Professional Documents
Culture Documents
Strategy and
Structure of the Food
and Beverage Industry
Course: Mgt 489 section: 6
Shahedul Alam (Shl)
Executive Summary
Food and beverage industry is one of the fastest growing industries around
the world as food is humans most basic necessity. Though this industry is
growing on a moderate level in US, it is the largest industry in Europe. There
is high competition in this industry. Though most companies in this sector are
SMEs, a few large companies are contributing by doing merger and
acquisition, vertical integration and expending into overseas market to
increase their sustainability and efficiency. The large companies in this sector
are- Nestl, Kraft Foods, Unilever and Cargill. Alongside US and EU, emerging
economy for food and beverage industry is China and India. They mainly
provide the raw materials for this industry. Any Economic downfall may
highly affect all other industry but food and beverage as it provides necessity
product which people need to use even in heavy economic downfall. Being
one of the fastest growing industries, this sector faces some issues such as
technological development. Due to increasing completion the R&D of this
industry should be well maintained which can be challenging to bring out
new
technologies
to
make
the
products
sustainable
and
efficient.
and beverage industry is one booming industry to invest in. With the
emergence of super shops concept and new technologies now many large
companies are investing in this sector and exploring its potential. Thus this
economic crisis immune industry has become one of the stable and
sustainable industries in Bangladesh.
Table of Content
Introduction.4
Global Industry Structure5
Global Industry Issues8
Bangladesh in Global Context
Analysis and Conclusion
References
Research Method
Formal thank you letter.18
Introduction
Food and beverage industry includes harvesting, packaging, distributing,
processing of consumer products over different regions. The industry is
growing at a moderate level in United States because of which the
companies are restructuring and realigning their activities to reduce cost,
increase volume and improve profits. Furthermore, large companies are
merging different companies varying in size to gain higher market share and
widen the product line they hold. On the other hand the non-soft drink
companies are seeing growth whereas the soft drink industry is not seeing as
much. Due to the high competition companies are expanding into overseas
market to grab more market share therefore increasing competition in
different regions of the world (TB Woods Incorporated Headquarters, n.d.). In
the EU food and beverage industry is the largest industry there, with an
estimated production value of 720 billion euros, this industry accounts for
13% of the total value of manufacturing. The industry employs more than 4.4
million people and transforms 70% of the agricultural raw materials produced
in EU. In EU the industry is highly fragmented with 99.1% of the total
industry run by SMEs employing 2.7 million people. The industry is made up
of many subsectors and uses different production process and packaging
techniques. Since it is dependent on various different techniques it is highly
dependent on the R&D sector since it helps improve the product and
process to make the companies more efficient. Although the industry is
highly concentrated with SMEs , there are a few large multinational producer
who have a significant impact on the international market. These companies
also participate in vertical integration to help increase the range of products
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they can supply and increase their market. The large companies concentrate
on the global market and the SMEs focus on meeting the local demands and
specialize in different subsectors (European Commission, 2005). In terms of
Bangladeshi market the industry is growing at a fast rate with many small
companies fighting for a position in the food and beverage sector however,
the market is mostly controlled by large corporation who enjoy economies of
scales and supply a wide variety of products to the consumers. The top
contenders in the industry are Transcom Beverage ltd, Akij Food and
Beverage and Partex Beverage ltd (Businesshabit.com, 2014).
the industry value was $50 billion in 2008. Below are some of the key
players:
Compa
Key
Market
Geographic
Reven
Operati
ny
brands
covered
coverage
ue
ng
name
Nestl
Nescafe,
Products are
Americas: 30.15%;
$101.8
profit
$13.8
Maggi, Milo,
sold in 120
Europe: 25.62%;
billion
billion
Kitkat,
countries
USD
USD
Gloria,
across the
Africa: 15.59%;
Nestl,
world
ARCHER
Power Bar
Monarch,
US,
32.45%.
US: 51.27%,
$69.2
$2.7
Novatol,
Caribbean,
Germany: 10.74%,
billion
billion
DANIEL
Bionature,
Canada,
Other Foreign:
USD
USD
etc
Europe,
37.99%
MIDLAN
Middle east
D
UNILEVE
Lipton,
Mainly Europe
$59.6
$8.5
R NV
Knorr
and Asia
35.71%, Americas:
billion
billion
32.57%, Europe:
USD
USD
KRAFT
Easy
North
31.72%
US: 50.80%,
$42.2
$4.9
FOODS
Cheese,
America,
Europe: 31.13%,
billion
billion
INC
Pepito,
Europe, and
Other: 18.07%
USD
USD
Toasted
Asia
Chips,
Toblerone,
Twist,
Splendid
Source: (IMAP, 2010)
The industry went through it downs due to the problems such as increased
food prices, decreasing in consumer spending, increased transportation cost.
Although such adversities have affected many industries highly however, the
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food and beverage industry is relatively not as affected. The reason behind
this could be the fact that food is a basic necessity of the people and
regardless of how bad the economy is performing people need to use these
products.
Global
Industry Issues
8
The food and beverage industry is overall growing due to the growth in
population however there are some global industry issues that all the
companies are facing, below are some of the issues:
industry for example Food and Drug Administration (FDA) Federal Trade
Commission (FTC) are some of the agencies that work for the government to
help maintain the basic regulation in the industry. Alongside these agencies
there are many other local agencies which help in the regulation of SMEs
thus helping the government regulate the industry properly (Hg.org, 2015).
Similar to the FDA Bangladesh has a regulatory body called BSTI which
oversees and regulates all the food and beverage industrys products thus
keeping the products safe for the consumers.
Deliver products with more nutritional value and fewer allergens: Since
more consumers are being interested in eating healthy the added
factor will help bring competitive advantage. Many companies have
already started acting on this by producing whole grain products to
10
of the consumers they can also reduce costs by reducing the waste.
(Infor, 2012)
Bangladesh possesses a very large and rapidly growing food and beverages
industry which stands as a major potential sector of the economy in terms of
employment, and value addition. In fact, the food and beverages industry of
Bangladesh makes up about 22% of the total manufacturing production in
the country, and employs around 20% of the industrial manufacturing labor
force, and around 2.45% of the countrys total labor force. It is a 4.5 billion
dollar industry which has around approximately 700 food manufacturing and
processing businesses. The major sub-sectors in the food industry consist of
rice, wheat, fruits and vegetables, tea, sugar, dairy, and edible oils. Being a
country with one of the largest populations in the world, and with the
population base growing ever more rapidly, the demand for food and
beverages is always rising. Moreover, due to factors such as the growth in
the economy and rising incomes, demand is being shifted away from
traditional foods and more towards high value foods. (Kundu, 2015). The
food and beverages industry was initially very small and limited to a few
domestic and family businesses which emphasized on basic agricultural
commodities. The industry did not gain significance in terms of operation
until the 1980s. Since the early 2000s the food processing industry of
Bangladesh grew at a rate of 7.7% annually and the range of variety of food
products in Bangladesh increased drastically since the last decade due to the
entrance of a number of both domestic and international food companies
into the industry. (Md. Khairul Akter, 2015)
Moreover, the geographical agrarian setting Bangladesh is situated on, and
its strategic location, is very beneficial to the agricultural production. (Md.
Khairul Akter, 2015) Agriculture contributes greatly to the food industry of
Bangladesh. As of the 2012 2015 Bangladeshs export policy, the agro
sector remains one of the top most priorities. Out of the total Gross Domestic
Product, 32% of it is made up by the agro foods and beverages industry. (Md.
Khairul Akter, 2015)
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However, even with all this crop produced, constraints such as population
pressures continue to make it hard for farmers to meet demand and
therefore lead to food deficits and losses. For instance, the Bangladesh Sugar
and Food Industries Corporation BSFIC has recently incurred a loss of TK
5.3billion last year alone. These food deficit gaps are met and matched by
commercial imports from other countries.
The Bangladeshi food and beverages industry plays an important role in both
the domestic and the global market. The impact globally can be noticed
through the increased exports of agro foods from Bangladesh to countries
around the world. Although the agricultural sector of the food industry is
falling, the country has great prospect if and when viewed as an industry
which exports food. Moreover, when it comes to labor intensive agricultural
manufacturing and processing and production of horticultural goods,
Bangladesh has a comparative advantage over other countries. The
Bangladesh Agro-Processors Association has been focusing on
manufacturing, processing, and exporting approximately 90 different
products to around 70 different countries. Moreover, the country is aiming to
increase its GDP through the food and beverages industry by exporting
certain agro foods. For instance, the fertility of Bangladesh is suitable for
growing maize and corn which is in turn is exported to maize/corn consuming
countries such as Egypt and Nigeria (Agroprocessed industry in Bangladesh,
n.d.).
The figure below shows the market share of various industries in Bangladesh
in 2001-2002. Since the Bangladesh food and beverage industry is growing
fast it can be assumed that the market has expanded however, the overall
structure to some extent has remained same.
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Company
Transcom Beverage Limited
Products
Pepsi range of beverages-Pepsi, 7up,
Mirinda Orange, Mirinda Lemon, Slice
and Soda.
Shark Energy Drinks, Zam Zam Cola,
Appy Fizz
Royal Tiger, Uro Cola, Uro Orange,
Uro Lemon, Fizz Up
Maxx Cola, Cloudy Lemon, Clear
Lime. Power Drink
RC Cola, RC Orange, Upper 10, RC
Lemon, MUM Mineral Water, Danish
Condensed Milk
Mojo, Lemu, Clemon, Speed, Frutik
industry in Bangladesh and not many companies are there to take the
market. As discussed before there is a growing demand for fruits and
vegetable products therefore corporation could fixate on that industry.
Abroad many companies make profitable business out of producing
packaged fruits and vegetable, Bangladesh could go into a similar movement
and expand the horizon of food and beverage industry.
The food and beverage industry in Bangladesh is a lucrative market since the
competition is not as fierce as it is in the global market due to the lack of
competitors. Furthermore, the range of products produced in Bangladesh is
also less therefore creating a gap in the industry. There are many small
companies producing variety of products however, due to lack of
technological development the companies are not being able to be the most
efficient. If more research and development could be done to improve the
efficiency of producers in Bangladesh the market would become more
competitive thus forcing corporations to become even more efficient.
Previously there were not many super shops in Bangladesh therefore most
food and beverage items were brought from local vendor, now due to
development in the super shop industry many super shops invest in making
their own label which attracts the consumers more. The trend of generic food
and beverage items has reduced greatly due to the influence of the super
shops and is thought to change more in the future years. Furthermore, these
super shops also have similar products from different food and beverage
companies alongside their products which is allowing the consumers to
compare and choose what they like best thus inevitably increasing
competition.
In the beginning most food and beverage items were imported from various
countries; products such as Ketchup, dairy items, bakery items and fruits and
vegetables were not as widely produced in Bangladesh. Due to recent
development many local companies such as Pran and BD Food are producing
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the same standard items in the local market at a much cheaper cost. This is
lead to a new movement in the food and beverage industry which is to bring
positive changes in the Bangladesh economy. Furthermore due to recent
R&D many new types of fruits and vegetables are being produced in
Bangladesh for example strawberry and dragon fruit are now widely
available. If similar type of research is done more variety of products can be
produced in the country thus reducing the need to import the products.
In conclusion the food and beverage industry seems to be an a highly
profitable and stable industry. Although it is dominated by few multinational
there is scope for development by the SMEs. Food is a basic necessity of
every human being hence making it an inelastic product for all consumers
therefore it is clear that this industry is not bound to become extinct rather
grow. Also as discussed earlier the food and beverage industry is immune to
the economic crisis thus making it a rather interesting industry to work with.
The government and the local authority has been trying to protect the SMEs
for a very long time, this is to initiate healthy competition as well as create
scope for development. In Europe the SME food and beverage industry is
highly protected by the government and often given subsidies to help them
sustain. A similar approach could be taken by the Bangladeshi government to
stimulate the growth in the food and beverage industry. Overall the industry
seems to be booming not only because it is an inelastic product but also
because of the growing population therefore more investment should be
done in this industry by more corporations in Bangladesh. Since the
population is growing the opportunity seems to be the best one to grab in
Bangladeshi context.
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References
Agroprocessed industry in Bangladesh. (n.d.). 1st ed. [ebook] Dhaka.
Available at: http://www.hortex.org/Employment%20and%20GDP_Agroprocessed_171113.pdf [Accessed 10 Jul. 2015].
Bangladeshtrades.com, (n.d.). Bangladesh Beverage Industry | Bangladesh
beverage company list. [online] Available at:
http://www.bangladeshtrades.com/bd-company-list/bangladeshbeverage-company-list.html [Accessed 9 Jul. 2015].
Businesshabit.com, (2014). Top 10 beverage companies in Bangladesh.
[online] Available at: http://www.businesshabit.com/2014/12/top-10beverage-company-in-bangladesh.html [Accessed 9 Jul. 2015].
European Commission, (2005). ICT and electronic business in the Food and
Beverage industry. [online] Available at:
http://ec.europa.eu/enterprise/archives/e-businesswatch/studies/sectors/food/documents/Food_2005_I.pdf [Accessed 9 Jul.
2015].
Hg.org, (2015). Food and Beverages Law - HG.org. [online] Available at:
http://www.hg.org/food-and-beverages-law.html [Accessed 9 Jul. 2015].
IMAP, (2010). Food and Beverage Industry Global Report 2010. [online]
Available at:
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http://www.imap.com/imap/media/resources/IMAP_Food__Beverage_Repor
t_WEB_AD6498A02CAF4.pdf [Accessed 9 Jul. 2015].
Infor, (2012). White Paper How food & beverage companies gain competitive
advantage. [online] New York. Available at:
http://www.infor.com/content/whitepapers/howfoodandbevgainadvantage
.pdf/ [Accessed 9 Jul. 2015].
Kundu, S. (2015). Wheel :: Business Magazine. [online] Wheel.com.bd.
Available at: http://www.wheel.com.bd/cover_story.php?id=26 [Accessed
10 Jul. 2015].
Leatherheadfood.com, (2012). Emerging technology in the food and
beverage industry | Leatherhead. [online] Available at:
https://www.leatherheadfood.com/emerging-technology-in-the-food-andbeverage-industry [Accessed 9 Jul. 2015].
Linklaters, (2013). Food and beverage. The Linklaters Emerging Opportunity
Index. London.
Md. Khairul Akter, M. (2015). Sector profile and strategic planning for the
agro-base food industry of Bangladesh. [online] Bangladesh Textile Today.
Available at: http://www.textiletoday.com.bd/newsite/sector-profile-andstrategic-planning-for-the-agro-base-food-industry-of-bangladesh/
[Accessed 10 Jul. 2015].
MINISTRY OF FOREIGN AFFAIRS OF DENMARK, (2009). FOOD PROCESSING IN
BANGLADESH.
Prnewswire.com, (2013). Global Food and Beverage Survey 2013-2014 Market Trends, Buyer Spend and Procurement Strategies in the Global
Food and Beverage Industry. [online] Available at:
http://www.prnewswire.com/news-releases/global-food-and-beveragesurvey-2013-2014---market-trends-buyer-spend-and-procurementstrategies-in-the-global-food-and-beverage-industry-218839341.html
[Accessed 9 Jul. 2015].
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Research Method
The report Strategy and Structure of the Food and Beverage Industry is based on both
secondary research and primary research. The information was collected from various online
resources in different journals and articles. The primary data was collected through an interview
session with an employee from Partex Star Group. He helped us give more insight about the
local market and help give us suggestion. The referencing format for the whole document was
Harvard referencing style.
Limitation of this research is that there was a lack of data in the local market and most data was
outdated. Therefore, most of the information connecting to the recent years is based on the
estimations provided in the secondary sources.
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To make a dynamic report it was very important for us to gather the latest and specific
information regarding the food and beverage industry. We got some information from the
secondary sources, but it was not the most fruitful one. Finally, it was our pleasure to meet you.
We have learned a lot regarding the food and beverage industry such as the present market
scenario, how they adapt themselves to the customers need, want and demand, their limitations
and most importantly their impact on global and domestic economic trend. Apart from this, we
have also learned some practical knowledge which will be very much useful in our near future.
Once again, thank you for taking the time to meet with us. We hope that you feel as good about
our interview as we do. We look forward to hearing from you, and We hope to be working with
you and your co-operation soon.
Sincerely,
On behalf of managers group
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