Chapter 1 Introduction to Food Marketing

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Chapter 1Introduction to Food Marketing

• Courtesy of WSU, Pullman WA
• Fall 2002

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Agricultural marketing defined

• The performance of all business activities
  involved in the flow of food products and
  services from the point of production until they
  are in the hands of consumers.

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Important points

• Includes entire system.
• Mutual interdependence.
• Must be coordinated and organized.
• Final focus of the system is THE CONSUMER!

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Marketing Channels
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Roles in the Food Marketing System

• Consumers
• Middlemen
• Farmers

Increased vertical coordination
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Major Groups in the Food Marketing System
Ag. Producers Food Marketing Firms processors who
lesalers retailers Consumers
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Measuring Economic Efficiency

• Efficiency an accepted measure of performance
• Efficiency is often measured by output relative
  to some input.

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Apply to the food marketing system

• Output/Input
• Two types of efficiency
• Operational efficiency
• Pricing efficiency

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Food Fiber System and US Economy
Share of Share of US US GDP Employment Farm
ing 0.9 1.2 Farm Inputs 3.9
3.2 Manufacturing 2.2 2.0
Distribution 5.9 10.4
---------
--------- Total Food Fiber System
13.1 16.9
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Points

• Farming is relatively small part of system.
• Roles have changed over time
• The food system as a of the U.S. economy is
  falling 1947--40, 1993--14

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Complexity of Food Marketing System

• Raw product produced on about 2 million farms
  spread across 3.5 million square miles of
  territory.
• production and population are dispersed.

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Complexity of Food Marketing System (contd)

• About 600,000 business establishments involved in
  getting farm products to consumers
• 14,000 assemblers.
• 24,000 food processing plants.
• 53,000 food wholesalers.
• 157,000 food retailers.
• 382,000 eating and drinking places.

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Complexity of Food Marketing System (contd)

• Serves about 250 million domestic consumers and
  exports about 140 million metric tons (MMT) of
  product worth about 50-60 billion each year.

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Food Marketing is costly

• Farm Value 584.6 billion
• Marketing Bill 465.8 billion or 80
• At-home 60 of expenditures.
• Away from home 40 of expenditures
• Marketing costs
• At-home 74 of expenditures.
• Away from home 84 of expenditures.

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Is the Food Marketing System productive?

• Productivity is defined in economics as the
  creation of utility
• making something people want and are willing to
  pay for.
• value-added

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Is the Food Marketing System productive?

• Form utility
• Place utility
• Time utility
• Possession utility

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Marketing as a Value-Added Process

• Change form of food products--
• Transport food to consumers
• Store and preserve foods--
• Assist consumers in acquiring the foods they want
  with supermarkets and advertising.

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Major players in the Food Marketing System

• Production Agriculture
• hard to identify in most commodity areas.
• Sales
• Food Processing
• Phillip Morris 31.5 billion
• ConAgra 28.8 billion
• Cargill 21.4 billion

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Major players in the Food Marketing System

• Sales
• Grocery Retailing
• Kroger 43.0 billion
• Wal-Mart 39.0 billion
• Albertsons 36.0 billion
• Food Service
• McDonalds 18.1 billion
• Tri-Con 14.0 billion
• Diageo PLC 8.6 billion

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Factors Changing Markets

• Consumer preferences
• Technology
• Competitive marketing strategies
• Govt policy
• International trade