1. MARKETING CHANNEL Adding Utility
Processors: form
Wholesalers: place and possession
Retailers: place and possession
Food service: form and possession

2. Top 5 Food Companies by Stage of Marketing, 2005

3. Second 5 Food Companies by Stage of Marketing, 2005

4. FOOD PROCESSING
Food and beverage manufacturing plants transform raw agricultural materials into intermediate foodstuffs or edible products
Use labor, machinery, energy, and scientific knowledge.
In 2005, these plants accounted for 13% of the value of shipments from all U.S. manufacturing plants.

5. FOOD PROCESSING Size and location of processing plants:
Geographic concentration of raw products
Economies of scale
Cost of transportation of raw materials vs. final products
Cost of labor

6. FOOD PROCESSING Challenges: “Right” plant size
Operational efficiencies vs. transportation costs

7. FOOD PROCESSING
Vertical integration to address how to operate at full capacity with highly fluctuating supplies

8. FOOD PROCESSING Most processors are highly diversified: Multiplant
Multiproduct
Multimarket
Multinational

9. FOOD PROCESSING

10. FOOD WHOLESALING
Food wholesaling consists of that part of food marketing in which goods are assembled, stored, and transported to customers, including retailers, foodservice operators, other wholesalers, government, and other types of businesses:
Sales in 2002, the latest year available.
Retailers (food-at-home sector) - $282 billion
Foodservice (food-away-from-home) sector - $118 billion
Sales to other wholesalers—small specialty wholesalers who purchase goods from larger wholesalers—were a significant share (26 percent) of total sales.
Merchant wholesalers are important for small independent stores

11. Three Types of Wholesalers by Function
Manufacturers' sales branches and offices (MSBO)
Wholesale operations maintained by grocery manufacturers to market their own products.
Merchant wholesalers
Also referred to as third-party wholesalers
Buy from manufacturers and resell to retailers, institutions, and other businesses. 
Account for 61% of grocery wholesale sales.
Brokers and agents
Buy or sell for a commission as representatives of others
Typically do not own or physically handle the products.

12. Merchant grocery wholesalers by the types of products distributed:
General-line distributors
Also referred to as broadline or full-line distributors
Handle a broad line of groceries, health and beauty aids, and household products
Examples: C&S Grocers, Supervalu, Nash Finch, and Sysco.
Specialty distributors
Primarily handle items such as frozen foods, dairy products, meat and meat products, or fresh fruits and vegetables.  
Specialty wholesalers account for nearly half of grocery wholesale sales.
Miscellaneous distributors
Primarily distribution of a narrow range of dry groceries such as canned foods, coffee, bread, or soft drinks.

13. Three types of foodservice distributors
Broadline foodservice distributors
Purchase and stock a wide range of food products from manufacturers
Offer value-added services designed to meet the needs of single-store restaurants and small chains.
For instance, foodservice operators without the staff to research new products and plan menus may rely on a distributor's sales representative for assistance (for example, Sysco and U.S. Foodservice).
Specialty distributors
Operate in niche markets where it is necessary to have specialized knowledge about the type of product being handled or type of operator being served.
For example, specialty cut meats, produce, ice cream, and coffee.
System distributors
Serve mostly of chain restaurants with centralized purchasing and menu development.

14. Types of Food Retailers for Food at Home
Supermarkets still the largest
Non-traditional continuing to grow

16. Food Retailing Strategies
Differentiation of store or company
Natural, organic
Upscale products and service
Life styles: Health, layout, experience
Cost lowering
Data synchronization with trading partners
29% of retailers and wholesalers using it in 2004
29% planning to participate in 2005
33% were considering it

17. Food Service Large and growing
Nearly equal to food at home on a dollar basis
Buying more than nutrition in the price

18. Food Service Types Full-service establishments, 40%
Have waitstaff, and other amenities such as ceramic dishware, nondisposable utensils, and alcohol service.
Fast food restaurants, 38%
Use convenience as a selling point; they have no waitstaff, limited menus and relatively sparse dining amenities.
Noncommercial foodservice operators, 15%
Institutional and educational settings, such as schools, nursing homes, child care centers, and hospitals.
Other 7%
Vending, sporting arenas, bars

19. Trends in Food Marketing
Mergers and acquisitions
Concentration
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

20. Peaked in late 1990s and has slowed in 2000s

23. Trends in Food Marketing
Mergers and acquisitions
Concentration
New product introduction
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

24. Over 90% considered “non-innovative”
Over 90% failure rate

25. Upscale = premium, gourmet, CAB, etc
Credence attributes?????

26. Trends in Food Marketing
Mergers and acquisitions
Concentration
New product introduction
Globalization
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

27. Globalization of Food Business
About the same dollar amount of US in other countries and foreign firm located in the US
US firms mainly manufacturing
Foreign own manufacturing and retail

28. FOOD PROCESSING Globalization

29. Global Food Retailing
Largest 5 worldwide food retailers in 2004 (Source: Supermarket News):
Wal-Mart (U.S.)
Argentina, Brazil, Canada, China, Germany, Hong Kong, Japan, Mexico, Puerto Rico, Singapore, South Korea, U.K., U.S.
Carrefour (France)
Argentina, Bahrain, Belgium, Brazil, China, Colombia, Czech Republic, Dominican Republic, Egypt, France, French Polynesia, Greece, Guadeloupe, Indonesia, Italy, Japan, Malaysia, Martinique, Mexico, New Caledonia, Oman, Poland, Portugal, Qatar, Reunion, Romania, Saudi Arabia, Singapore, Slovakia, Spain, South Korea, Switzerland, Taiwan, Thailand, Tunisia, Turkey, United Arab Emirates
Metro Group (Germany)
Austria, Belgium, Bulgaria, China, Croatia, Czech Republic, Denmark, France, Germany, Greece, Hungary, India, Italy, Japan, Luxembourg, Moldova, Morocco, Netherlands, Poland, Portugal, Romania, Russia, Serbia and Montenegro, Slovakia, Spain, Switzerland, Turkey, Ukraine, U.K., Vietnam
Ahold (Netherlands)
Costa Rica, Czech Republic, El Salvador, Estonia, Guatemala, Honduras, Latvia, Lithuania, Netherlands, Nicaragua, Norway, Poland, Slovakia, Sweden, U.S.
Tesco (United Kingdom)
China, Czech Republic, France, Hungary, Ireland, Japan, South Korea, Malaysia, Poland, Slovakia, Taiwan, Thailand, Turkey, U.K.

30. Trends in Food Marketing
Mergers and acquisitions
Concentration
New product introduction
Globalization
Wholesale club-stores
Store size
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

31. FOOD RETAILING Trends:
Increased market share of supercenters and wholesale clubs vs. traditional foodstores
Food sales by foodstores and wholesale clubs
1995
($ billion)
2000
Growth rate
(%)
FOODSTORES
402.5
483.7
20.2
WHOLESALE CLUBS
39.9
63.2
58.3
Costco
17.9
31.9
78.5
Sam’s Club
19.8
26.4
33.3

32. FOOD RETAILING Number and sales of retail foodstores Year
Number of Foodstores (1,000)
Annual Average Sales per Foodstore
($1,000)
Number of Food Items Carried
1920
375
30.7
700
1940
446
20.2
1,800
1960
260
198.8
5,900
1980
167
1,321.4
13,000
1992
180
2,043.2
16,000
1997
177
2,429.9
18,000

33. Trends in Food Marketing
Mergers and acquisitions
Concentration
New product introduction
Globalization
Wholesale club-stores
Store size
Information technology
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

34. Information technology
Trading partners work closely together to eliminate excess costs from the supply chain and efficiently serve consumers
Example
On-time replenishment of products based on consumer demand that allows manufacturers to more directly respond to consumer purchase behavior
Efficient Consumer Response (ECR)
Efficient Foodservice Response (EFR)

35. Trends in Food Marketing
Mergers and acquisitions
Concentration
New product introduction
Globalization
Wholesale club-stores
Store size
Information technology
Corporate social responsibility
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”

36. The Five Stages of Corporate Responsibility
Defensive stage.
When faced with unexpected criticism from media and social activists, typical deny the allegations or a relationship between the company’s practices and negative outcomes.
Compliance stage.
Corporate policy is formed and observed, and is usually made visible to critics. Compliance is viewed as a cost of protecting the company’s reputation and avoiding litigation.
Managerial stage.
Companies realize that the problem cannot be deterred by simple compliance or public relations strategies.
Source: Harvard Business Review excerpt, Zadek (2005)

37. The Five Stages of Corporate Responsibility
Strategic stage.
Companies learn how establishing strategies to address responsible business practices can give them a competitive advantage. One example is food companies that seek greater awareness of how their products affect consumer health.
Civil stage.
Leading companies promote industry guidelines and actions to address societal concerns. For example, companies may engage in educational initiatives to promote healthy lifestyle choices, or refrain from sales promotion strategies that could adversely affect social welfare. In a 2005 press release, Kraft Foods announced an initiative to advertise more nutritionally healthy products in media primarily viewed by children ages 6-11.
Source: Harvard Business Review excerpt, Zadek (2005)

38. Trends in Food Marketing
Mergers and acquisitions
Concentration
Integration
New product introduction
Globalization
Wholesale club-stores
Store size
Information technology
Corporate social responsibility
Enabling technologies enhanced information flow and management, improving logistics and allowing use of supply-chain initiatives like “efficient consumer response” and “efficient foodservice response.”