Energy transition case study: The Arnott’s Group

KKR’s decision to buy Australian snack foods producer The Arnott’s Group through its core investments strategy – intended for relatively stable assets that require extended holding periods – was driven by economics, but there could be an environmental, social, and governance (ESG) payoff.

“The core fund has a longer hold period, 10-plus years rather than five years, and that factors into our thinking around all topics, including ESG. It means we have more time to achieve our long-term initiatives,” said Rupert Pedler, a principal at the firm. “[We can be] proactive around sustainability in ways that go above and beyond what we can do with our other investments in Australia.”

KKR acquired the business in 2019 through a USD 2.2bn carve-out from Campbell International. It included a range of Asia-based food and beverage brands, manufacturing facilities, and distribution channels. Arnott’s was the crown jewel and key revenue driver – a portfolio of biscuits and snacks built around Tim Tam, one of Australia’s most internationally recognisable brands.

There are three main areas of focus for sustainability. The first is sourcing, where Arnott’s has built upon an existing responsible sourcing supplier code by pledging to become 100% sustainably sourced across key ingredients by 2035. The others are diversity and inclusion and reducing the amount of energy used in manufacturing and the amount of plastic that features in packaging.

In terms of energy, progress has been made on greenhouse gas emissions reduction through initiatives such as fast-tracking a renewable electricity pathway for the business and trialling solutions that eliminate or minimise gas power in the baking process.

“The majority of our operations are in Australia, and we are conducting a site-by-site assessment of the potential for renewable energy infrastructure,” said Simon Lowden, chief transformation officer at Arnott’s. “We are looking at the different options, whether it is solar, wind, or something else.”

The company is targeting net-zero emissions from operations by 2040 and across its value chain by 2050. The targets Arnott’s has set are regarded as challenging but realistic. Lowden noted that they had to be achievable in the given timeframe, not “targets for the sake of targets.” The company is also cognizant of the need for agility, so that it can head off problems before they gain momentum.

“We think it’s really important to get ahead of – and exceed – consumers’ expectations around brands being more sustainable and environmentally conscious,” said Pedler. “If we fall behind there could be a negative impact on demand for our products and for our business financially. We want to preserve the brand love people have for The Arnott’s Group.”

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• Topics
• Australasia
• Consumer
• Buyouts
• Australia
• KKR
• manufacturing
• energy
• renewable energy