It is difficult to create a synthesis from the huge wealth of competition that exists in the food and beverage industry of industrialised nations, given the incessant amount of innovations and alternative strategies used in the name of rivalry among the different players in the segments of this industry. That is why some of the conclusions presented in this brief contribution may not fit in with the individual views of certain segments here, and in the same way will doubtless not be interpreted as such from the standpoint of specific companies in the sector.
The basic aspect which companies in the sector have to focus their strategies on, is that of identifying the series of major changes which are happening as a result of way consumers themselves are modifying their consumption habits, laying out new fields of competition for companies working in the sector.
If we pay attention to the most renowned works on this subject, we find ourselves in a situation which highlights the reality of groups of consumers with more spending power and less time to decide on what to buy, at the same time health conscious, and of a multicultural background, increasing the frequency of purchase throughout the day -especially in the afternoon and evening-and with a notable percentage who are mobile or prepared to travel in the quest for new experiences and flavours, etc. This is why one of the main concerns for companies in the sector is that of researching new ways to reach consumers, at the same time trying to increase their presence or profitability.
In contrast to the above mentioned global trends in consumption -strongly typified by the industrialised world -there is also another type of consumer, (defined by Professor CK Prahalad as the “Base of the Pyramid“), which requires a distinct approach. For this group it is necessary to adapt quality products to offer at low cost in order to solve the very real economic problems of the less well-off sectors of society, moulding the characteristics of these products and services to a the defined set of needs of this group (such as single doses of soap, reduction in the number of products per packet -avoiding wastage -high energy products, modified promotions, etc.).
In terms of rivalry within the sector, a number of trends should be taken into account when it comes to defining individual strategies of companies in this sector:
Consumption habits in terms of food and drink in the home have been noticeably changing: there is now a segment of the population that are demanding an ever increasing sophistication in meals and beverages, but the demand from homes for ready-made meals is also showing considerable growth too.
There is a rise in the number of clients with a greater mobility, who are generating major changes in the way companies have to present their products: packaging, commercial distribution, etc. and this reality is showing an exponential growth.
Food and drink of an essentially functional nature is also undergoing a marked development, although it caters for a segment of consumers with a wide variety of habits, thereby setting up a new areas of specialisation for certain companies in the sector.
The sophistication and raising of the quality level of products, along with the way they are marketed and sold in developing nations, has shown important growth, which is leading to a shift in management mechanisms in the value chain of companies in the food and beverage industry on an international scale.
The influence of the phenomenon of immigration in the West has also had a major impact on the competitive dynamics of the sector. Marketing and selling activities have been adapted to take in this segment of the population. There are an increasing amount of “personalised” offers for these groups produced by companies in the sector.
Product innovation and adaptation to different moments of consumption is one of the keys to competitiveness in the sector. Products must be armed with enough versatility in order to fit in with the various requirements of consumers according to the occasions when they may be purchased.
There is a growing trend to give products, which have always been market stapies, or difficult to set apart, a label of “exclusivity”: lettuce (ready cut and at a clearly higher price), bread for daily consumption (highly competitive), coffee (Starbucks is a well known example), salt, etc.
A growing collaboration is being witnessed between the food and beverage industry and enterprise working in other sectors with an aim to make the products on offer more attractive to consumers.
Each and every aspect related to a given product is important when it comes to aiding processes of differentiation and sale: design, marketing, containers, material, packaging, logistics, attracting clients, unorthodox methods of selling etc.
All the trends in the above mentioned section can be summarised by the need to take the segmentation of clients to an extreme, at the same time taking into account new behavioural trends and habits, selecting the most suitable products at the right moment of consumption, providing enough information and making the goods attractive to consumers. Traditional practices of segmentation of the food and drink industry have to become more sophisticated in order to meet the constantly evolving demands of the market. Food and beverage industry companies should be provided with a higher level of flexibility in the processes of developing new products; they should launch more products and focus on segments where they can find elements of differentiation that can be sustained over time. World brands continue to be strong, but it is still possible to compete in specific market niches when acting quickly, as adapting to clients and immediacy are two factors, which give a competitive edge.
Another critical element for the development of the food and beverage industry is the role of distribution, which has a huge influence on the competitive dynamic of the sector. For this reason it is also necessary to analyse certain relevant trends in this area:
There is a marked tendency towards the concentration of distributors in Europe, especially in the North, where three main groups account for 80% of markets in Sweden, Norway, Finland and The Netherlands. This is not the case in the United States given anti-trust regulations in force there.
Globalisation of the retail trade is a significant trend, although few chains have managed to establish profitable set ups in overseas markets.
Distribution chains focus their scope of activity to Format Development. Some of these formats, such as discount chains, convenience stores or local stores, are increasingly used by consumers. This means that major stores have to provide a variety of formats within a single floorspace, whilst small shops are moving towards specialisation in offering unique value propositions.
A major change is taking place in the concept of private or own brands. These had their beginnings in the battles to offer lower prices, but now, own brands have been transformed into product lines that are a commodity controlled, commercialised and sold in their own right by the chains, competing with brands from other suppliers.
Food and beverage manufacturers and distributors are also strengthening ties among themselves as it becomes necessary to fuse the aspirations of both parties concerned. Global manufacturers are looking for increased growth, whilst distributors focus on margins. There is a notable degree of collaboration between both sides in terms of information exchange on consumer behaviour, on forms of adapting the launch of new products to consumer needs, research into ways of in store commercialisation, packaging, logistics, etc.
The main challenges of retailing in relation to the aspirations of clients, (in other words; creating a store that offers a variety of purchasing choices which allow the client to satisfy particular needs, rather than a shop lacking in the ability to differentiate internally) can be met by; setting up ways of obtaining data on clients using multidimensional analytical methods in order to define client target groups, creation of specific offers for different client segments in local markets and in a variety of purchasing opportunities, offering to consumers a variety of purchasing formulae within the same store (from self-service to fully assisted sales), etc.
One of the most relevant aspects of cooperation among manufacturers and distributors is trade marketing, namely direct contact with consumers with the product within stores themselves. This is an area of the future where leading companies are concentrating major promotional efforts in order to win clients.
It would not be possible to discuss future trends for the food and beverage industry without taking into consideration the changes derived from the inclusion of new technologies in developing competition in the sector: sales over the internet, (experiencing growth, but without yet meeting expectations, envisaged or hoped for), use of new technology to provide a more accurate segmentation of client groups, (to the extreme of creating an individual client segment), use of the RFID system which allows goods to be traced throughout the entire logistic process, and mobile commerce, (generating new relationships with clients). In other words, for this sector, although there may be limits to imaginative ideas and commercialisation, technology has no bounds.
Catalan food and beverage firms should therefore orientate their activities bearing in mind the provisos mentioned here. Although size matters, it is not everything when it comes to designing business strategies. It is the author’s opinion that these elements around us, (and those which are specific to a given market) should be taken into account when trying to develop action plans with a tendency to research into the creation of niches overlooked by other organisations (taking as a starting point the specific characteristics of a given group of clients). In addition, they should make sure that competition has less of an influence in these niches, look for emerging demands in them, break with the dynamic of choosing between value and cost (both essential elements in strategic planning), and streamline all the activities of the company into looking to set apart its products from those of its main competitors at international leve!
*Publicado en el Informe Anual del Observatorio de Mercados Exteriores del COPCA, Junio de 2006