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Hamish Gow
Professor of Agribusiness &
Director of Business Strategy and Innovation
Te Puna Whakatipu
Unlocking the Value Puzzle –
What are grower’s options and their implications
• The Mega Trends
• Market Observations
• Consumer value
• Implications for the food industry
• Value disciplines
• Seeking alignment
• Conclusions
Presentation outline
The Challenge for Growers
The Megatrends
Food and Agriculture
Shift in economic and trade flows
Demographic and consumption
changes
Rapid urbanisation
Climate change and resource scarcity
Technology consumption
and breakthroughs
Source: PwC
Demographic and consumption changes Asia will drive the world’s population growth through to 2050
Sources: United Nations Population Fund Database; Food and Agriculture Organization of the United Nations (FAO)
• Supply chains will significantly alter • There will be unprecedented pressures on
infrastructures both hard and soft within these regions
• High potential for social and economic cost
42% or 1 billion of that
growth will come from Asia
Global population will grow from 6.9 billion in 2010 to 9.3 billion in 2050
The Middle Class Boom
Expect significant changes in
per capita consumption
Over the past 20 years, global consumption of protein has increased at a greater rate than population growth. This trend will continue.
Meat and Dairy
Meat
2010 2030 2050
Milk and Dairy
By 2050, Asian protein consumption will have grown by
128%
64kg 84kg 96kg
49kg 63kg 72kg
15kg 21kg 24kg
kg per person per year
http://cleanet.org/resources/42868.html
Rapid Urbanization
Asia beginning to dominate
Urbanization = Opportunity
No longer cooking at home
Global Economic Power Shifting Rise of the new Asian middle class
The Response…
Economic Colonisation
Embracing Complexity
Securing of Supply Chain through Technology
Active Engagement and Control of Critical Issues
Top retailers have gone global
With a population of 9.3 billion by 2050, the world will need…
80% more energy
55% more water
70% more agricultural
production
Climate Change and Resource Scarcity
World Land Grab
Technology is being leveraged
across the food chain
Precision Ag Satellites/ drones
Mobile and wearable
computers
Animal sensors
Genetically modified
plants/seeds
Cloud and Fog computing
2.5x 2020 internet
connected devices
1.7x 2020 internet
connected people
Innovating to Zero
b
Online is increasing
Would you say your online food purchasing has increased in the past year?
Source: Marketing Magazine.com.my
They want to share their experiences
Source: Marketing Magazine.com.my
So what are we observing in the markets?
Source: Hughes
What is the value proposition?
Global
High Tech
New and Improved
Ready-to-Eat
Low Price
Good For You
All Year
Large-Scale
Commodity Market
Open Supply Chain
Polarization of Markets
Local
High Touch
Traditional
Natural/Unprocessed
Premium Price
Naughty but Nice
Seasonal
Craft-scale
Speciality Market
Closed Supply Chain
We need to rethink how we view
markets, value creation, and strategy
Rapid Service Innovation:
Providing Convenience
Different trends,
Many Implications
Source: Rabobank 2015
Source: Deliotte 2015
• Does not mean that the Traditional drivers are no longer important – they will continue to be important for the foreseeable future for 49% of consumers
• The Evolving drivers encompass a broader set of purchase criteria and considerations
– these Evolving drivers are not driven by a certain region, age or income group
– they are pervasive across regions, age, and income
• which is either a good thing or a bad thing depending on your view of the world!
• Worse, consumers who place more value on the Evolving drivers in their purchase decisions appear more likely to use social media, mobile applications and devices, digital sources to acquire information about products or brands and are more prone to distrust the food industry in general
Deloitte. (2015). Capitalizing on the shifting consumer food value equation.
A pervasive change
The Hybrid Consumer
Source: Rabobank 2015
Nothing to be ashamed of….
Mid Market Beware
Source: Rabobank 2013
From Volume to Value
Huge Paradox
Consumers want different; Supermarkets offer more of the same
Implications for the food industry
• Food producers, processors, manufacturers and retailers need to determine what side of the new consumer value equation they seek to serve
– in the knowledge that an increasing number of consumers will be redefining the new normal
• Consumer tastes and preferences are expected to continue to fragment
• The middle is disappearing
• New “Retailers” role in influencing purchase decisions is increasing
• Smaller, newer companies will leverage new technology, third party relationships and better engagement to compete
• Larger competitors must adjust to fulfill new value propositions
Value Discipline Triangle
Product Leadership (State of the Art Technology)
Operational
Excellence (Lead in Price and
Convenience)
Customer
Intimacy (Tailor and Shape Offers
for Individual Customers)
Successful
Businesses Excel
in One Primary
Discipline or Boundary
Adapted From: Treacy and Wiersma, Harvard Business Review 1993
Product
Leadership
Operational
Excellence Customer
Intimacy
Products R&D, Brand Promotion
Costs Optimal Processes,
High Efficiency
Customers Problems
Understanding Needs,
Finding Solutions
What do I think about?
What do I focus on?
Branding Approaches
Product
Leadership
Operational
Excellence
Customer
Intimacy
New Technology = New Brands
“New Brands That Mean Performance”
Minimize Brands to
Maximize Efficiency
“Brands Don’t Sell
Products, Low Prices Do”
Customer Experiences and Needs
Drive Brand and Line Extensions
“Just the Product for You”
Brand
Proliferation
Brand
Minimization
Brand Optimization
Pricing Approaches
Product
Leadership b
Operational
Excellenceb
Customer
Intimacybbbb
Driver: Manufacturer Perceived Benefits Value to Customer
“Premium Price for Premium Performance”
Driver: Cost + Profit Expectations
“Low Prices Drive Volume Up
and Costs Down”
Driver: Channel and/or
Customer Perceived Value
“Programs for Everyone’s Needs”
Premium Pricing
Aggressive Pricing Variable Pricing
Channel Dynamics
Channel Captain
Adversarial Markets Shared Value
Product
Leadership
Customer
Intimacy
Operational
Excellence Standardized Norms
Open Markets
External Innovation
Licensing
Preferred Suppliers
Private IP
Open Knowledge Flow
Collaborative Partners
Co-Creation
“Stacked” Value Disciplines
Companies align around each other and attract
customers based on their value disciplines
OE
OE
OE
CI
CI
CI
Processor
Channel
Consumer
Supplier
OE CI
Alignment
Everyone has customers….
Good PL or OE Companies Are Customer Focused!
Give the Customer a Great Product That
Performs
Take Responsibility for
the Customers’ Success
Help the Customer Be
More Efficient or Cost
Effective
PL
OE CI
Address
Customers’
Concerns
The Support
PL
OE CI
Safety, Quality and Communications Critical to All Value Disciplines
Food Safety,
QA and ICT
Cut Waste and
Lower Costs
Brand
Protection
Agribusiness challenge
How do you build and manage dynamic sustainable biological production systems to meet consumers and channel partners changing expressed and latent needs and value disciplines within an increasingly volatile and rapidly shifting global market place?
Sears - Stuck in the Middle
Product Leadership (State of the Art Technology)
Operational
Excellence (Lead in Price and Convenience)
Customer
Intimacy (Tailor and Shape Products for
Individual Customers)
Target, Wal-Mart
Nike, Northface,
Calvin Klein
Nordstrom’s Sears
Cooler
Cheaper More Helpful
Sears - Stuck in the Middle
Product Leadership (State of the Art Technology)
Operational
Excellence (Lead in Price and Convenience)
Customer
Intimacy (Tailor and Shape Products for
Individual Customers)
Target, Wal-Mart, Aldi
Nike, Northface,
Calvin Klein
Nordstrom’s Sears
Cooler
Cheaper More Helpful
Fracture line
Implications for Growers
Product Leadership (State of the Art Technology)
Operational
Excellence (Lead in Price and Convenience)
Customer
Intimacy (Tailor and Shape Products for
Individual Customers)
Cooler
Cheaper More Helpful
Fracture line
• Understand your consumer and channel value discipline
• Need clear alignment, as in the earlier model from consumer to producer
• Not convinced that both consumer value drivers can be met by one business
• Choices need to be made – or they will be made for you
• The middle option is quickly disappearing
Clear alignment
