1. Competitiveness, Innovation and the Value Chain Rodolphe de Borchgrave Arcadia International® Den Haag, 27th November 2008

2. Agenda Competitiveness, Innovation and the Value Chain Approaches to Value Chain re-design Agro-food SME specifics

3. Introduction Arcadia International® –Agro-food industry consultants –An international network of experts –Info : www.arcadia-international.netwww.arcadia-international.net The motto of this presentation : « Competitiveness oriented innovation involves re- inventing the company’s value chain »

4. What is value in agro-food…? Life style Convenience Pleasure Nutrition Health Materials Production Logistics Marketing Profit Distribution Consumer’s (Willingness to pay) € Producer’s (Revenue) € The challenge :

5. Interdépendent operations/operators Agriculture Ingredients Transformation Distribution Costs Margin Inputs Consumers €

6. Materials and information flows Agriculture (farms) Ingredients’ producers (1st transformation) Food products producers (2nd transformation) Distribution

7. Agro-food value chain specifics Agriculture Ingredients Food products Retail Many operators upstream (farms) Largely a push supply chain Contact with the consumer dominated by retail PUSH PULL

8. Competitiveness, innovation and value chain transformation Competitiveness emphasis –Cost reduction –Integration Innovation emphasis –Value creation –Reinvention

9. Cost reduction Initial costs Reduced costs do the same with less resources an endless spiral ! the price to pay : which impact on value ? DRIVERS Retail pressure Overhead Substitution Reformulation Scale Economic cycle down turn Ex : addition of water (fruit juice) or sugar (chocolat, jams) Reduction of portion size (chocolat, biscuits …) or packaging weight

10. Integration Interconnection and coordination of…processes, activities, or information and materials’ flows …. with a view on continuous (seamless) operations as if there was no organisational or legal intercompany boundaries reducing inventories, improving flexibility and cycle time Company A Company B Company C Integrated Non integrated

11. Integration driven VC re-design An example : P&G Production Point de vente Consolidation Of data Distribution center Point de vente Point de vente Point of sales Production Data consolidation Point de vente Point de vente Point de vente Point of sales Sales data Supplies Goods Sales data Biens STRONGER INTEGRATIONLOOSER INTEGRATION

12. Innovation : value creation Life style Convenience Pleasure Nutrition Health and hygiene Life style Convenience Pleasure Nutrition Health and hygiene nutraceuticals bio-food … origin (appellation) exotism pre-cooked sizing….. variety texture ingredients Examples

13. Value as a combination of strategic capabilities Value production seen as the resultant of a unique combination of company specific capabilities Secure and reliable raw materials sourcing Innovative patents in milk peptides Strong « regional product » image By-products valorisation OTHER….. Benchmark XXXX XXX XXXX Standard ou sub-standard

14. Complementary capabilities in the business environment Supplies Patents Valorisation ETC … Image R&D Patents Logistics ETC … BRIGHT DESIGN Managing client fidelity Internet sales International ETC … Image CHEESES HOTEL CHAIN APPLIANCES ? ? ?

15. Complementary capabilities in the supply chain Agriculture IngredientsFood products STRONG COOPERATIVE UNIQUE NUTRIENT EXTRACTION BIO FRIENDLY PROCESSES

16. Recombining inter-company capabilities to create joint value SUPPLIES NETWORK OF SALES POINTS iNTERNAITONAL LOGISTICS

17. Examples Philips Domestic ApplianceSenseo + Douwe Egberts Coca Cola + NestléReady to consume tea and coffie Mc Donalds

18. What about SMEs ? Not only for multinationals ! SMEs also have unique and specific strategic capabilities ! These CAN be inter-company combined to create value Examples : –Pain Quotidien : « social » network of sales points –Marcolini + Nestlé : international development Requisites : –assessing one’s own strategic capabilities –monitoring the business environment ! A role for SME support agencies !