1. Brand Leadership and Product Innovation as Firm Strategies in Global Food Markets Mark J. Gehlhar Anita Regmi Spiro Stefanou Barry Zoumas International Food and Agribusiness Management Association 15 th Annual World Food and Agribusiness Forum, Symposium and Case Studies June 25-28, 2005

2. Competition in global food markets Competitiveness: re-emerging issue of national interest in the United States U.S. is now a net importer of processed food Is innovation taking place and what are the motivations?

3. New Drivers of Change The consumer: -Aging, educated, affluent consumers in developed markets -Greater urbanization in developing countries Product design: merging of food science and health awareness into products The retailers: growing concentration in developed markets with global retailers now reaching developing countries

4. Shift in balance of power Retailers pressuring manufacturers (quality and reliability) Margins on branded products under greater pressure more with private labels (store brands) Food products more difficult to differentiate with “imitator” manufacturers increasingly supplying retailers Branded manufacturers undergoing an identity crisis?

5. New Food Products Introduced Globally Source: Productscan Number of products

6. Source:Productscan,2005 Dairy share of food products Number of new dairy products (thousands) Dairy products as share of all new food products is rising

7. New Food Products Introduced Globally by the H.J. Heinz Company Source: Productscan, 2005 Number of new products A period of divestments but “focused” growth

8. New Food Products by Snyder’s of Hanover: A medium sized U.S. private company “America’s Pretzel Bakery” Source: Productscan, 2005 Number of new products

9. How does the branded manufacturer compete in the changing environment? Marketing Quality Productivity

10. Basic Orientations of Firm

11. Types of firms and motivation for innovation Previous study using case series approach Trail and Meulenberg 2002, Agribusiness Hypotheses: -Every successful firm has a single dominant orientation either in product, process, or market -Successful branded manufacturers are predominantly product or market oriented -Privately owned companies are more likely to be product oriented than public companies -Cooperatives are less product innovative and expected to be more process innovative

12. Market orientation (produce what current market wants) Process orientation (adopt efficient production and distribution technology) Product orientation (innovate products with quality focus) Branded food manufacturer Non-branded manufacturer Traditional cooperative Firm orientations and competitive forces

13. Our Approach Interview leading firms of different ownership types and sizes supplying in different product markets Discover their identity (or who they think they are) What makes them different ? What are they doing about securing growth and leadership? Who they are is revealed by their actions

16. Leading Companies in Global Dairy Sales, 2003

18. Case profiles of large public, medium private, and international cooperative H.J. HeinzSnyder’s of HanoverFonterra Cooperative Group Strategic resources (real or perceived) -High quality brand image since 1869 -International expertise in condiments and sauces -Fine art of pretzel baking since 1909 -Family tradition and geographic brand -Deep knowledge of milk and dairy components -Brand image of clean environment and green pastures Product orientation Packaging and innovation for healthier convenient products Niche marketer of high quality snack foods Improving dairy ingredients through technology Process orientation Streamlining initiatives with sharper focus Flexibility and speed in adopting new ideas and products Foreign partnership and global procurement to reduce risk and improve operational excellence Market orientation Educate consumer about health benefits of products Listen to new ideas and concepts from traveling abroad Educate consumers about benefits of products and ecological sound practices

19. Case profiles of large public, medium private, and international cooperative: Company statements H.J. HeinzSnyder’s of HanoverFonterra Cooperative Group Comments from management-Quality and innovation are the way forward” -Brand growth will benefit greatly from sharper product focus, reduced bureaucracy and simplified business processes -Do not let consumers take you where you don’t want to go -We want to be indispensable to our customers -Rather than innovate across the board, we are narrowing our focus to our highest- earnings brands

20. Market orientation Influence what market wants Process orientation adopt processes using strategic resources more effectively Product orientation Innovate to differentiate products using strategic resources H.J. Heinz Make existing product under Heinz brand healthier with convenient packaging Snyder’s of Hanover Specialize in baking tradition using product extensions of pretzels Leaders recognize strategic resources and use innovation to influence market for sustaining profits and growth Fonterra Use R&D extensively and promote wholesome “green pasture” image to promote milk products and ingredients Direction for sustaining superior profits Resource base Leaders recognize strategic resources

21. Summary A dominant orientation is not revealed in cases here, rather there is a balanced orientation A “focused growth” strategy using improved processes to enhance product innovation Leaders have clearer identity when recognizing their strategic resources Leaders try to steer the market with new products and consumer education