims to improve its water efficiency by 30 percent from 2007 levels by next year. The company’s annual report for the 2014 financial year showed it uses 6.9 litres of water to produce one litre of packaged product.
In Australia, Diageo manages just 1.1 litres of water per litre of packaged product and is looking to replicate that elsewhere.
Yalumba Wine Co. recently won the most recognized Australian industry award for climate change adaptation.
The National Climate Change Adaptation Research Facility, which works with CSIRO, cited Yalumba’s commitment to sustainability throughout its production chain, from vines to packaging.
Yalumba is grafting saline-resistant vine roots with grape-producing vines so that the vines are more resilient to the change when drought brings about a rise in the level of ground salt.
Experts say such mitigation and adaptation techniques are critical for many companies as they prepare for a future that is hotter, drier and prone to extreme weather and consequences such as flooding.
“We have to act very soon on mitigation, reducing carbon dioxide in the atmosphere, and adaptation,” said Mark Stafford Smith, CSIRO’s science director for cimate adaption.
However, many businesses are still burying their heads in the sand.
Michael Wilkins, Standard & Poor’s Ratings Services’ managing director of infrastructure, said many are “woefully underprepared.”
That has spurred S&P’s involvement in an initiative launched at a United Nations summit last month that will assess the financial loss a company could expect once in 100 years from climate change.
In a more immediate time frame, a business case for addressing climate change can be found in a study released last month by CDP, a London-based business environment adviser.
CDP found that S&P 500 share index companies that actively planned for climate change posted a return on equity this year that was 18 percent more than peers and 67 percent higher than those that did not disclose climate change-related strategies.
Such companies also reported 50 percent lower earnings volatility over the past decade compared with firms at the lower end of CDP’s climate-awareness scale.
