Chain Reaction Research: Alicorp: Peru’s Dominant Palm Oil Player Has NDPE Opportunity
Alicorp is one of the largest consumer goods companies in Peru. It has an important presence in Latin American countries. Alicorp is a domestic market leader in various product categories in the following business segments: consumer goods, B2B and aquaculture. It dominates the Peruvian oils and fats sector, and is the major buyer of palm oil for domestic use in Peru. Grupo Romero, one of the leading family-owned company groups in Peru, owns 45.7 percent of Alicorp.
- Between 2000 and 2015, an estimated 40,000 hectares (ha) of primary forest have been cleared for palm oil plantations in Peru. While this represents a minor share of overall deforestation in Peru, it also corresponds to 52 percent of the cultivated area for oil palm in Peru. Alicorp is a major buyer of Peruvian palm oil. But it does not yet have a public No Deforestation, No Peat, No Exploitation (NDPE) commitment in place.
- The lack of a NDPE policy poses business risks for Alicorp. Zero-deforestation is rapidly becoming a requirement to access international buyers. An important and increasing number of domestic consumers value sustainability initiatives.
- Four percent of Alicorp’s revenue may be at risk due to increased demand for zero-deforestation products. For the consumer goods segment, changing consumer behavior could put three percent of revenue-at-risk. Additionally, the B2B segment may add one percent revenue-at-risk. This could mean a 12 percent equity price decline.
- Financial institutions increasingly recognize deforestation as a material financial risk. The lack of a public zero-deforestation commitment could prevent Alicorp’s access to finance from international markets, reduce enthusiasm for future bond or share issuance and raise their cost of debt. BlackRock has recognized deforestation as a material climate-change related risk.
- A strict cross-commodity NDPE policy could make Alicorp Peru’s frontrunner in the drive to halt deforestation and expand its competitive advantage into international markets. It could align the company with efforts by the Peruvian government and other stakeholders, which could increase the company’s market value.
- Alicorp’s adoption of an NDPE policy would reduce the Peruvian market for palm oil linked to deforestation. Alicorp is 45.7 percent owned by Grupo Romero. Grupo Romero wholly owns Alicorp’s competitor Grupo Palmas, which is Peru’s largest palm oil producer. Alicorp’s board overlaps with Grupo Palmas’ board, although they directly compete against each other in the B2B segment. With Grupo Palmas, an Alicorp NDPE policy that applies to all affiliated companies would cover nearly the entire Peruvian palm oil value chain.
For more information, please contact Tim Steinweg.