The 12 Megatrends in Agriculture (Doane’s Focus Report 1/30/04) 1.Continued consolidation at all levels of agriculture 2.Increasing government and regulatory influence 3.Rising impact of globalization on local markets 4.Continued development of niche markets

Megatrends (continued) 5.Continued technology advances 6.Increasing capital/finance pressures 7.Increasing focus on animal welfare 8.Greater demands for environmental stewardship

Megatrends (continued) 9.Job-creating rural development 10.Increasing emphasis on food safety 11.Increasing role of ag energy production 12.Increasing public scrutiny/pressure on ag policy

“You Can Eliminate the Middleman, but Not Their Marketing Function” Chapter 2 – Analyzing Agriculture and Food Markets

“The difference between and orderly closet and a disorderly closet can be traced to an adequate system of hooks, hangers, and shelves”

Approaches to Studying Food Marketing  Functional Approach –Breaks down marketing processes into “functions” –Looks at “Who” is involved Dr. John D. Lawrence, Iowa State University

Approaches to Studying Food Marketing  Institutional Approach –Analyzes the various agencies and business structures in the marketing process –Considers “what” is done Dr. John D. Lawrence, Iowa State University

Approaches to Studying Food Marketing  Behavioral Systems Approach –Looks at the marketing firms and how they behave in the marketing process –Combines who and what Dr. John D. Lawrence, Iowa State University

The Functional Approach  Exchange Functions –Buying –Selling

The Functional Approach (continued)  Physical Functions –Storage –Transportation –Processing

The Functional Approach  Facilitating Functions –Standardization –Financing –Risk Bearing –Market Intelligence

The Functional Approach (continued)  Important Characteristics of These Functions –Affect the “value” of food to the consumer as well as the cost. –You can eliminate the middleman but not their marketing functions –These functions can be performed anywhere by anyone in the system.

Institutional Approach  Merchant Middleman (takes title to, owns the merchandise before it gets to the consumer)  Retailer  Wholesaler

Institutional Approach (continued) Agent Middleman (act only as a representative, do not take title to or own product at any stage)  Brokers –Do not have physical control  Commission Men –Have broader powers

Institutional Approach (continued)  Speculative Middleman –Buy and sell products in hopes of profiting by price increases)  Processors and Manufacturers –Process and repackage product to increase its value  Facilitative Organizations –Stockyards, grain exchanges, etc.

Which is better? Selling direct to consumers Or Selling through a middleman

Mini Case, Page 30  How would you advise Kathy and Bill on their plan?  What are the pros and cons of their proposal?

“The Middleman Bias Is Even More Pronounced in Other Countries”

Behavioral Approach (Attempts to Identify Major Problems)

Four Major Types of Problems  Input-output system (producing an output)  Power system (being a market leader)  Communication system (transmitting management decisions into actions)  Adaptive system (adapting to change)

Food Marketing Management  Find wants and fill them  Not everyone wants the same thing  Target markets  Successful firms satisfy customer needs

“Efficiency Is the Most Common Measurement of Market Performance”  Operational Efficiency –Labor Productivity –Table 2-1 (page 36)  Pricing Efficiency –The ability of the market to allocate resources

“The Consumer Is King”  Vote with the dollar –Fat Hogs & Margarine –Beef Hormones &BST

Square Watermelons  A round watermelon can take up a lot of room in a refrigerator  Usually round fruit often sits awkwardly on refrigerator shelves.  Smart Japanese Farmers have forced their watermelons to grow into a square shape by inserting the melons into square, tempered glass cases while the fruit is still growing on the vine.

Doctrine of Consumer Sovereignty  Consumer must be provided with real alternatives  Consumer must have reliable and accurate information  Prices must reflect all private and social costs of marketing that food

“There is a wide and growing gulf between farmers and the food marketing system.”

The Farmer’s Marketing Problems  Should farmers become as large and powerful as the major food corporations?  Should large food marketing firms be broken up?  Should farmers foster group action through cooperatives and bargaining associations?

“The consumer will increasingly be involved in the food industry” Why?