Geopolitical fragmentation refers to the increasing division and divergence in political, economic, and social policies and actions among countries and regions worldwide. This fragmentation can manifest in various forms, including trade disputes, regional conflicts, sanctions, and divergent policy directions on international platforms. In recent years, the pace of globalization has slowed, a direct result of geopolitical fragmentation, a phenomenon often called "slowbalization." This shift, which began after the global financial crisis, has reversed decades of expanding cross-border flows of goods, services, and capital that had been ongoing since the mid-20th century. This trend was already in motion before the Covid-19 pandemic and the war in Ukraine, but both events have further strained international relations and contributed to the diversion of capital flows. Geopolitical fragmentation poses significant risks to the global economy, potentially driving inflation and disrupting supply chains. This article explores how geopolitical fragmentation is manifested through trade wars and military conflicts, prompting countries to implement various mitigation strategies, such as supply chain adjustments and trade protectionism, to navigate the resulting economic disruptions and maintain stability in an increasingly fractured global landscape. Geopolitical Fragmentation Manifestations The world has recently witnessed three major manifestations of geopolitical fragmentation: Trade Barriers The U.S.-China trade war, which began in January 2018, is a significant economic conflict characterized by the imposition of trade barriers between the two largest economies in the world. China, which became the world's largest exporter over a decade ago, surpassed the U.S. as the largest economy in purchasing power parity terms around 2016. Concurrently, the decline in U.S. manufacturing jobs, partly due to rising Chinese imports, has fueled growing dissatisfaction with globalization and altered American perceptions of China. In 2018 and 2019, the Trump administration levied tariffs on a wide range of products worth about $380 billion, marking one of the largest tax increases in recent decades. In continuation, the Biden administration has largely maintained these tariffs and, in May 2024, introduced increases on an additional $18 billion of Chinese goods, including steel and aluminum, semiconductors, electric vehicles, and rare earth metals. In response, China quickly retaliated by initiating an anti-dumping investigation into chemical imports from the U.S., European Union, Japan, and Taiwan. Sanctions Another manifestation of geopolitical fragmentation are the sanctions imposed on Russia following its invasion of Ukraine which have significantly disrupted global trade, fueled energy & food inflation, weakened the currencies for import-reliant countries and impacted economic stability worldwide. This has resulted in a global economic slowdown, with many countries, especially in Europe, facing recession risks due to energy shortages and rising costs of living. Additionally, the geopolitical landscape has prompted shifts in trade patterns and investment strategies as nations seek alternatives to Russian supplies, highlighting the far-reaching consequences of the sanctions on the international economy. In addition, Russia’s exclusion from SWIFT has led some nations to consider diversifying away from the US dollar and euro, potentially favoring currencies like the Chinese Renminbi, Russian Ruble, or Indian Rupee for international trade. This had an impact on the US dollar index & global trade prices. Disrupting Maritime Routes More recently, the recent geopolitical tension in the MENA region that escalated in October 2023, has significantly contributed to geopolitical fragmentation, resulting in severe disruptions to global trade. From December 2023 up to mid-February 2024, the conflict has caused a significant rise in attacks on commercial shipping in the Red Sea, leading to a decline of approximately 90% in container shipping. This disruption is particularly concerning as the Red Sea is a crucial maritime route, facilitating about 12% of global trade and 30% of container traffic. As a result, businesses are facing higher logistics costs, which are likely to be passed on to consumers, further exacerbating inflationary pressures in the global economy. Mitigating the Impact of Geopolitical Fragmentation To effectively address the challenges and overcome the negative economic consequences posed by geopolitical fragmentation, countries have implemented various mitigation strategies as follows: Supply Chain Rerouting The war in Ukraine has severely affected long-standing containership routes in the Black Sea, forcing companies to seek alternative shipping methods through land or sea with neighboring countries like Poland, Romania, Turkey, and Bulgaria. Similarly, drone and missile attacks by Houthi rebels on vessels in the Red Sea have led to significant disruptions along major containership routes connecting Asia and Europe. As a result, many ships that would typically transit through the Suez Canal are now being rerouted around the Cape of Good Hope, despite the longer journey time and higher shipping costs. Nearshoring, Friendshoring, and Reshoring Companies are increasingly adopting nearshoring, friendshoring, and reshoring as essential strategies to manage supply chain risks. In nearshoring, companies move production closer to their primary markets to reduce transportation costs and geopolitical risks. For example, Foxconn Technology Group, a Taiwanese multinational electronics contract manufacturer, is expanding its manufacturing operations in Mexico to have easier access to the US market amid the on-going trade war. Friendshoring is an increasingly popular trade approach that prioritizes supply chain networks in nations viewed as political and economic partners. For example, Apple, the tech giant, has recently taken steps towards friendshoring by shifting part of its iPhone production from China to India. Currently, only 5% of Apple's products are manufactured outside China, but a recent analysis by JP Morgan suggests that this figure could increase to 25% by 2025. As for reshoring or onshoring, these strategies involve relocating offshore production back to the company's domestic market. An example of onshoring can be seen with Intel's investment of over $100 billion over 5 years in the U.S. to expand chipmaking capacity and capabilities in Arizona, New Mexico, Oregon and Ohio. This significant move will enable Intel to produce the world’s most advanced chips domestically, reducing reliance on foreign suppliers and strengthening the U.S. semiconductor supply chain. Rise in Trade Protectionism Trade protectionism is a manifestation & a mitigation strategy for geopolitical fragmentation. Trade protectionism encompasses government policies designed to create barriers such as tariffs, import quotas, and subsidies that make imported goods more expensive or less accessible compared to local products. For example, The Indian government has levied high tariffs on various imported goods, particularly in the information and communication technology (ICT) sector, with duties ranging from 7.55% to 20% on products like mobile phones and integrated circuits since 2014. This has led to disputes with the EU at the World Trade Organization (WTO), where the EU argues that these tariffs hinder its exports and violate global trade norms. A further illustration is the Carbon Border Adjustment Mechanism (CBAM) implemented by the EU imposes charges on carbon emissions associated with imported goods, effectively increasing their costs compared to domestically produced items that are subject to the EU's stringent carbon regulations. In-Country Value Initiatives (ICV) ICV initiatives have emerged as a strategic response for countries to enhance economic resilience and reduce dependency on foreign entities. For instance, Petroleum Development Oman (PDO), which is state-owned, has initiated its In-Country Value (ICV) program to boost the procurement of local goods and services, and foster the development of local suppliers that contribute to the energy industry. Similarly, major companies like Abu Dhabi National Oil Company (ADNOC), Saudi Arabian Oil Company (Aramco), and Qatar Petroleum (QP) have adopted comparable initiatives to promote localization within their energy and industrial sectors. Alternative Payment Options In response to geopolitical tensions affecting traditional financial systems, countries are exploring alternative payment methods. For example, Russia has increasingly utilized the Chinese renminbi for international transactions post-sanctions, while several nations are considering digital currencies as a means of bypassing traditional financial systems dominated by the U.S. dollar. Conclusion Geopolitical fragmentation has been prominently manifested through various events all of which have disrupted global trade, energy supplies, and financial systems. To mitigate these challenges, nations and businesses have adopted strategies such as supply chain rerouting, nearshoring, friendshoring, trade protectionism, in-country value initiatives, and alternative payment options. While these strategies are fueling the "slowbalization" of the global economy, it was viewed as a strategic solution for some countries to reduce dependence on global supply chains during turbulent times, foster economic resilience, and navigate rising geopolitical risks. 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Saudi Arabia, traditionally known for its vast oil reserves, is undergoing a significant economic transformation. As the country shifts its focus towards the Non-Oil Economy, the Vision 2030 plan emerges as a pivotal strategy for diversifying the Economy in Saudi Arabia. This shift is driven by global trends towards sustainable energy and the need for economic stability amid fluctuating oil prices. In this article, we delve into the historical advancements, current progress, and future prospects of the non-oil economy in Saudi Arabia, exploring how the Vision 2030 initiative is reshaping the nation's economic landscape. Historical Advancements in Saudi Arabia's Non-Oil Economic Growth Between 2003 and 2014, there was a notable increase in the non-oil private sector's contribution to the Saudi Arabian economy due to higher oil prices, which the government used to stimulate private sector activity through increased spending. As other sectors such as industrial and services have developed, the proportion of the oil sector in the economy has decreased since 2003. In 2021, the Non-Oil Economy in Saudi Arabia grew by 4.9% for the full year, recovering lost output in 2020. This can be attributed to several initiatives: Regional Headquarters Directive by MISA and RCRC In February 2021, MISA and the Royal Commission for Riyadh City (RCRC) announced a new directive that companies that want to contract with the Saudi Arabian Government (SAG) must establish their regional headquarters in Saudi Arabia, preferably in Riyadh, by 2024. Companies that relocate their regional headquarters to Riyadh will receive tax breaks and other incentives. Legal Reforms Announced by the Crown Prince In a February 8, 2021 statement, the Crown Prince announced draft legal reforms impacting personal status law, civil transactions law, evidence law, and discretionary sentencing that aim to increase predictability and transparency in the legal system, facilitate commerce, and expand protections for women. Launch of the Shareek Program for Domestic Investment 3)On March 30, 2021, the SAG announced the new Shareek program, an initiative designed to generate $3.2 trillion of domestic investment from the SAG, the sovereign wealth Public Investment Fund, and the private sector into Saudi Arabia’s economic development. Approval of the Private Sector Participation Law In March 2021, Saudi Arabia approved the Private Sector Participation (PSP) Law. The PSP law aims to increase private sector participation in infrastructure projects and in providing public services by supporting Public-Private-Partnerships (PPP) and the privatization of public sector assets. Transformation of the Public Investment Fund The SAG has been transforming its Public Investment Fund (PIF), traditionally a holding company for government shares in state-controlled enterprises, into a major international investor and sovereign wealth fund. In 2020 and early 2021, the PIF made a number of new investments, including in Facebook, Starbucks, Disney, Boeing, Citigroup, Live Nation, Marriott, several European energy firms, Carnival Cruise Lines, Reliance Retail Ventures Limited (RRVL), and Hambro Perks Ltd’s Oryx Fund. In 2022, Saudi Arabia experienced the highest rate of economic growth among the G20 countries. The country's overall growth amounted to 8.7%, which was mainly due to the 4.8% growth of its non-oil GDP. During Q4 2022, the non-oil sector grew by 6.2%, the highest level since Q3 2021. The Saudi non-oil sector is predicted to grow by 4.7% in 2023. The non-oil sector is experiencing growth mainly because of strong private consumption and investments from the private sector, including large projects. The main drivers of this non-oil growth were the wholesale, retail trade, construction, and transport industries. Overall, the changing composition of the Saudi economy highlights the private sector's contribution and the country's transformation. Current Progress & Challenges in Saudi Arabia's Economic Landscape Sector-Specific Growth: Analyzing Saudi's Non-Oil Economic Sectors Rapid growth in some sectors, including transportation, storage, communications, trade, restaurants, and hotels, has occurred, whereas others, such as finance, insurance, and real estate, have slowed down. In Q1 2023, the transport, storage, and communications sector experienced a 9.3% y-o-y growth, while trade, restaurants, and hotels saw an increase in real output growth to 7.5% y-o-y. The construction sector also experienced stronger growth at 5.5% y-o-y. However, key sectors such as finance, insurance, and real estate saw a slowdown in growth from 3.9% in Q4 2022 to 2.8% y-o-y in the last quarter. The government service sector grew at the fastest pace since 2018 with a 4.9% y-o-y growth, accounting for around 14% of total GDP. Demographic Dynamics and Saudisation in the Evolving Saudi Economy The Saudi population is relatively young, with 63% of citizens under the age of 30. The Saudi government is aware of this potential demographic pressure on the labor force, and this partly explains the economic shift undergone in recent years, where a host of new, more labor-intensive industries such as hospitality and tourism have been encouraged to flourish and Saudis have been encouraged, through the “Saudisation” strategy, into jobs previously occupied by immigrant workers. In December 2022, the “Tawteen programme” launched the second phase of creating 170,000 jobs, with 30,000 allocated to the tourism sector. Despite efforts to diversify the economy, oil still accounted for about 40% of real GDP in the last few years, down from about 45% a decade ago. The share of the oil economy in nominal GDP varies significantly with oil prices and was about 30% in 2021 but is projected to have increased to about 40% in 2022. Saudi Arabia's diversification efforts and development of the non-oil sector are essential to realizing the Vision 2030 plan and reducing the country's reliance on oil for economic growth. While it seems to be challenging, several initiatives are paving the way for a more diversified economy. Vision 2030: Steering Saudi Arabia Towards an Economic Diversification Era Vision 2030 encourages the diversification of non-oil exports and an increase in non-oil GDP share to 50% in 2030. Key sectors to achieve this goal include finance, insurance, transport, communication, non-oil manufacturing, and agriculture. Saudi Arabia's income in 2023 improved considerably because of higher non-oil revenues, which rose by 9%, while oil revenues declined by 3% due to lower crude prices. The Saudi authorities have carried out extensive fiscal reforms in recent years as part of Vision 2030 to reduce oil dependence. These include revenue mobilization, energy price reforms, expenditure rationalization, Treasury Single Account implementation, fiscal risk assessment, budget disclosure improvement, and strengthened debt management. The non-oil sector is less volatile, more sustainable, and generates more jobs than the oil sector, which will help to accommodate the rapidly growing number of Saudi nationals entering the labor market each year. Saudi Vision 2030's initiatives, including the National Transformation Program and Fiscal Balance Program, aim to realize this vision by establishing targets and initiatives for non-oil sector development. Conclusion Saudi Arabia's reliance on oil has been a cornerstone of the country's economy for decades, but this approach is no longer adequate in light of the growing demand for environmentally sustainable energy. As a result, the Saudi Vision 2030 initiative aims to diversify non-oil exports and increase non-oil GDP share. Creating a non-oil economy is essential for generating long-term and sustainable economic growth. 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The global debt pile is mounting at an alarming pace, with a stock of $305 trillion in 2023, recording a staggering surge of $100 trillion over the past decade, as the Institute of International Finance highlighted. The World Bank identifies the emerging risk of entering 'a fifth wave' of a debt crisis. This implies a threat to low-income countries, endangering their ability to fulfill the pledge of “Leaving no one Behind” in the journey towards sustainable development. The United Nations shaped this ambitious promise in 2015, aiming to fulfill it by 2030 and eradicate poverty and curb all forms of inequality. It is already halfway to 2030, and with the cascading crises that the world witnessed, from the outbreak of COVID-19 and the war in Ukraine to climate disasters worldwide, the financing needs of developing countries to counter the shocks are rising, as is their cost of debt service. “Countries are facing the impossible choice of servicing their debt or serving their people”. The United Nations Secretary,General António Guterres,July 2023 The Debt Trap: Soaring Poverty and Hunger Public debt is deemed “sustainable” when the government can fulfill its present and future payment commitments without requiring exceptional financial aid or facing the risk of default. The primary instrument creditors use to evaluate the risk of default in Lower-Income Countries (LICs) is the Debt Sustainability Framework (DSF) developed by the World Bank. This framework categorizes countries according to their capacity to repay their debt obligations, establishes threshold levels for specific debt burden indicators, and stress-tests scenarios in comparison to these thresholds. According to this framework, over 40% of low-income countries are already approaching debt distress (unsustainable) levels. There is a vicious circle between debt and achieving the Sustainable Development Goals (SDGs), where mounting debt puts a heavy strain on mobilizing public resources dedicated to investments in the economy and people’s well-being. In fact, around 3.3 billion people live today in countries that spend more on interest payments than on education, health, climate adaptation, and social protection, according to the United Nations. Source: UNCTAD 2022 Meanwhile, global hunger (Sustainable Development Goals 2) is soaring amid the dire economic effects of political conflicts and climate change, whereby the number of undernourished people has grown by as many as 150 million in the last 10 years. Ethiopia, for instance, where 4% of the global population is extremely poor, was already at high risk for debt distress, even before the pandemic crisis. Source: Sustainable Development Goals in the Debt Trap, June 2022, extracted from the World Bank Debt Sustainability Analysis, https://www.worldbank.org/en/programs/debt-toolkit/dsa. Unprecedented Record: Don’t solely blame the pandemic. Even before the cascading crises, the pandemic and the Russian War posed a major threat to advancing the Sustainable Development Goals. Moreover, the cost of debt servicing for countries eligible for international development assistance more than doubled between 2000 and 2019. (UNDESA, 2020). In 2022, 69 low- and middle-income countries made payments of $62bn on public debt, which means a 35% increase from 2021. On this front, the UN issued an alarming warning as global public debt reached a record of $92 trillion in 2022. According to the IMF, public debt as a ratio to GDP has soared across the world during COVID-19; the global average of this ratio in 2020 approached 100 percent, and it is expected to remain above pre-pandemic levels for about half of the world. Source: EIU Debt and Climate Change: Bidirectional Causality The vicious circle of debt is even more intertwined with the threat of climate change (Sustainable development goal 13), whereby countries that are most vulnerable to the climate crisis are also the ones on the frontlines of sovereign default. In fact, UNCTAD outlines that over 70% of current public climate finance takes the form of debt. Meanwhile, the UN Environment Programme estimates that the annual climate adaptation needed for developing countries could amount to $340 billion by 2030 and $565 billion by 2050. Today, around 60% of the poorest countries are already in debt distress or on the brink of it; among these are Sri Lanka, Ghana, Lebanon, and Zambia. The causality between debt distress and climate change is bidirectional. In developing nations, constrained governmental budgets pose a challenge: they hinder the ability to make investments needed for a climate-resilient recovery. Simultaneously, studies provide empirical evidence that the exposure of sovereigns to climate risks can impact credit ratings and debt servicing costs. Addressing this issue, the IMF empirically demonstrates that countries with higher resiliency to climate change shocks enjoy elevated credit ratings. The IMF also argues that the impact of climate change is disproportionately greater in developing countries, due largely to a weaker capacity to mitigate the consequences of climate change. African countries, the Middle East, and Latin America are the regions least resilient to climate change shocks. A possible way out Amid substantial financing requirements spanning over a wide range of countries, reminiscent of the levels witnessed during the 1980s debt crisis, a rising demand for debt restructuring is emerging. Structural fiscal reform The World Bank suggests long-term remedies such as ramping up economic growth, whereby the best way to escape a debt trap is “to grow out of it”. Growing out of debt can be done through improving business conditions, better allocation of resources, and healthy market competition to boost productivity. On the structural reform front, the WB stresses the importance of accelerating fiscal policy reforms through improving tax administration efficiency and broadening the tax bases in ways that support rather than impede long-term growth. That can be accomplished by improving tax compliance, debt management procedures, and public spending while strengthening the legal environment for debt contracting. DEBT RESTRUCTURING While fiscal consolidation and growth-oriented structural reforms have the potential to diminish debt ratios, they might not suffice for nations grappling with severe debt issues or the heightened risks associated with debt rollovers. In such instances, it may become imperative to undertake debt restructuring, which involves renegotiating the terms of a loan. For vulnerable middle-income countries, the United Nations proposes several urgent solutions to alleviate the ballooning debt; these encompass payment suspensions, longer lending terms, and lower interest rates. The G20 had several contributions on this front; they assisted low-income nations through the suspension of loan and interest repayments until mid-2021, known as the Debt Service Suspension Initiative (DSSI), and then through the Debt Service Suspension Initiative (DSSI). Typically, debt restructuring is employed as a measure of last resort due to its potential for considerable economic costs, reputational risks, and challenges in terms of coordination. Despite these challenges, when coupled with fiscal consolidation, debt restructuring can significantly decrease debt ratios by up to 8% or more over a five-year period, as noted by the IMF Debt Swaps Unlike debt relief, debt swaps come with conditions for external debt alleviation, necessitating the allocation of domestic funds to activities tied to the Sustainable Development Goals. These activities encompass health, education, child development, and environmental preservation. Debt swaps can take the form of equity investments (equity swaps), environmental activities (environmental swaps), or development activities (development swaps). Egypt is a salient example of a development debt swap; in 2001, the country signed an agreement with Germany to swap 50% of its debt amounting to 204.5 million euros to finance projects in the areas of poverty reduction, improving water and sanitation infrastructure, improving basic education, and environmental protection. A more recent example of development debt swaps is in 2017, when the Global Fund to fight Aids, Tuberculosis, and Malaria (GFATM) declared that Spain had signed agreements to withdraw 36 million euros of debt to the Democratic Republic of Congo, Cameroon, and Ethiopia. In return, the countries would invest a total of 15.5 million euros in health-related projects. Conclusion Amid ballooning inflation, the surge of interest rates, and sluggish growth, governments in developing countries are now burdened with alarming levels of public debt, forcing them to choose between paying debt service or investing in their nations. To mitigate the trade-off between “investments in debt and investments in people”, focusing on the reforms of global debt architecture (debt relief, restructuring, swaps, etc.) as well as finding innovative financing schemes is of utmost importance to prevent exacerbating poverty and “a lost decade of inaction”. 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Food production, particularly meat production, is a major contributor to nearly 60% of the planet-heating gases emitted by humans. This article delves into the significant growth of the plant-based food market in recent years and its projected expansion over the next decade, highlighting the major consumer trends driving this growth. How does meat consumption contribute to climate change? Greenhouse gases, such as carbon dioxide and methane, significantly affect the earth’s temperature. The most known greenhouse gas is carbon dioxide (CO2). But there are other gases responsible for the greenhouse effect, such as methane, which is up to 34 times more damaging to the environment than CO2 if measured over 100 years; this ratio increases to 86 times more damaging if measured over 20 years. Livestock produces significant amounts of methane as part of their normal digestive processes, and when there is an overconsumption of cattle, there is a strong increase in gas emissions. According to recent studies, by 2050, global meat consumption is projected to reach between 460 million and 570 million tons, which is twice as high as in 2008. And clearly, Processing and transporting this livestock further increases emissions. Livestock emissions make up about 14.5 percent of the total global greenhouse gas emissions, and roughly 2/3 of those emissions come from cattle. Meat production is responsible for 57% of all food production emissions; 1 kilo of beef generates around 70 kg of greenhouse gas emissions. Meat production also contributes to the exhaustion of water resources. The UN states that producing one quarter-pound burger consumes around 1,500 liters of water. In addition to the gas emissions, raising meat requires a large quantity of feed, and cattle ranching requires millions of acres of land and monoculture crop fields to feed this livestock. Cattle ranching drives deforestation 5 times more than any other sector and is responsible for a great majority of the Amazon forests; estimates show that about 70% of its deforested land is used for cattle. Converting natural habitats to agricultural fields releases greenhouse gases that contribute to climate change. As a result of these facts, the plant-based movement has been growing as people understand the relationship between their food choices and the planet's health. From the planet’s perspective, plant-based foods would require 37% less water, and their production would generate significantly lower gas emissions. This is where the race for market share begins. Plant-based food: the future? 2021 Bloomberg report The plant-based food market globally is expected to reach $162 billion by 2030, up from $29.4 billion in 2020. A report published by Bloomberg in 2021 stated that global retail sales of plant-based food alternatives (meaning food that consists of all minimally processed fruits, vegetables, whole grains, legumes, nuts and seeds, herbs, and spices and excludes all animal products) may reach $162 billion by 2030, which is an increase of more than $100 billion compared to 2022. The plant-based market is growing 5 times faster than the overall food industry. In the Middle East and Africa, the plant-based meat and dairy products market is projected to witness a CAGR of ~6% from 2022 to 2027. As more people are moving toward a healthier and cleaner lifestyle, the term “flexitarian” (meaning a casual vegetarian) is growing fast. With 14% vegetarians and vegans worldwide and 15% flexitarians, this means that 29% of consumers globally are now embracing plant-based alternatives The Asia-Pacific region has the largest share of the global plant-based market, and with a growth scenario of around $51 billion from 2020 to 2030, its market could reach $64.8 billion. This growth is driven by cultural and demographic factors, since the region’s population is expected to exceed 5 billion people by 2030, increasing the demand for plant-based alternatives. Plant-based meat In 2025, the global meat market share is expected to reach 90% of the global meat supply, and this ratio is expected to decrease by 50% in 2040. While meat alternatives are expected to increase by around 15%, reaching 25% of sales during the same period, cultured meat (genuine meat that is produced by cultivating animal cells directly) is expected to increase by 35%. These predictions demonstrate the market potential of plant-based alternatives, and that plant-based and cell-based meat will account for most of the meat sold by 2040 (with a combined share of 60%). The Asia Pacific plant-based food market was valued at $17.1 billion in 2020 and is forecasted to grow at a CAGR of 15.9 percent between 2018 and 2026. With a market share of 37.9% in 2020, China dominates the Asian plant-based food market. On top of that, the Chinese government is planning to reduce meat consumption in the country by 50% by 2030. According to a study published in 2021 by DuPont Nutrition & Biosciences and IPSOS, demand for plant-based meat substitutes in China and Thailand is expected to increase by 200% by 2025. In the US, the plant-based food market reached $7 billion in sales in 2020, compared to $4.8 billion in 2018, recording a growth of 43%. The growth of plant-based food sales has outpaced the growth of total food sales by 2.5 times during that same period The table below illustrates the top 5 companies in meat alternatives by dollar share: In the Middle East, meat alternatives are increasing, for instance, UAE-based Halal food brand Al Islami launched its first vegan burger in 2021. In 2019, the global plant-based meat market reached $19 billion, with the Middle East accounting for $176.5 million, and was projected to grow by 4 to 5% annually until 2023. Plant-based milk The plant-based milk and derivatives market has already disrupted the dairy market and still has significant room for growth. Multiple factors are contributing to this growth potential, including lactose intolerance, and rising health concerns. According to the Food Intolerance Network, as much as 75% of the world’s population is lactose intolerant. Dairy products also contain high levels of saturated fats, which increases the risk of high cholesterol. As people are moving toward a healthier lifestyle, plant-based dairy alternatives have the potential to reach $68.8 billion by 2030, compared to their 2021 value of $25.2 billion, growing at a CAGR of 11.8% from 2022 to 2030 In the Asia-Pacific region, alternative dairy products are projected to make up 57% of the plant-based protein market by 2030 In the GCC region, 65% of consumers suffer from lactose intolerance, and 48% of consumers claim to prefer the taste of almond and oat milk to cow’s milk. Lulu hypermarket, a leading supermarket in the UAE, stated that the plant-based milk market has grown by 50% in 2020. New market access Millennials and Gen Z are more likely to become vegetarians and vegans, as they are more environmentally aware and have a strong sense of social responsibility. Regarding their consumption, 63% of Gen Zers consume a vegetarian or vegan meal at least once per month, and 44% do so once a week or more. According to a 2022 report, 79% of millennials and Gen Zers are already regularly eating plant-based. In the United States, while only 2.5% of Americans over the age of 50 consider themselves vegetarians, 7.5% of Millennials and Gen Z have given up meat. Since future consumers are millennials and Gen Z, companies are focusing on offering products that appeal to them." The plant-based food industry is rapidly expanding and capturing a sizable market share; it also shows promising growth potential over the next 10 years. Therefore, now is the time for companies to innovate and develop plant-based alternatives. Interest in alternative proteins, for instance, is increasing globally, as plants have limited environmental impacts and are a healthy alternative filled with protein. Although alternative proteins accounted for only 2% of the world protein market in 2020, they are expected to reach 12% by 2035. Pea protein, for instance, grew at a 30% CAGR from 2004 to 2019. Animal protein will stay prevalent in the market; this, however, does not eliminate the room for plant-based foods to grow and solidify their place in the market. According to a Bloomberg study, the plant-based food market is estimated to hit $162 billion in the next 10 years. Sources: https://www.theguardian.com/environment/2021/sep/13/meat-greenhouses-gases-food-production-study https://www.myclimate.org/information/faq/faq-detail/what-are-greenhouse-gases/ https://unece.org/challenge https://news.un.org/en/story/2018/11/1025271 https://www.cleanwateraction.org/features/meat-industry-%E2%80%93-environmental-issues-solutions https://www.bbc.com/news/explainers-59232599 https://www.sustain.ucla.edu/food-systems/the-case-for-plant-based/#:~:text=Now%2C%20for%20those%20of%20you%20worried%20about%20protein%20content%3A&text=From%20a%20water%20perspective%2C%20using,to%20eat%20plant-based%20foods. https://www.forbes.com/sites/christophermarquis/2021/03/02/plant-based-foods-are-our-future-and-entrepreneurs-are-helping-us-make-the-shift/?sh=7dbeae5351f5 https://insideclimatenews.org/news/21102019/climate-change-meat-beef-dairy-methane-emissions-california/#:~:text=Emissions%20from%20livestock%20account%20for,for%20grazing%20and%20feed%20crops. https://www.theworldcounts.com/challenges/consumption/foods-and-beverages/world-consumption-of-meat/story https://www.washingtonpost.com/world/interactive/2022/amazon-beef-deforestation-brazil/ https://www.livekindly.co/middle-easts-vegan-food-market-growing-fast/ https://assets.bbhub.io/professional/sites/10/1102795_PlantBasedFoods.pdf https://foodspecialities.com/industry-news/dairy-ingredients-industry-news/high-margin-growth-opportunities-with-plant-based-milks/ https://cultivateinsights.com/2019/07/22/alternative-meats-could-be-60-of-the-market-by-2040/ https://gfi.org/marketresearch/ https://thevou.com/lifestyle/2019-the-world-of-vegan-but-how-many-vegans-are-in-the-world/#:~:text=Right%20now%2C%20the%20total%20number,percent%20of%20the%20world%20population. https://foodinstitute.com/focus/veganuary-2022-coincides-with-growing-flexitarian-trend/#:~:text=Flexitarians%20are%20more%20flexible.&text=It's%20estimated%2015%25%20of%20the%20population%20already%20is%20flexitarian. https://tradeinsights.amys.com/millennial-gen-z-buying-habits-spell-growing-opportunity-for-plant-based/ https://www.visualcapitalist.com/sp/how-does-animal-meat-compare-to-plant-based-meat/ https://www.bloomberg.com/company/press/plant-based-foods-market-to-hit-162-billion-in-next-decade-projects-bloomberg-intelligence/ https://www.mordorintelligence.com/industry-reports/middle-east-and-africa-plant-based-meat-and-dairy-products-industry https://web-assets.bcg.com/a0/28/4295860343c6a2a5b9f4e3436114/bcg-food-for-thought-the-protein-transformation-mar-2021.pdf https://www.plantbasedfoods.org/marketplace/retail-sales-data-2020/ https://www.globenewswire.com/news-release/2022/05/18/2446161/0/en/Plant-Based-Meat-Products-Market-Size-Worth-US-14-527-55Mn-Globally-by-2028-at-15-3-CAGR-Exclusive-Report-by-The-Insight-Partners.html https://www.globenewswire.com/news-release/2019/10/14/1929284/0/en/Plant-based-Meat-Market-To-Reach-USD-30-92-Billion-By-2026-Reports-And-Data.html https://www.globenewswire.com/en/news-release/2022/08/16/2499600/0/en/Dairy-Alternative-Market-Size-to-Hit-USD-68-79-Billion-by-2030.html#:~:text=The%20global%20dairy%20alternatives%20market,11.8%25%20from%202022%20to%202030.
As with most industries, digitization and increasing automation have revolutionized the automotive industry, giving rise to four major disruptive technological trends: electrification, autonomous driving, shared mobility, and connectivity. These trends, combined with demand and supply challenges such as declining purchasing power, increasing inflation, rising fuel prices, and reliance on Chinese supply, are putting pressure on automotive players to reconsider their current business models. Since the invention of the automobile, the sales model has remained mostly the same. In the early 1900s, multiple distribution models were attempted in the auto industry; however, by the 1950s, the dealership model had proven to be the most effective for distributing automobiles. In this model, the manufacturer builds the vehicles and then sells them to dealers, which act as retailers and service providers. Traditional sales models, however, have undergone fundamental changes in recent years as e-commerce and industry leaders revolutionized the purchasing process. Currently, new automotive players, such as EV startups, have started to adjust their sales model to adapt to evolving buying behaviors. Since 2016, EV pioneers like Tesla have been combining their city showrooms with their online stores, providing their customers with a simple interface and a brand-new purchasing experience when compared to traditional sales models. The agency sales model: transforming the automobile purchase journey The agency sales model can be considered the evolution of the traditional three-tiered sales model towards an integrated online/offline sales model. In that sense, the vehicle manufacturers interact directly with the customers and assume all sales responsibilities. The dealers still play a decisive role in this model, but they act only as agents and only retain activities that require physical interaction, such as the execution of test drives and handling of service appointments. The traditional sales model players, which include dealerships and national sales companies (NSCs), remain present in the agency model but are there to provide a superior omnichannel customer experience, allowing OEMs to establish a 360° customer view, resulting in increased cross-selling and market transparency. Likewise, certain roles and responsibilities are transferred from the dealer to the manufacturer. The dealer’s financial risk can be reduced while gaining full access to the national car inventory and shortening delivery times. [caption id="attachment_8493" align="aligncenter" width="608"] Figure 1 - Traditional sales model (three-tiered, mainly offline) vs agency sales model[/caption] Automotive retailing: a shift toward e-commerce The online car buying market refers to the end-to-end purchase of vehicles through online platforms. This offers customers accessibility and ease of shopping from home, more visibility on pricing, and digital and secure payment processes. Online vehicle sales have increased significantly in recent years. The global online car buying market was valued at $237.93 billion in 2020 and is projected to reach $722.79 billion by 2030. This market was not triggered by the pandemic in 2020, but rather is the result of the accelerated digitalization of car manufacturers and a shift in mindset and consumption behavior. According to BCG projections, it is expected that online billing & payment transactions will account for 5-7% of new vehicle sales in 2025 and up to 33% in 2035. In terms of market share, Tesla continues to be the leader in direct sales, along with “Polestar”, which provides a mature online interface that challenges Tesla. [caption id="attachment_8494" align="aligncenter" width="621"] Figure 2 - Projected Growth in Online Sales of News Cars Around the World[/caption] Online aftermarket sales: the rise of a new sales channel The online automotive aftermarket is a secondary market accessed through e-commerce databases that sell almost all automotive spare parts, marketing services, and auto-related services. Since the pandemic, the automotive aftermarket has registered an important evolution led by multiple trends, which can be perceived through the continuous global demand for used vehicles, auto parts becoming more sophisticated, and consumers holding onto their cars because of the financial downturn caused by the pandemic. The whole automotive aftermarket sector (online & offline) is expected to grow from about $380 billion in 2021 to $449 billion in 2023. Moreover, the COVID-19 pandemic, along with the global disruption of the automotive supply chains, is acting as the main factors affecting buying behavior and leading a growing number of consumers toward the online aftermarket. In that sense, according to Hedges & Company, online sales totaled $16 billion in 2020, a 40% increase from $7.4 billion in 2019 (figure 3). Similarly, business-to-consumer mobile sales also saw a significant increase in recent years, accounting for approximately 50% of all online auto part sales in 2020, an increase of 35% compared to the previous year. Currently, the online aftermarket channels are being led by new players such as Car Parts and Mister Auto, whose business models are 100% online. Likewise, automotive manufacturers are also starting to respond to the current industry disruption by cooperating with online players to sell their parts and accessories. [caption id="attachment_8495" align="aligncenter" width="552"] Figure 3 - Business to consumer online Sales in USD Billions[/caption] Growth of e-commerce automotive aftermarket The trend of consumers looking for aftermarket products online has been accelerated by pandemic restrictions and the accelerated drive toward digitization in 2020 and 2021, which helped online sales channels increase their penetration rates (figure 4). The trend was most noticeable in the parts and accessories segment, which includes enthusiast and general maintenance DIY brands that experienced a sustained increase in sales in 2021. [caption id="attachment_8496" align="aligncenter" width="567"] Figure 4- e-commerce Penetration in the Automotive Aftermarket[/caption] Ultimately, a growing number of customers sought alternative channels for a variety of products, despite the fact that retailers were deemed essential service providers and operated during multiple shutdowns. As a result, retailers have been accelerating their digital solutions projects by improving e-commerce functionality and adding new shopping options, such as curbside pickup and faster home delivery. The automotive industry is experiencing major changes in its landscape with digitization, electrification, and the complexity of the global market. Leading global players, including suppliers, OEMs, and new entrants, are already innovating their business models to adapt to the extremely competitive ecosystem. Even though the industry's online penetration has increased in recent years, there are still plenty of opportunities for leaders to seize. Success in 2030 will require automotive players to prepare for uncertainty, leverage partnerships (e.g., around infrastructure for autonomous and electrified vehicles), and reshape their value propositions. Concurrently, aftermarket players must improve their e-commerce strategies due to a greater emphasis on digital presence, as shoppers are becoming more accustomed to online channels due to the increased breadth, convenience, and ability to find exact specifications over traditional ones. Finally, as suppliers and retailers focus more intently on digital strategies to address consumer purchasing behavior, the e-commerce channel will continue to grow at an exponential rate in the automotive aftermarket. 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