MBA Training - Sveučilište u Zagrebu Agronomski fakultet Slide Nr. 1 ©Morath [email protected] University of Hohenheim Institute farm management

AgribusinessSlide Nr. 1 © Morath

[email protected]://www.uni-hohenheim.de/agrarinf

University of HohenheimInstitute farm managementComputer Applications and Business Management in AgricultureProf. Dr. Reiner DoluschitzClemens Morath, M.Sc.Schloß-Osthof-Süd70593 Stuttgart

Agribusiness

Clemens Morath, M.Sc.

University of HohenheimInstitute farm management (410C)

Department Computer Applications and Business Management

MBA TrainingMBA Training25.09.25.09.--29.09.2006 Zagreb29.09.2006 Zagreb




Structuring

1 Definitions2 Elements3 Status in overall economy4 Problems5 Development6 Food industry7 Food industry in Europe8 Selected sectors9 Performance10 Literature




Definitions




Definition of Definition of AgribusinessAgribusiness

Agribusiness:

• upstream enterprises - from the viewpoint of agriculture(feed industry, agricultural machinery industry, plant protection industry, fertilizer industry etc.)

• Agriculture

• downstream enterprises – from the viewpoint of agrculture(food industry, food handicraft, food trade, wood industry, farm tourism etc.)

• Services (consultation, veterinarian, transportation …)




AgribusinessAgribusiness

Agri-Food-Chain

ConsumerProcessorAgricultureSupplier

Including wholesaler, retailer, packaging, picking and

transportation




Elements




1. Elements of 1. Elements of AgribusinessAgribusiness




Status in overall economy




Status in Status in overalloverall economyeconomy




SubsidiesSubsidies in in different different countriescountries




AgricultureAgriculture in in comparisoncomparison




AgribusinessAgribusiness in in comparisoncomparison




AgricultureAgriculture: : CustomerCustomer of of AgribusinessAgribusiness




EmployeesEmployees




AgrarianAgrarian goodsgoods in in thethe EUEU--countriescountries




Problems




Food Food expensesexpenses of of consumerconsumer in in comparisoncomparisonwithwith all all expensesexpenses




RevenuesRevenues of of agricultureagriculture in in comparisoncomparison withwithfoodfood expensesexpenses of of consumerconsumer




RevenuesRevenues of of agricultureagriculture forfor selectedselectedproductsproducts in comparison with food expenses of consumer




Price Price increaseincrease oror decreasedecrease




TendenciesTendencies in in AgribusinessAgribusiness

Influenced by: Legislation, consumer, competition

The price-competition in Germany is highest in comparison with the other European countries.

One result is that food retailers offer a huge range of products and use many and big stores.

Thereby all parts of the Agribusiness suffer. The rate of return of the enterprises are endangered. Some enterprises however successfully use this trend.

Causes for the price-competition are:

• Pronounced price sensitivity of the consumer

• Advertising-effective promotion of the price sensitivity

• Increasing market power of individual enterprises




Market Market powerpower

In the Agribusiness the tendency to larger enterprises groups continues. The necessity and the possibilities for growing are however different depending upon sector.

Enterprise sizes within the value chain rise from the farmer to the consumer. This causes a market power at the customers side.

The farmer is indeed the smallest partner in the value chain, since both its suppliers are larger as well as its customers. The farmer thereby has the smallest market power within the value chain.




Price Price erosionerosion

Since in many parts of the Agribusiness the inferior goods are on the majority the portions of the expenditures of the consumer decline although the income rises.

Inferior goods are according to household theory of micro economic goods, which demanded less while income rises. Their income elasticity of the demand is at absolutely inferior goods smallerthan 0, at relatively inferior goods smaller than 1.




Milk Price Milk Price erosionerosion




Development




DevelopmentDevelopment of of productproduct supplysupply

Food: The development is going from goods to become saturated to goods to serve special interests. Today we have also productsfor:

• Special age groups

• Sportsmen

• Diet

• healthiness

• Convenience and others.

Parallel to that development we notice a change in price ratio.

New: Energy supplier, resource supplier, …




ProductivityProductivity




Farm Farm enterprisesenterprises and and workersworkers




Food industry




Attributes of Attributes of foodfood industryindustry

The wage level in the food industry is almost 20 % lower than in theindustry average.

In relation to the turnover part of the processing industry of about10% the part of the employees is low with about 7%.

Reasons are:

• Above-average capital expenditure

• Above-average material and goods usage

The enterprise sizes are heterogeneous.

The situation is difficult for small and middle enterprises, since the food trade has larger market power.




EmployeesEmployees in in thethe foodfoodindustryindustry




Food Food industryindustry: : EmployeesEmployees and and EnterprisesEnterprises




Food Food industryindustry: : TurnoverTurnover ratioratio




Food Food industryindustry: : TurnoverTurnover and and exportexport ratioratio




Food industry in Europe




Employee and Employee and addedadded valuevalue(2000)(2000)




IndicatorsIndicators forfor foodfood industryindustry(2001)(2001)




AddedAdded valuevalue and and EmployeesEmployees dependingdepending on on enterpriseenterprise sizessizes (2001)(2001)




Food Food spendingsspendings of of europeaneuropean HouseholdsHouseholdsin in percentagepercentage




Selected sectors




AgriculturalAgricultural techniquetechnique industryindustrySituation in GermanySituation in Germany

• 280 agricultural techniques enterprises in Germany

• Employees: 25.500

• Turnover in 2002 about 4,5 Mrd. Euro, about 25% are tractorproduction

• In Europe the agricultural techniques market was bullish in 1996 to 1998 and declining till 2001

• The german market was weak in the last years. The overallinvestment of an agricultural enterprise are around 25.000 Euro.

Quelle: VDMA Fachverband Landtechnik: http://presse.dlg.org/workspace/de/page8847.html/




Plant Plant protectionprotection industryindustrySituation in GermanySituation in Germany

Turnover: 3,2 Mrd. Euro of the IVA-members

Export: 2,1 Mrd. Euro of IVA-members

Employees: 8000

6 enterprises contain80% of the global turnover

A product costs 200 Mio. Euro till market launch.

Quelle: Industrieverband Agrar: http://www.iva.de/




BaceryBacery handicrafthandicraftSituation in GermanySituation in Germany

• Turnover: 12 Billion Euro in 2003

• Yearly investment of more than 500 Million Euro


• Decline of the enterprises from about 55.000 in the fifties to about17.500

• Market share is about 60% of the des bakery product market

• 1,7% of the enterprises contain 45,5% of the market

• Trend: out of office consumtion, health-conscious food, globalisationof the bakery market, computers in bakery, refrigeration

Quelle: Zentralverband des Deutschen Bäckerhandwerks e.V.: http://www.baeckerhandwerk.de/




MillsMillsSituation in GermanySituation in Germany




BreweryBrewerySituation in GermanySituation in Germany

• 1200 Enterprises

• 5000 trademarks


• The biggest 10 worldwideproducingbetween 31 and 190 Hektoliter




Milk Milk economyeconomySituation in GermanySituation in Germany



• about 500 enterprises

• Wage rate is 5,9% and is clearly under the rate of the food industrythat has 10,9%

Quelle: Zentralverband Deutscher Milchwirtschaftler: e.V. http://www.zdm-ev.de




MeatMeat processingprocessing industryindustrySituation in GermanySituation in Germany



• about 1000 enterprises

Quelle: Bundesverband der Deutschen Fleischwarenindustrie: http://www.bvdf.de und die dortigen links




Food Food retailersretailers

Heterogeneous enterprisesizes and increasing marketpower of the biggest.




Discounter in Discounter in foodfood tradetrade

Discounter are winingmarket share.

The competitors try to create innovative concepts or owndiscount strategies.




TheThe biggestbiggest foodfood retailersretailers worldwideworldwide




AgrarianAgrarian softwaresoftware enterprisesenterprises

Software enterprises in Agribusiness:

• Low number of enterprises

• small softwware enterprises

• They are producing software for special agrarian problems

• Strategies additionally to the sector specific functions:Extended benefits (e.g. accounting), special software is structured likestandard software




Performance




MokselMoksel

Moksel AG

Meat processingindustry is affectedby overcapacities

Market capitalisation129,13 Mio EURFree float2,27%




MetroMetro

Metro AG

Food retailers wantsto lower the pricecompetition.

Market capitalisation14.634,32 Mio EURFree float49,80%




DeereDeere

Deere & Co AG

Agriculturaltechniquesproducers push mergers and marketpower.

Market capitalisation14.377,89 Mio EURFree floatn.a.




NestlNestléé

Nestlé AG

Market capitalisation216.886,18 Mio EURFree float100,00%




ReferencesReferences

References which have been used for these slides (most are german):http://forum.europa.eu.int/irc/dsis/bmethods/info/data/new/coded/de/all.htm

http://epp.eurostat.cec.eu.int/cache/ITY_OFFPUB/KS-NP-04-039/DE/KS-NP-04-039-DE.PDF

Breitenacher, M. / Täger, U. C. (1996): Branchenuntersuchung Ernährungsindustrie

Deutscher Bauernverband (2004): Situationsbericht 2004

http://www.mm-eurodata.de/presse/Food_Top30_2002.pdf

http://www.verbraucherministerium.de/data/0005369D7F881050BEF66521C0A8D816.0.pdf

http://presse.dlg.org/workspace/de/page8847.html

http://www.agri.biz/images/agribusiness.jpg

http://www.agri.biz/system/absatz/index.html

http://www.geva.com/index.php?id=31&backPID=31&pS=1086040800&pL=2591999&arc=1&tt_news=135

http://www.situationsbericht.de




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MBA Training - Sveučilište u Zagrebu Agronomski fakultet Slide Nr. 1 ©Morath [email protected] University of Hohenheim Institute farm management