Building a Better Future - THE LAUDER GLOBAL BUSINESS INSIGHT REPORT | 2022 - The Lauder Institute
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THE LAUDER GLOBAL BUSINESS INSIGHT REPORT | 2022 Building a Better Future
INTRODUCTION THE LAUDER GLOBAL BUSINESS INSIGHT REPORT | 2022 Building a Better Future There is much to worry about in 2022. The world is in its third year of a deadly and divisive pandemic, climate change is an existential threat, the inequality gap is growing, and political tensions are rising. It’s hard to find the positive amid such chaos and despair, yet hope flourishes for those who dare to look. In this report, the students at the Joseph H. Lauder Institute for Management & International Studies reveal the stories hidden beneath the headlines and show how nations, industries, organizations, and individuals are building toward a better future. Latin American economies are modernizing and adapting to consumer demand. In Africa, several countries are using what they’ve learned from past disease outbreaks to stay ahead of COVID-19’s deadly curve. And in a reversal from history, China is now encouraging families to have three children. The indomitable human spirit is accelerating change around the world, and there are no signs of a slowdown. This edition of The Lauder Global Business Insight Report is itself a reflection of change. For years, this report has been the result of months of work from students who immerse themselves in an intensive course in their program of concentration, then follow up with field study that takes them to various parts of the world. But the pandemic limited travel and pushed many activities online. The students, much like the nations and people they studied, learned to rise to the challenge. Without the option of field study, the students conducted interviews via phone and video with experts and sources who described what they could not witness for themselves. Without a physical classroom, they used every digital tool available to collaborate on their articles, learning to work together in the new normal created by the disease. Their efforts reflect a microcosm that is being repeated in grand scale around the world. Contemporary English philosopher Alan Watts said, “The only way to make sense out of change is to plunge into, move with it, and join the dance.” The students of the Lauder Institute have taken this sentiment to heart, and they offer the following articles that cast a hopeful eye on the future. The Lauder Institute | The Lauder Global Business Insight Report | 2022
TABLE OF CONTENTS BUSINESS AND INDUSTRY The Business of War: The Rise of the Private Mercenary Industry in Colombia....................................... 2 How China and Japan are Using Robots to Fill Gaps in the Workforce...................................................... 7 In Latin America, Demand for Plant-Based Foods is Upending the Market.............................................11 Is Edtech Flourishing in Latin America and Africa?........................................................................................14 Mind the EV Gap ...................................................................................................................................................18 Sky’s the Limit: How the Boeing-Airbus Trade Deal Impacts US-EU Relations.......................................22 POLITICS AND CULTURE China’s Three-Child Policy: Passive Permission vs. Active Incentive.........................................................25 Football in the Pursuit of Soft Power................................................................................................................29 The State of Censorship in Kenya, Tanzania, and Nigeria.............................................................................33 Nord Stream 2 and Europe’s Bumpy Energy Transition.................................................................................37 Cultural Exports and Soft Power Diplomacy in East Asia.............................................................................41 BANKING AND FINANCE The Digital Payment Revolution: Four Case Studies Across Asia...............................................................45 The Surge of Venture Capital in Latin America...............................................................................................50 Private Equity in Latin America: Past, Present, and Future .........................................................................54 Digital Integration of the MENA Economy......................................................................................................57 HEALTH CARE Health Care 2.0 in Africa......................................................................................................................................61 Pandemics in Africa: Does Experience Mean Preparation?..........................................................................65 Building a Better Future 1
BUSINESS AND INDUSTRY
The Business of War: The Rise of the Private
Mercenary Industry in Colombia
Colombia’s highly skilled soldiers are the byproduct of more than a half-century of civil war. This
article explains why so many of these former soldiers have turned to the private security sector.
Early in the morning of July 7, 2021, men disguised as unpopular, and Haiti had dealt with an economic crisis and
agents of the U.S. Drug Enforcement Administration criminal gangs. Violent protests erupted over allegations of
entered the private residence of Haiti’s president in Port- government corruption as well as the president’s refusal to
au-Prince. Encountering minimal resistance, they quickly step down in a dispute over when his term should end.
made their way to the president’s room. Around 1 a.m.,
After processing the cold-blooded assassination of a
shots rang out. President Jovenel Moïse was dead. The
national leader, the world turned to the next obvious
first lady, Martine Moïse, was also shot but survived. Their
question: What were 26 Colombian ex-soldiers doing in
daughter was in the house but managed to hide.
Haiti?
Of the 28 men that entered the President’s home, two
were Haitian American. The other 26 were Colombian A Long War
mercenaries. The answer to this question ties back to Colombia’s more
In the weeks that followed, news began to circulate. than 52-year civil conflict, which dominated the country
Interim Prime Minister Claude Joseph declared a state of during the second half of the 20th century and produced
siege, placing the army in charge of security and limiting the most professional and highly skilled military in Latin
freedom of information. Joseph took charge of the America. This military became home to a group of highly
government but stepped aside later in July in favor of Ariel trained soldiers who, upon retiring, have transitioned
Henry, whom Moïse had appointed as prime minister the in increasingly greater numbers to the private security
day before his assassination. A Haitian American doctor industry. Colombia went from an importer of private
was suspected of ordering the attack as part of a plot to security throughout the 1980s and 1990s to an exporter,
take over the presidency. In the months leading up to sending highly trained soldiers around the world at a
the assassination, President Moïse had become deeply fraction of previous costs.
2 The Lauder Institute | The Lauder Global Business Insight Report | 2022
Since the 1948 assassination of populist leader Jorge U.S. military training and aid proved vital in the
Eliécer Gaitan, Colombia has been embroiled in a violent professionalization of the armed forces of Colombia. Gen.
internal conflict that has killed over 200,000 and injured Alberto Mejia, ex-commander of the Colombian armed
and displaced countless more. The war, which has forces between 2017 and 2018, said in an interview that
been financed largely by narcotics trafficking, has seen soldiers trained by the U.S. were the “tip of the spear in
whole sections of the country cordoned off by Marxist fighting terrorism and narcotraffic in Colombia.” However,
guerillas, weakening nearly to breaking point the power the resourcefulness and adaptability that make Colombian
and legitimacy of the government. For more than half a soldiers such skilled fighters are uniquely Colombian.
century, the Colombian armed forces have waged war and These are men capable of surviving in the jungle, the
sustained large casualties, forging by fire the third-largest desert, and high altitudes, who can, in Mejia’s words, “set
and one of the strongest and well-equipped professional up a system of communication in a matter of minutes”
armies of the region, standing 300,000 strong. Today, and pilot Black Hawk helicopters through difficult terrain.
after the 2016 peace treaty with the oldest Marxist The combined $7 billion in U.S. aid has accounted for only
guerilla group in the world, the FARC (Fuerzas Armadas 4% of the defense budget; the rest has been funded by
Revolucionarias de Colombia), Colombia has become “a Colombians through tax revenue
net-exporter of security,” as U.S. Navy Adm. Kurt W. Tidd
told a Congressional hearing in 2018.
“Colombian men and women
Professionalization of the Army and the continue to be caught up in the
Cost of War business of war.”
The modernization of the armed forces can be traced to
a change in national perception of security after a failed However, as Restrepo said in an interview, the price
attempt at peace. According to an article by Elvira Maria of war has been costly in Colombia. According to the
Restrepo, associate professor of international studies at Stockholm International Peace Research Institute, military
George Washington University and former special counsel expenditure in Colombia represented on average 11.2% of
to Colombian President Juan Manuel Santos (2016-2017), government spending between 2002 and 2021, which is
in the aftermath of the failed peace agreement at Caguán the highest amount in the region as a percentage of GDP
by President Andres Pastrana, one of the four separate (3.4%). Additionally, its partnership with the United States
attempts at peace processes since 1982, military aid aimed led to demands that crossed sovereign boundaries. For
at ramping up a war on drugs turned the tide of the conflict example, Colombia was the only country in the world to
in Colombia and helped form the armed forces of today. allow a foreign power to conduct aerial fumigation of crops
The failure of the peace agreement led to a change in the within its national territory. Glyphosate fumigation by the
national psyche towards a preference for the hard-nosed United States aimed at destroying coca crops between
national security doctrine that would characterize Alvaro 1994 and 2015 has severely damaged the Colombian
Uribe’s presidency. Uribe’s election in 2002, under the ecosystem and led to health problems for farmers whose
slogan “mano firme, corazon grande” (“firm hand, big heart”), crops were purposefully or accidentally fumigated, all
propelled the country into an age of militarization that without effectively reducing coca cultivation.
transformed the army and allowed for the government to
regain control of the country. Fueled by a U.S. aid package Further, the incentive structure that allowed the military to
originally negotiated by Pastrana, named Plan Colombia, become a highly effective fighting force also led to human
the Colombian armed forces cemented a deep relationship rights abuses that inflated the body count (as was the case
with the United States and brought large swaths of territory for the U.S. in Vietnam). In what is known as the “false
once again under the control of the central government. The positive scandal,” military officers executed civilian men
military victories achieved under Uribe’s presidency would who were falsely accused of being enemy combatants.
set the stage for the successful negotiation of peace with The silver lining in all this national pain is that today the
the FARC by President Santos between 2012 and 2017. Colombian army plays a role in training and peace keeping
Building a Better Future 3
internationally, by exporting security and training Central With the newly established peace, there was significant
American armies alongside the United States. positive speculation on Colombia’s economy. The National
Planning Department (DNP) forecasted a permanent
Currently, the Colombian armed forces are the only
increase of 1.1% to 1.9% to the GDP. According to the
Latin American army to be a partner to NATO and
World Bank, Colombia sustained unprecedented levels
have served as a proxy for U.S. troops in more than 40
of foreign direct investment, a signal of confidence in the
countries, training local military forces. In a U.S. House of
country’s stability. “Many of the professionals that were
Representatives 2014 subcommittee hearing, Gen. John F.
leaving the army and police had the possibility of joining
Kelly of the U.S. Southern Command praised the training
a regular work life and having a more or less normal life,”
efforts of the Colombian military in Central America, saying
Restrepo said about the positive outlook. However, the
that Colombian soldiers “are such good partners with
COVID-19 pandemic has brought economic instability to
us (that) when we ask them to go somewhere else and
Colombia. In 2020, according to the World Bank, Colombia
train the Mexicans, the Hondurans, the Guatemalans, the
experienced its first recession since 1999, observing a 6.8%
Panamanians, they will do it almost without asking, and
reduction in GDP. Unemployment rose over five percentage
they will do it on their own.” While the war with the FARC
points to 15% of the workforce. In this new climate,
has ended, the role of the army in Colombian life nationally
retiring soldiers are encountering inhospitable employment
has not changed. Military spending has not significantly
prospects and are more likely to turn to the private security
decreased since the signing of the peace treaty in 2016,
sector and the attractive salary that it brings.
with military spending still accounting for 3.4% of the
GDP in 2020, or $9.2 million. Colombian men and women
The Plan for Reintegration
continue to be caught up in the business of war.
When Colombian soldiers retire after 18 to 20 years of
service, they receive different standard pensions based
“Decades of war are not easily on their rank. For public officials and military officers, the
standard pension is the basic monthly salary, currently
dismissed by those who devoted
established at 908,526 pesos (approximately $240),
their lives to it.” with different premiums based on seniority, activity,
family, disability, etc. For professional soldiers, the
standard pension is 70% of their monthly salary (currently
The Human Factor established at a 40% increase of the basic salary), 38.5% of
While the end of war has been long awaited, it has also their seniority premium, and potential additional premiums
resulted in an increasingly large number of private soldiers. similar to that of public officials and military officers.
According to the General Command of the Military Forces,
The financial compensation of the Colombian armed forces
there has been a reduction of approximately 30,000
has remained relatively stable since the peace accords.
officers during 2013-17, with the biggest annual drops
However, a 2016 veteran’s law aiming at honoring the
observed since 2008.
work done by the Veterans of the Public Force provided
But decades of war are not easily dismissed by those new social benefits and welfare through state programs.
who devoted their lives to it. Layoffs and comparable These benefits range from access to digital media
low pay could create an incentive for former soldiers to platforms to access to basic and higher education. As
put their skills to use elsewhere. According to Restrepo, mentioned by Gen. Mejia, “For those who reach the term
“The peace agreement hadn’t foreseen a private security of 20 years, of which there are thousands, the military
sector reform, or anything that would reincorporate does something extraordinary. In their last year, when they
professionals from the army and police that would no have completed 19 years of service, they are sent to study
longer be necessary with the end of the war and give them for a year at SENA (Servicio Nacional de Aprendizaje); they
a dignified way out the same way that it was given to the can choose where and what to study. The government
former guerrilleros.” gives them this year as a tool so they can find a dignified
4 The Lauder Institute | The Lauder Global Business Insight Report | 2022job at the time of retirement.” This program aims to help immense majority of professional soldiers and retired
soldiers reintegrate into society and find a civilian job. military personnel who are working appropriately,
professionally, and ethically in Colombia or elsewhere.
Although the new veteran’s law establishes a positive
These soldiers take these fully legal jobs to support their
trend towards the reintegration of Colombian soldiers in
families and should not be scapegoated because of the
society, it does not fully address the issue. Neither did the
incident in Haiti. For example, Colombian ex-soldiers
peace accord. While the agreement prioritized establishing
were hired by Erik Prince, the founder of private military
peace, Restrepo noted, it failed to address what would
company Blackwater (now known as Academi), to work
happen to these highly skilled and technical soldiers
in the United Arab Emirates. The force was intended to
now that their primary purpose had been accomplished.
conduct special operations missions inside and outside
Furthermore, the armed forces purposely refrained from
the country, defend oil pipelines and skyscrapers from
including army personnel decisions in the accord to avoid
terrorist attacks, and put down interval revolts, according
being treated at an equal level to the FARC fighters.
to a 2011 New York Times article. However, the newspaper
The challenge that stems from the current situation is also reported that the UAE secretly dispatched hundreds
twofold. Firstly, the current reintegration plan only applies of Colombian and other Latin American private soldiers to
to those soldiers who remain in the army for over 20 Yemen to intervene in its civil war and fight Houthi rebels,
years. However, there are thousands of soldiers who leave increasing the complexity of a proxy war involving the U.S.
the armed forces before that. Mejia confirmed that the and Iran. In recent years, Colombian private soldiers have
military completely loses touch with them once they do. been in conflicts in several other countries in the Middle
Secondly, the transition to civilian life can prove difficult, East, including Iraq, Libya and Afghanistan, according to
both financially and emotionally, even with training. These reporting by The New Arab.
factors, when combined with high unemployment, the
It could be argued that with or without Colombian private
flood of Venezuelan refugees into Colombia, and a global
soldiers, the UAE would have found a way to intervene in
pandemic, significantly limit the options for retired soldiers.
the conflict in Yemen. But, as Gen. Mejia points out, these
By entering the private security industry, these retired
soldiers were treated as full members of the UAE army,
soldiers can often earn more than five times their regular
and their generous compensation gave them a stronger
income, significantly enhancing their economic prospects.
economic base when they returned home. Monetary
incentives are and will remain an attractive alternative
A Global Problem
for professional soldiers who have suddenly found their
As in any market, supply and demand are the norm, and
advanced skill set without use domestically but in high
Colombia is not unique in having thousands of experienced
demand in so-called “conflict markets,” and Colombia is not
special forces looking for employment in higher paying
unique in this regard.
markets. The pull that the private security industry has
on retiring soldiers is a phenomenon faced by countries
What Comes Next?
around the globe. Private security companies such as
Three of the Colombian mercenaries were killed by police
the Russian-based Wagner Group, London-based Aegis
in Haiti the morning after the assassination. Another 18
Defense Services, and U.S.-based Triple Canopy Inc.
were taken into custody and currently await trial. There
all recruit former special operations forces from the
are still many unanswered questions. How much did the
U.S., British, and Russian military forces, among other
soldiers know about what they were paid to do? How
nationalities. This industry is not new. In the 1980s, Israeli
much were they paid? Due to Haiti’s political climate and
soldiers for hire were discovered to be training “murder
continued instability, there is a chance that we will never
teams” for narcotraffickers in Colombia.
get the answers to these questions.
Moïse’s assassination putting the spotlight on Colombia’s
In the meantime, Colombia will continue to grapple with its
growing pool of former soldiers for hire, but Mejia points
role as one of the leading military forces in Latin America.
out that these few men cannot be associated with the
Building a Better Future 5While this presents opportunities for peacebuilding across is not new, and the answer has eluded many countries the region, it comes with a set of challenges familiar to before, but it is one that Colombia should try to solve if it any military power tasked with reintegrating soldiers into hopes to maintain its position of influence in the region. civilian society. Private security will always be there as a legal option for retired soldiers. The real question is how to This article was written by Lola Basabe, Julia Berbel, Mariana prevent highly trained soldiers from being lured into illegal Pavia, Mateo Sasse, and Hannah Sherman, members of the missions in search of economic incentives. This question Lauder Class of 2023. 6 The Lauder Institute | The Lauder Global Business Insight Report | 2022
How China and Japan are Using Robots to Fill
Gaps in the Workforce
Facing an aging population and a shrinking worker pool, China and Japan are turning to robots
to help keep their economies strong. This article explores the development of automation in
both nations.
As the world’s second- and third-largest economies, of the world’s first, most extreme, and most controversial
China and Japan have relied on their large workforces cases of government-mandated family planning. With
to drive economic growth over the past few decades. few exceptions (for minority groups and rural villagers),
Both countries now face the challenges of an aging the One-Child Policy mandated that each family have no
population and a shrinking workforce. These trends more than one child. Those in violation of the policy would
have led to a twofold issue — social systems burdened face hefty fines (estimated at 3 to 6 times the annual
with elder care and factories that need laborers. To income), forced abortions, and in some cases, mandated
address these challenges, China and Japan have turned sterilizations.
to automation, albeit in remarkably different ways. While
Over the next 30 years, the One-Child Policy shaped the
Chinese policies encourage support from national and
demographics of modern-day China, greatly reducing the
municipal governments in the form of direct investment
country’s population growth. According to the United
into automation, Japan’s policies have been markedly
Nations, total fertility dropped from nearly 6 births per
less interventionist: The government has provided
woman in 1960 to consistently below 2 in 1990. By some
subsidies, regulation removal, and guidelines in an effort
estimates from the Chinese central government, nearly
to foster private innovation. These different approaches
400 million births were prevented during this period due
to automation ultimately serve to guide industrialized and
to the policy. At the same time, the economy grew rapidly
newly industrialized countries that face similar population
and has since become one of the largest in the world. Now
and demographic challenges.
an industrialized economy, the country faces a different
demographic issue. In China’s most recent census, the
China’s Demographic History
population of 60 and older grew by 5.44%, while the
China’s demographic experiment is unlike any other in population between 15 to 59 shrunk by 6.79%. This
the world. The history of China’s demographic evolution shrinking population of working-age adults and growing
dates back to 1949. After taking control of the country population of elderly retirees has put pressure on the
in October of that year, the Chinese Communist Party country’s workforce and social security system. In an effort
swiftly implemented controversial economic and social to counteract some of these pressures, the government
policies, resulting in long-term consequences on the has taken targeted measures to reverse some of the
course of history for the country. Despite intending to impacts from the One-Child Policy. The country introduced
transform the previously feudal and agrarian country a Two-Child Policy in 2015 and a Three-Child Policy in
into a planned economy, programs such as the Great May 2021. At the same time, both private and public
Leap Forward and the Cultural Revolution had disastrous enterprises have worked to adopt uniquely innovative and
effects on the economic output of the country: Famines automated solutions to address these issues.
were widespread, the economy shrank, and in 1970,
China ranked amongst the poorest countries in the China’s Public and Private Sector
world, according to the United Nations. These calamitous
In 2014, President Xi Jingping called for a “robot
impacts on the economy, coupled with the country’s
revolution” that would transform China and the world. In
rapidly growing population, led the Communist party to
order to address its demographic challenges and increase
decisively implement the One-Child Policy in 1979, one
its competitiveness globally, the Chinese government
Building a Better Future 7started the “Made in China 2025” initiative to push for convert to jobs in the growing service sector; however,
high-tech manufacturing and gradually replace manual due to the low-skill nature of the jobs, they often
labor with robots. Local governments began to offer struggle to make a living wage. An optimistic view is
generous subsidies in order to promote conversion to that by automating low-skilled jobs, workers will be free
automation. In 2017, the city of Dongguan, in the heart of to be entrepreneurs, create new companies, and drive
the industrial hub of Guangdong province, invested ¥385 innovation. The next decade will be critical in determining
million ($56 million) toward the automation of factories, the future of China’s workforce and the relationship
according to the South China Morning Post. between it and technology. For a country that has so
heavily relied on its cheap labor to drive economic
Private companies have been driving automation to
development, China will inevitably be forced to adapt to a
supplement their shortage of workers. Jennifer Pak, a
new landscape over the next few decades.
China correspondent for Marketplace.com, reported
in a 2018 interview that to many Chinese factories,
Japan’s Demographic History
“automating is not so much about saving money; it’s a
matter of survival.” Otherwise, they would have to shut Japan faces a unique set of demographic challenges
down due to lack of a stable workforce. For example, Ying that threatens its long-term working-age population.
Ao, a sink manufacturer company quoted in the Financial This shortage is caused by Japan’s gradually declining
Times, spent more than $3 million between 2012 and population coupled with a rapidly aging population.
2016 to replace the jobs of 140 workers with nine robots. Factors such as low birth rates and low immigration are key
for the former, whereas the latter is compounded by long
life expectancy and high standards of elderly care.
“Private companies have been Figures from the Japanese Statistics Bureau in 2020 show
driving automation to supplement that since peaking at 128 million people in 2010, Japan’s
their shortage of workers.” population has been declining steadily, with the latest
census in 2019 coming in at 126 million people. Crucially,
this trend is expected to continue with the population
A 2018 study by the Boston Consulting Group reported projected to decline to 119 million by 2030 and even
that Chinese manufacturers have invested heavily in the further to 93 million by 2060.
past decade to develop automation capabilities across The data also show that Japan’s population growth
different industries, such as the automotive industry. throughout the 20th century was driven mainly by two
Between 2011 and 2016, Chinese automakers went from baby booms in the post-war era (1947-1949 and 1971-
having one-third of the industrial robots that the U.S, 1974). However, birth rates have gradually declined since
automakers had, to reaching parity with the United States. then, reaching a pivot in 2005 where death rates exceeded
By 2025, it is estimated that 5% of China’s workforce will birth rates for the first time — a trend that has continued.
be replaced by machines. By 2027, 2.28 million jobs in As reported in The New York Times in December 2018,
China’s banking, insurance, and securities sectors will be historically restrictive immigration policies arising from
automated, “particularly those involving mechanical and domestic opposition have also prevented an external
repetitious operations.” solution to the shrinking population, although recent
To Chinese people, this transformation will have mixed changes are attempting to reverse that trend.
effects on their welfare. The Chinese government is Japan’s aging population has also never been higher. As
invested in retraining its workforce, and it is offering of 2019, 28.4% of the population was above the age of
subsidies to companies that reemploy laid off workers. 65, far exceeding that of other developed nations such as
According to Jenny Chan, an assistant professor of the U.S. (14.6%), France 18.9%), and Germany (21.2%).
sociology at Hong Kong Polytechnic University, people Exacerbating this, the population of children (ages 0-14)
who are losing their jobs to automation are trying to in Japan reached a record low, at 12.1% of the total
8 The Lauder Institute | The Lauder Global Business Insight Report | 2022population. The resulting workforce shortage is expected to There have not been updates on the robot strategy. Due to
affect sectors such as caregiving, construction, agriculture, the coronavirus pandemic, the World Robot Summit 2020
and shipbuilding, with Prime Minister Shinzo Abe remarking has been postponed, and METI has yet to establish when
in 2018 that Japan has to look at several measures it will be held again. However, at the Robot Revolution and
including increasing female participation in the workforce, Industrial IoT International Symposium 2020, RRI did stress
delaying retirement, and increasing the use of robots. that automation will be accelerated by COVID-19, and that
the goal is not just to overcome the crisis post COVID-19,
Japan’s Public Sector but to become more resilient to crisis.
The Japanese government sees that robot technologies As the declining birth rates, aging society, and shrinking
possess the potential for solving social and demographic population of productive age advance, the Japanese
challenges. In 2015, the Japanese Ministry of Economy, government is investing in robot technologies to solve
Trade and Industry (METI) published the “New Robot social challenges such as labor shortages, overwork, and
Strategy” and established the Robot Revolution Initiative productivity growth. The RRI envisions a society where
(RRI) with 226 members from enterprises, governmental “robots can be found in every corner of Japan.” As other
stakeholders, research institutions, and individuals. This countries are concerned with rising unemployment due to
membership had grown to 560 as of September 2021. the robot revolution and automation, Japan is confident
In the 2015 report, METI established five sector focus that the revolution would not impact the job market in the
areas for Japan’s Robot Strategy: (1) manufacturing, (2) country. The unemployment rate in Japan continues to see a
service, (3) nursing and medical fields, (4) infrastructure, steady decline as robotic automation grows in the country.
disaster response, and construction fields, and (5) Perhaps Japan can set an example for other countries that
agriculture, forestry, fishery, and food industry. are going through similar demographic changes.
METI planned to provide R&D subsidies, standards
development, removal of regulatory barriers, user-driven “The Japanese government sees
design, pilots and “social verification” projects. METI
also planned to promote international collaboration,
that robot technologies possess
competition among research institutes by contest and the potential for solving social and
award scheme, and introduce open innovation. The Robot
demographic challenges.”
Revolution Realization Council, hosted by the Prime
Minister’s Office, oversees the progress, and METI is
responsible for the implementation of the strategy. Japan’s Private Sector
While the Japanese government is taking extensive
In the nursing and medical fields, METI’s motivation is for
measures to advance automation, much work is left to
robots to reduce the physical and mental burden of care
be done in the private sector. McKinsey & Company
workers, improve the quality of life of elderly, and enhance
published a report stating that Japan has massive
productivity and efficiency. METI also planned to provide
potential for automation, and “researchers estimated that
acceleration of medical product approval process for care
automation could displace around 57 percent of the work
robots and to make rental of care robots eligible for public
activities being done across Japan, enabling companies
medical insurance. METI aimed nursing care robots to
to lower costs and boost productivity despite a shrinking
achieve market share of ¥50 billion by 2020.
workforce.” The largest area of potential for automation is
In 2018, the government announced a robot hospital in physical labor, and a number of companies are beginning
project with a target of establishing 10 model hospitals by to take action.
the end of 2022. Per Nikkei Asia, the project is worth ¥100
Telexistence, a robotics company, is using automation to
billion through solicitation of private investments in robot
displace work activities in one of the most visible places
development.
Building a Better Future 9in Japan: convenience stores. Backed by the Softbank aging populations, the Japanese private-sector companies Group, Telexistence created a kangaroo-shaped robot have laid out a template to follow to compensate for the called Model T that can stack food and drinks on shelves shrinking workforce. throughout stores. A leading convenience store company, FamilyMart, plans to roll out the Model T in 20 of its stores Conclusion in Tokyo by 2022. With over 56,000 across the country, China and Japan have turned to automation to address convenience stores are an integral part of everyday life and the issue of a shrinking working-age population. In some a substantial part of the country’s retail sector. Advancing ways, they have taken similar approaches by advancing the automation will not only support the workforce in this manufacturing, construction, and service sectors, and both area, but also familiarize the general public with interacting countries are using robots to meet the inevitable gap in the with robots. workforce supply. However, they also differ in approach, Robots and automation are also being applied at greater with the Chinese government making direct investment scale in the building sector. The Japan Times reported and subsidies for automation efforts, compared with that only 10% of construction workers in Japan are Japanese companies using their own capital to develop under 30 years old. Tracy Staedter of Northrop Grumman specialized solutions to the shrinking workforce. While expounded on how major construction corporations like efforts are underway to progress automation to fill the gap Obayashi, Kajima, and Shimizu Corporation have invested in resources caused by a shrinking working-age population, billions of dollars in robotics to counteract the problem it will take time to realize the full potential. Nevertheless, of a shrinking labor force. Obayashi developed robots China and Japan stand out among industrialized nations to make concrete dams; Kajima developed self-driving for taking a proactive stance in solving a fundamental bulldozers to excavate and dump materials; and Shimizu economic problem. Corporation developed Robo-Welder and Robo-Buddy to continuously weld and bolt materials. Labor shortages This article was written by Austin Allen, Mintai Bautista, Peter have forced Japan to produce innovative solutions, and Jin, Shannon Julian, and Elliott Ng, members of the Lauder with many countries soon to face the same problem of Class of 2023. 10 The Lauder Institute | The Lauder Global Business Insight Report | 2022
In Latin America, Demand for Plant-Based Foods
is Upending the Market
Plant-based food and drinks are gaining in popularity across Latin America, where animal
proteins have been a dietary staple for hundreds of years. This article looks at the growth of
industry through the lens of NotCo, one of the most successful food-tech firms.
Across the U.S. and Europe, one of the biggest trends in burgers tasting like cardboard. From coconut and almond
food and beverage over the past two decades has been to oat and pea, dairy disruptors are garnering multibillion-
rising consumer interest in plant-based products. The dollar valuations, and plant burgers that “bleed” are
reasons are numerous, from long-standing moral appeals upending the very definition of meat.
for animal rights to more recent scientific evidence of
greater environmental sustainability and promises of American Giants
better physical health. Chief among them seems to be The popularity of plant-based foods didn’t happen
a large and rapidly growing base of consumers who overnight. Historically, countries like the United States,
prioritize sustainability and ethical considerations over China, Canada, Argentina, Brazil, and Chile have had
other concerns. Innova Market Insights’ Top Consumer some of the highest daily meat consumption per capita
Trends for 2022 and Vegconomist suggest environmental in the world. However, global trends towards healthier,
sustainability for the first time is poised to overtake plant-based foods have created space for tech-centric, AI-
personal health as consumers’ top-cited reason for empowered food-tech companies to engineer plant-based
shifting to a more plant-based diet. Following these vocal plates to perfection. The supermarket aisles are filled
consumers, savvy investors and innovative entrepreneurs with popular brands including Oatly, Beyond Meat, Blue
are stepping up to the plate to meet the demand for more Diamond Almond Breeze, and Morningstar Farms.
and better plant-based products.
But is the trend towards plant-based food and beverage
“Consumers across Latin America
relegated to highly developed, established markets and
their more affluent consumer bases? The case of Latin are not just interested in more and
America suggests otherwise. Regional consumer trends better plant-based products. They’re
have paved the way for a new breed of plant-based food
products manufacturers that are able to achieve scale hungry for them.”
without the support of distribution giants such as Unilever
and Nestlé. In fact, the continent recently minted its first Impossible Foods, one of the most well-funded and
food-tech unicorn this year: Chile’s plant-based NotCo. well-known plant-based companies, is on a mission to
In 2021, just six years after its founding, NotCo attained “transform the global food system” with their array of
a $1.5 billion valuation built on a wide and innovative products. To date, the company has focused on meat
product portfolio that includes milk, burgers, mayonnaise, substitutes, emphasizing healthy, sustainable products
and ice cream. Until recently, all this growth was that consumers can afford. Though they are U.S.-based
homegrown in Latin America. and primarily serve the American market, the company
Clearly, consumers across Latin America are not just is expanding into China. A member of Impossible Foods’
interested in more and better plant-based products. International Strategy team emphasized the exciting
They’re hungry for them. Gone are the days of soy milk challenge of serving plant-based chicken, beef, and fish
being the only available dairy alternative and veggie substitutes across a region with deep cultural alignment to
alternative proteins.
Building a Better Future 11While Impossible is gaining shelf space in the North To understand the effects of the positioning between
America and Asia, NotCo is dominating the South these two paths, it is important to review some of the key
American region. Founded in 2011, the company has implications and motivations that could arise from this
expanded from its first product, NotMayo, to add decision. First, in terms of valuation, positioning a company
three new products to their South American portfolio: that is following a tech path could yield higher valuation
NotIceCream, NotMilk, and NotBurger. According to as multiples in the tech space are generally higher than
Martín Bergada, senior manager for Strategic Planning, traditional players. In other words, investors that view
NotCo decided to attack the meat and dairy categories a new plant-based company as a tech company would
simultaneously to raise brand awareness, leverage their be willing to pay more to own a stake than those that
strong R&D capabilities, and address the market with view the company as a more traditional CPG. Therefore,
a holistic approach to plant-based diets. Last year, a company with the same net profits could attract more
the company expanded to the U.S. market with their investment just by positioning itself as a tech firm rather
NotMilk drink. Wearing the badge of Chile’s first unicorn than a consumer products firm.
company, NotCo is planning to expand in Latin America
Second, there are also cultural implications that trickle
through partnerships with quick-serve restaurants (QSRs).
down to staff. For instance, younger generations of
They also plan to continue to leverage Giuseppe, their
talent might be attracted to tech companies that want to
proprietary “AI chef” that analyzes the molecular structure
challenge the status quo. Bergada said target customers
of traditional foods, to find the perfect combination of
believe there is a need to switch from traditional models
ingredients to build tasty, plant-based alternatives to dairy
towards sustainable models to generate a positive change
and meat.
in the world. An innovative company committed to this
cause can be attractive to this type of customer, especially
“Consumption trends signal an younger consumers living in the larger urban centers.
Third, the goal of reaching a massive client base across the
inevitable shift towards more plant- world resonates with positioning as a purely traditional
based food.” consumer company. In order to have a robust execution,
companies will need to lean on expertise from large CPG
companies and use those market strategies for expansion.
While both Impossible and NotCo have had tremendous Although it is clear that a focus should be made to reach
track records in both the board room and the dining room, unpenetrated markets, this strategy can make the spirit of
they face challenges around company identity and product the company less innovative.
market fit as they scale.
Having analyzed this framework, it is unclear the path that
companies in the industry should follow in the next few
Nontraditional CPG
years as there is still room to innovate and to penetrate
Consumer hunger demands not only a wide offering of underserved markets. They will have to balance pursuit of
plant-based products but also a long-term sustainable profitability with continued growth and investment.
vision of the companies that sell them. While their present
is certainly exciting, what does the future look like for An Inevitable Shift?
companies like Impossible Foods and NotCo?
Consumption trends signal an inevitable shift towards
On one hand, there is pressure to follow the traditional more plant-based food. Moreover, these trends are
consumer packaged goods (CPG) industry path in pursuit accelerating. In the two years from 2019 to 2020, plant-
of profitability and continued revenue growth. On the based food retail sales increased 43% in the United States,
other hand, these companies have been industry pioneers which is nine times faster than total food sales). Players in
by introducing groundbreaking products developed this industry are already positioning themselves in different
through complex, proprietary technologies. geographical regions and consumer segments with a wide
array of products.
12 The Lauder Institute | The Lauder Global Business Insight Report | 2022At first glance, Latin America might not seem to be the historically entrenched multinationals like Nestlé and
most attractive market for a startup in this industry, owing Unilever have led the penetration of food and beverage
to a lower purchasing power and degree of awareness on products across Latin America, it seems that in the
the environmental impact of animal-based food relative to growing niche of plant-based foods, a more diverse base
other regions of the world such as Europe or the United of fast-growing startups has led the charge. As consumer
States. Furthermore, a strong culture and tradition of red preferences in the region grow beyond local and more
meat consumption in countries such as Argentina, Brazil, traditional foods, these new firms seem well-poised to
and Chile, poses additional obstacles for plant-based food shape the future of Latin America’s consumption trends
penetration. However, NotCo is experiencing significant and habits.
demand traction in large Latin American urban centers
As new players enter and disrupt existing markets in
like Buenos Aires, Santiago, and São Paulo, especially
agriculture and food manufacturing, the conversation
among younger generations. Initially, this Chilean company
continues to shift away from traditional consumer
targeted vegetarian and nutrition-conscious consumers,
products and more towards technology. As the market
but Bergada said they are experiencing a surging demand
moves forward, it is becoming more and more important
from young, nonvegetarian customers who assign a higher
to consider whether existing players in food production
value to environmentally friendly products. By providing a
and distribution will engage this growing field and begin to
high-quality product that mimics taste, texture, indulgence,
develop capabilities of their own.
appearance, and nutritional content, the company has
succeeded in supplying a demanding consumer that, Similar to Tesla in the automotive industry or Everlane
according to NotCo’s statistics, 40% of the time did not in clothing and apparel, companies such as Impossible
buy plant-based products again because they did not taste Foods and NotCo are increasingly threatening established
good or failed in some of these categories. giants in their industry. Whether or not they will one day
eclipse their more traditional industry counterparts is yet
The portfolio of products also varies substantially by
to be seen. The range of consumer habits that vary across
company. Firms such as Impossible Foods or Beyond Meat
countries and regions make addressing a global market
are focusing on marketing substitutes for meat, while
with a uniform product difficult. Nevertheless, it’s clear
others, such as Oatly, are concentrating on dairy products.
that the future of this sector is full of promise. As product
NotCo is not only marketing plant-based substitutes for
quality improves and the consumer base for plant-based
meat but also dairy products. Bergada highlighted the
foods continues to evolve, the future of the industry looks
importance of understanding how consumer preferences
brighter than ever.
vary between geographies, a reasoning that guided
NotCo’s decision to enter the United States market in
This article was written by Nader Sharif-Emami, Mateo
2021 solely with their milk product line in a first stage, so
Menna, Sophie Dezen, Cristobal de Atucha, and Alexander
as to better interpret demand response before expanding
Robinson, members of the Lauder Class of 2023.
to other categories.
Challenges and Opportunities for
Embracing a More Plant-Based Future
An important takeaway from the industry today is the role
of new businesses in shaping the global market. Although
Building a Better Future 13Is Edtech Flourishing in Latin America
and Africa?
Education technology companies are popping up across Latin America and Africa, seizing the
opportunity to fill the educational gaps created by governments. But drawing investors remains a
top challenge because of infrastructure. This article examines the edtech market in both regions.
Despite leaps and bounds in recent years, the global build the infrastructure needed to improve accessibility.
education technology (edtech) market still has a long Governments in emerging economies, especially in Africa
way to go to deliver significant change in emerging and Latin America, are often unable to leverage the
economies. Edtech was valued at nearly $1 billion in increased investment in edtech in their respective regions.
2020 and is expected to increase at a compound annual The managing director of a large impact investment private
growth rate of 19.9% between 2021 and 2028, according equity fund explained to Lauder Global Business Insight that,
to estimates that indicate the breadth of the market. while there is goodwill to invest in the education space
While edtech has created more innovative methods of in those regions, they lack the infrastructure required to
delivering education in emerging markets by introducing make the returns desired by private investors.
stronger digital elements and enhancing access across
The main constraint to scaling edtech investments is the
economic segments, it has yet to bring a substantial shift
lack of digitalization and the accompanying infrastructure
in democratizing education. The COVID-19 pandemic
in emerging economies. Across Africa and Latin America,
helped catalyze change, albeit rather slowly given the
insufficient government spending on critical digital
adoption and access issues that are the core problems of
infrastructure hinders the rollout of innovative educational
the industry in the developing world, as pointed out by
tools. The education sector is recognized as an essential
The Economist.
enabler for people in emerging markets looking to break
the cycle of poverty and improve their lives, particularly
“The main constraint to scaling edtech where continuing professional development is concerned.
Impact investors operating in this space promote these
investments is the lack of digitalization benefits, providing funding for innovative and early-stage
and the accompanying infrastructure projects that governments may not necessarily invest in.
Nonetheless, until governments in these markets prioritize
in emerging economies.” widespread internet access, digital tools, and regulatory
environments, these economies will not benefit fully from
the positive impacts and multiplier effects offered by
High literacy rates are crucial to achieving sustainable edtech. According to a senior director of an impact venture
development, according to UNESCO, yet they are capital fund, large funds will keep shying away from these
stagnating across the developing world, with figures markets due to the lack of infrastructure that enables
near 50% in many African countries. Graduation rates in these technologies on a large and equitable scale.
emerging economies appear to remain low overall. In Latin
America, where literacy rates are high and education is Investing in the Future
valued, only half of the students managed to graduate On the investor side, activity has proven to have high
from secondary education institutions as of 2017. Equity potential under the right conditions in the ecosystem.
and quality of education remain the main problem as This year, Peruvian edtech platform Crehana announced
governments in developing countries fail to invest the the largest Series B fundraising in Latin America to date,
funds required to enhance the education system or valued at $70 million. Crehana is an edtech platform that
14 The Lauder Institute | The Lauder Global Business Insight Report | 2022focuses on reskilling and upskilling individuals across Latin and policy to further its development. According to LEK
America, delivering a seamless experience for enterprises Consulting, nearly 80% of spending in the education sector
seeking to assist employee learning and development. is driven by governments, as opposed to 60% in health
The company partners with over 400 experts to offer care, meaning the number of investable projects is lower.
continuing professional development courses, and it The education sector in emerging markets has traditionally
achieved triple-digit growth in 2020. Crehana’s landmark been the sole responsibility of governments and
$70 million investment shines a light on the importance international aid agencies. Impact funds have been solving
of edtech companies and the keen interest from impact this challenge by investing in ancillary education services
investing firms to support them in Latin America. Luis such as teachers’ training. Investisseurs et Partenaires
Cervantes, managing director for General Atlantic, a (I&P), an Africa-focused impact investment group, has a
growth equity firm that led the round, said that “we dedicated education fund to promote education initiatives
believe digital education will increase access to life- in sub-Saharan Africa. According to Emilie Debled,
changing opportunities for lower-income populations I&P’s Executive Director for Strategic Development
across Latin America.” and Partnerships, tertiary education and professional
development have also seen a significant boost in demand
Behind the forces pouring money into edtech investments,
and innovation in response to the pandemic. However,
impact-focused funds and venture capitals with an impact-
Debled also explained that a visibility study conducted by
oriented thesis play a considerable role, with investors
her company revealed a lack of investment opportunities
such as IFC, ALIVE Ventures, and Rethink Education. Luis
in Africa within the education space, which reflects the
Narro, a venture partner at ALAYA Capital, said he sees
currently limited infrastructure and lack of government
investors with an impact-oriented thesis playing an even
promotion of investment ecosystems. As a result, I&P
more prominent role in venture capital investments in Latin
created a grant to support education businesses and
America in the future. In particular, edtech represents a
prepare them for the next stage of growth. Grant funding
massive area of growth due to the opportunity for positive
will support 45 companies, mainly in West Africa, and I&P
social impact in Latin America combined with the tailwinds
will provide technical support and mentoring to these
of high mobile penetration and government support.
businesses. I&P will be looking to make equity and quasi-
However, Latin America is not a solitary example. In
equity investments from its €50 million fund, which will
Africa, the industry saw a nearly 90% increase in funding,
be used for investments in Francophone African-based
from $7.6 million in 2019 to $13.7 million in 2020, and a
education companies.
year-on-year increase of 89.5% in January to May funding
2020 and 2021. Both continents are expected to continue Another vehicle of edtech innovation is specialized
this rapid rise in impact investing in edtech in similar yet vocational training as workers seek to equip themselves
different paths. with the right skills to succeed in a digital world. The
public sector has an important role in ensuring that
As evidenced by the scale of VC investment in edtech
policy frameworks are crafted to support professional
across Latin America and Africa, there is a clear demand
skills development for the population. According to
for investment in the sector to help bridge educational
the Organisation for Economic Co-operation and
gaps. Access to education is a fundamental building block
Development, Chile has been particularly progressive
of job creation across global emerging markets. The need
in this regard. Its government has incorporated
for innovative solutions in education has never been
“computational thinking” into the national curriculum as
more pertinent. According to UNICEF, the COVID-19
part of a coordinated effort across Chilean ministries to
pandemic further catalyzed the need for advancement
prepare the country for the global transition to a digital
in the education sector, where school closures have left
system. Across the rest of Latin America, the response
over 100 million children without in-person schooling in
to digitalization has been somewhat slower, putting the
Latin America. However, the education sector in emerging
drive for relevant educational solutions in the hands of
markets is still heavily reliant on government investments
the private sector. CreaCode, an initiative co-founded in
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