New Market Strategies in a Global Market

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New Market Strategies in a Global Market

• Reginald Clause
• Iowa State University
• Extension Value Added Agriculture

01.515.294.6601 rclause_at_iastate.edu
11/30/2004
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Session Goal To Offer a USA Perspective

• Frame the forces of change
• Describe current responses to change
• Implications for the future

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Scope of US Market

• Population 293 million
• 900 Billion spent on food
• Over half spent on meals outside home
• 2 Trillion output Total food and fiber
• 24 million employed in the industry

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Issue Drivers

• Food Safety
• Food Security
• Health
• Obesity
• Trade
• Environment
• Key pulses of nature important to consumers

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Demographic Drivers

• Baby Boom
• Price is major
• Convenience
• Knowledge marketing is working Labels
• Relationship Food with a Face
• Desire for more direct
• Affluence
• Want Variety
• Want nuance
• Trading up Authenticity
• Global perspective and curiosity
• Ethnicity

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Cultural Drivers

• Religion
• Personal Values (buyers conscience)
• Motility of the experience of food
• Home town food where-ever you are
• Ethnic diversity
• Segmentation and nuance
• Trading up
• Willing to pay for the experience and quality
• Authenticity
• You cant hype this one it has to be there

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Culture vs. Personal

• Consumer wants taste
• Society expects better nutrition

• Consumer wants abundance on the shelf
• Society expects easy on the environment

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Technology Drivers(From Because we can to
Because it works)

• Information tech
• Efficient info sharing
• Efficient traceability
• WalMart inventory system
• Bio-tech
• Example
• Low linolenic soy
• Mid oleic soy
• No saturated fat soy
• Production tech
• Massive reduction in chemical farming
• Extraordinary New Processing tech
• ADM soy processing example

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Stakeholder Evolution (Revolution?)

• Through mid 1980s Processor Controlled the power
  in the Supply Chain
• Large scale, undifferentiated, Processor
  mentality
• IBP, Tyson, General Mills, Kraft, Green Giant
• Power shifted to consolidated retail and food
  service
• WalMart, Safeway, Kroger, Ahold, SYSCO
• Consumer demands are now controlling
• I want it MY WAY
• And Ill move the target on you!

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Old Chain Format
Processor Drove Demand Down the Chain
Processor
Wholesale Retail Food Service
producer
Consumer
No Transparency
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Todays Chain Format
Consumer Drives Demand Signals up the Chain
Consumer
producer
Wholesale Retail Food Service
Processor
Transparency (Visible Value to the Consumer)
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Supply Chain Trends

• HACCP trending to QMS
• No Information trending to
  full transparency
• Consumer connected to Producer
• Traceability
• Authenticity
• Labels and Brands
• Differentiation
• Trading up

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Supply Chain Trends

• Three Ts are driving and enabling change
• 1) Technology
• 2) Traceability
• 3) Transparency

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Supply Chain Trends

• Farnhamville Coop AIB Certification
• New Feeds ISO 9000 Certification
• SE Iowa Ag Guild ISO 9000 producers
• Diamond V Mills GMO segregation

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Safeway ResponseFourth Largest US Food Retailer

• Differentiate on
• Quality
• Selection
• Communication
• Ranchers Reserve Tender Beef
• Coordinated effort with packer and feedlots
• Technology solutions
• Traceability
• Absolute tenderness guarantee
• Return of the meat cutters case

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SYSCO(Largest US Food Service)

• Pushing suppliers for differentiated product
• Customers pushing SYSCO
• Relationships with very small niche companies
• Autonomy for their various marketing companies
• New central distribution with decentralized
  marketing

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Organic/Natural

• 20 growth year on year Organic
• Mainstreaming
• Safeway forecast 1.2 billion
• 167 growth conventional stores
• 650 growth new format stores
• White Wave now owned by Dean Foods
• Affluence enables
• Baby boomer values fit
• Cost may be a constraint

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Marketplace Trends

• Private Label Products (Supermarkets 2003)
• Total sales for private label products 42.9
  billion
• Market share of private label food products for
  the year was 16.3 percent
• Toll Processing
• Pure Marketing (Brand) Companies
• Outsourcing Production Processing

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Marketplace Trends

• Market segmentation
• Player consolidation
• Globalization
• Product differentiation
• Supply chain coordination
• Integration and disintegration co-exist
• Innovation
• process
• product

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Market Reality Advertising

• General advertising not working
• Old advertising methods not working
• Word of mouth more dominant
• Consumers are more like a community in action

Advertising conundrum A wealth of information
creates a poverty of attention.
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Market Realities

• Shorter product life cycles
• Most new products will fail in two years
• Supplier relationships are crucial
• Transportation/logistics a dominant force

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Market Realities

• Quality Management Systems (QMS)
• Internal efficiency
• Perfect order to the customer
• Perfect quality to the customer
• Audit-ability
• Certification
• Ag 9000 initiative
• US National Animal Identification System

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A Great Food Chain Company

• Emphasizes communication and knowledge to the
  customer
• Emphasizes communication and knowledge from the
  customer
• Innovates in product, service AND process
• Balances customer wants with society expectations

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A Great Food Chain Company

• Establishes business organization for perfect
  orders and continual improvement
• Linkage forward and back for coordination,
  response and change
• Implements Traceability
• Values Transparency
• Implements Quality Assurance

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New Market Strategies in a Global Market

• Reginald Clause
• Iowa State University
• Extension Value Added Agriculture

01.515.294.6601 rclause_at_iastate.edu
11/30/2004