Rural Marketing: A Diversion

WELCOME YOU ALL

Global Agribusiness Trends

Session 2
Emerging Issues and Challenges

Ranjan Chaudhuri

Rural Marketing
Most marketers realize that India is on the
cusp of momentous change. The economy is
vibrant, incomes are rising; and the habits,
preferences, and attitudes are changing
rapidly.
But nowhere is this more evident than in rural
India.
There is thus an emerging need to build
expertise in Rural Marketing.

Agribusiness
Management

Agribusiness
Management
Definition

The making of business decisions that

tend to maximize net farm income
consistent with the operators objectives.

What decisions need to be made?

What do produce?
How much to produce?
What kinds and amounts of resources to
use?
What technology to use?
When to buy and sell?
How to finance?

Who makes the decisions?

Farm Operator
Farmers Spouse
Landlords
Farm managers
Farm Advisors
Government
Financers

Reviewing Major Concepts

Food for thought
Key players in the global agri-food markets
Key drivers of food supply and demand
Food quality and safety issues
Climate change and sustainability of agriculture
Sustainable Supply Chain Management (Carbon
Footprinting)
Impact of ETechnologies/EReadiness
Need for education/training at all levels

Food for thought (1)

There are now 80 million+ new mouths to feed every year 3.
By 2030, the United Nations estimates that demand for
agricultural products will be about 60% higher than today4.
Rising income in developing markets is creating an increase
in annual protein intake of 11%-15%5.
In 2030, Chinas meat consumption will be more than double
the 1997 levels of 41kg per person6.
We now have about half the arable land per person that we
had 40 years ago7.
Population Reference Bureau (PRB) World Population Clock 2006 Datasheet
http://www.fao.org/english/newsroom/news/2002/8280-en.html
5. CBA, Commonwealth Research, 2005
6. SOW-VU website (http://www.sow.vu.nl) (Centre for World Food Studies Amsterdam),Brief: Chinas
rapidly growing meat demand: a domestic or an international challenge?
7. United Nations Food and Agricultural Division: Dimensions of need: An atlas of food and
agriculture.Rome, FAO, 1995. p. 16-98
3.
4.

Food for Thought (2)

Consumers in the modern world are no longer
satisfied with the simple food their ancestors ate for
day-to-day survival.
Todays consumers seek added value and interest
from their food and drinks
as a result, innovation is essential within the food and drinks
industry of the 21st century.

The industry has become increasingly commercial

and new product development is now supported by
significant investment in R&D, advertising and
marketing
leading to exploration of ever more diverse and unusual
product concepts.

Where does this leave us?

Agribusiness
the industry that feeds the world

What is Agribusiness?
The Agribusiness sector is a large, multifaceted
industry sector comprising businesses that are
involved as:
Input Suppliers (e.g. Chemical and Fertilizer companies such as
Cargill, Bayer, Incitec/Pivot etc)
Service Providers (e.g. Banks, R&D, DPI, Consultants etc)
Producers (Growers)
Traders (e.g. Mitsubishi, AWB, Bohemia Nut Company, ConAgra,
Queensland Cotton)
Processors (e.g. Weston Flour Mills, Peanut Company of
Australia, Parmalat)
Manufacturers (e.g. Food processors such as Krafts, Mars,
Cadbury Schweppes, Unilever)
Retailers (e.g. Small traders and supermarkets such as Tesco,
Woolworths, Carrefours, Aldies, Krofers)
Logistics (e.g. Transport and storage companies e.g. TNT, ABB
Grain)

Main Issues for Agribusiness (1)

1. Part of, and comprise, Food Chains
Food generally, is of major interest
Quality, Quantity, Variety, 24hrsx7daysx12months availability

i.e. Agri-industry chains are thus highly CUSTOMER

driven
Businesses need to know what the customer is wanting as
soon as they want it (or before)
Information Feedback down chain
Food Integrity / Security (Identity Preservation)

They need to
Be AGILE
Have transparent Product TRACEABILITY
Good record keeping, information management

Main Issues for Agribusiness (2)

Deal in low margin commodities
Cost of Production very close to value created

Geographically distributed & Variable Climate

Directly affects creation/availability of raw product &
subsequent product flow through the chain
Commodity availability has a direct impact on prices

Ensuring constant volume, high quality product is a

major driving force in agri-industry chains
Value Chain Analysis has become a valuable tool

Key Players in Global Food Markets

Food Markets
Meat and Meat Products (including Poultry)
World

Meat

Exchange

au/new_aginfo/about_us.cfm

https://www.secure1au.com/meatnet-com-

Fish and Fish Products

Global Fish Site - http://www.thefishsite.com/

Fruit and Vegetables

Produce Marketing Association PMA - http://www.pma.com/

Dairy & Products, Eggs, Oils and Fats

International Dairy Foods Association - http://www.fil-idf.org/

Bread, Cakes, Biscuits and Cereals

Asia is experiencing the strongest volume growth in the biscuit market,
at almost 7% per annum.

Miscellaneous Foods
Confectionery, ice cream, alcoholic drinks, hot and cold beverages
(including fruit juices, tea and coffee)
Snack Foods

Key Players (Countries)

Meat (Beef, Pork, Broilers)
Exporting - Brazil, EU-25, China, India, Argentina, Canada, Australia. (USA)
Importing - Japan, Korea

Fish and Fish Products

Exporting - China, Norway, Thailand, USA, Denmark, Canada, Spain, Chile,
Netherlands, Viet Nam
Importing - Japan, USA, Spain, France, Italy, United Kingdom, Germany

Fruit and Vegetables

Dairy Products
Western Europe

Eggs, Oils and Fats

Asia-Pacific, EU, USA

Bread, Cakes, Biscuits and Cereals

$30.3bn by 2013, a 19 per cent increase from $25.5bn in 2006.
Europe accounts for 64.3 per cent of the global bread and rolls market value,
while accounting for 50.5 per cent of the global biscuit market.

Key Players (Food Companies)

Size, degree of product diversification, and ownership structure
are important characteristics of food companies. Some
companies are;
publicly owned
privately owned, or
cooperatives, which are owned by producers of raw agricultural
commodities.

The three largest Food companies are:

Nestl, Kraft and Unilever

Food companies typically expand by acquiring existing brands

Unilever acquired the U.S. ice cream manufacturer Ben and Jerrys
Homemade Ice Cream in 2000
http://www.unilever.com/ourbrands/foods/

Smithfields Foods - Global Food Supplier US$12B and an active

acquistioner Bought EU branch of Sara Lee in 2004
http://www.smithfieldfoods.com

Others
Others include:
Meat - Tysons, Swift, Hormel, AMH
Dairy - Parmalat, Fonterra (National Foods), DairyCrest Pty Ltd, Bonlac
Cereals Kelloggs, Westons, Goodman Fielder
Fish & Fish Products - Albert Fisher, Amalgam Group of Kerala,

Dongwon
Group, Faroe Seafood, Fishery Products Intl, Inc., Hansung Enterprise, Lyons
Seafoods, Princes Ltd., Rybarstvi Trebon, Sajo Industries Co., Stolt Sea Farm,
Surapon Food Public Co Ltd, The Seafood Company, and Tri-Marine International,
Inc.

Fruit & Vegetables -

Del Monte Foods, Cadbury Schweppes, Motts LLP,

Minute Maid Company, Odwalla, Inc., Nestle SA, Ocean Spray Cranberries,
Tropicana Products, Inc., and Welch Foods

Confectionary -

Mars (Wrigley Jr Co), Cadbury Schweppes, Hershey Foods,

Barry Callebaut, Ferrero, Haribo, Perfetti Van Melle

Processed Food -

PepsiCo, Coca Cola, General Mills, Annheuser-Busch

Companies, Groupe Danone (Kraft) & Diageo, Frito-Lay (40% share of the
international snack market), Procter & Gamble, (Pringle), Starbucks, Xinjiang
Chalkis Co.Ltd, United Biscuits Holdings, Yamazaki Baking

Food Ingredient - Danisco Ingredients, Rhodia Inc, Associated British Foods

Retail - Walmart, Carrafour, Metro, Tescos
Traders - ConAgra, Mitsubishi,

A Few Interesting Facts

Japan remains the largest food processing market, but is expected to grow
at a slower rate in future compared to China & India due to saturated
market.
Rising per capita income, a growing working class & the popularity of
ready-to-eat food are expected to drive the food processing industries of
China and India.
India
Most of the economically developing countries in Asia have a low level of
processed food as compared to western countries, but this is changing.
Trade liberalization through multilateral & regional trade agreements is
helping the Asia-Pacific food processing industry to grow and will lead to
greater market access for players operating in the food processing industry.
Biggest problem for Asia-Pacific companies is to gain trust as a producer of
safe & high quality products in compliance with international standards.
Australian processed food industry has emerged as one of the most
technically advanced in the world. It produces products of international
standards at prices comparatively lower than the western world.
Japan & South Korea are the leading meat importing countries in world. In
future, processed food industry is expected to remain strong with rising
meat consumption in these countries.

Key Drivers Food

Growing
Supply & Demand
Global Population
(Agribusiness)
Geographic mismatch of Supply & Demand
Climate Variability
Bio-Fuel development
Oil Prices

Limited
Resources

Rising Income

Food Quality & Safety Issues

We are what we eat!

Sophisticated consumers are demanding more information about where

the food they are buying comes from and what has been done to it.
Major animal health scares such as foot-and-mouth disease and BSE
(bovine spongiform encephalitis or Mad Cow disease) outbreaks in
recent times have highlighted the need for systems to be in place along
the food production chain to enable full tracking and traceability of a
product from paddock to plate.
As a result, both governments and the commercial sector have
focused, and continue to focus attention on the development of
processes, standards and regulations to ensure that food safety within
production systems is a key issue in ensuring economically,
environmentally, ethically and socially sustainable food production.

Three Main Issues for Agrifood Industry

Biosecurity
Bioterrorism,
Bio-Safety
Quarentine

Food Safety
Product Tracking and Traceability
including Identity Preservation

Biosecurity
Biosecurity refers to the policies and measures taken
for protecting a nations natural resources including
its food supply,
supply from biological invasion and threats
both from accidental contamination and/or deliberate
attacks of bioterrorism (i.e. ensuring a nations biosafety).
Bioterrorism includes such deliberate acts as introducing
pests intended to kill food crops; spreading a virulent
disease among animal production facilities, and poisoning
water and food supplies or purposively contaminating the
environment.

Bio-safety
Biosafety
Reducing the risk of viral or transgenic genes, or prions such as BSE/Mad
Cow and reducing the risk of food bacterial contamination.
By international agreement, bio-safety involves the application of the
precautionary principle which is the idea that if the consequences of an
action are unknown, but are judged to have some potential for major or
irreversible negative consequences, then it is better to avoid that action

Major Issues
Emerging infectious diseases, e.g. new, previously unrecognized diseases
such as Severe Acute Respiratory Syndrome (SARS), or known diseases
which have increased in incidence, virulence or geographic range over the
past two decades (e.g. Foot-and-Mouth disease),
disease as well as diseases which
threaten to increase in the near future (e.g. Avian influenza).
influenza
Pathogen pollution, which is human-mediated introduction of alien
pathogens such as pests.
Livestock disease surveillance, which is a systematic series of
investigations of a given population of animals to detect the occurrence of
disease for control purposes.

Food Safety
Protecting the food supply from microbial (e.g.
listeria, salmonella), chemical (e.g.. rancidity,
browning) and physical (e.g.
drying out,
infestation) hazards or contamination that may
occur during all stages of food production and
handling growing, harvesting, processing,
transporting, preparing, distributing and storing

Food Safety

Microbiological risks
Chemical risks
Biotechnology (GMO) issues
Food Standards
Food borne diseases

STANDARDS

The Codex Alimentarius

HACCP
ISO
BRC (British Retail Consortium)
IFS (International Food Standard)
IKB (Integrated Chain Control)
EurepGAP
etc

What are the Asia-Pacific Stan

Food Tracking & Traceabilty

The International Standards Organization (ISO) defines
traceability as:

The ability to trace the history, application or location of an entity by means

of recorded identifications.

The European Union (EU) definition is more precise and has

enshrined in law in Article 3 (15) of EU regulation 178/2002, that
traceability is defined as:

The ability to trace and follow a food, feed, food producing animal or
substance intended to be, or expected to be incorporated into a food or
feed through all stages of production, processing and distribution.

i.e. it is tool that allows something to be tracked.

It is about collecting information on a particular attribute of a product and

recording it in a systematic fashion from its creation through to being sold to
the consumer.

Traceability and Tracking Systems

Traceability systems are record-keeping systems that act as a
tool for making information available either within an
organization or between organizations.
Records

Traditionally regarded as documents in paper files or bound

volumes
they can also exist in any physical format, eg photographic prints, video
cassettes, microfilm and/or any of the many current electronic formats.

Records have three distinctive characteristics:

Content (the information associated with the attribute being recorded)
Structure (the format and relationship between the elements comprising
the record)
Context (why the record was created, received or used, which includes
when and by whom and under which circumstances, and what links
there are to other documents making up the total record).

Food Miles
Core Issues

Environmental and social concerns relating to the

impact our food choices are having on the
environment

A growing interest in the safety, ethics and origins

of the food we eat

Spiraling costs in relation to energy usage

Valid to talk about Food Miles in relation to

Agrifood chains but need to be aware of what
creates the problem

Impact of E-Technologies/E-Readiness
E-Technologies

All those technologies that have been developed around

communication and networks
Impact in business in general has been massive
Increases efficiencies, improves information flow which
produces better decision-making and reduces time
Internet in particular has essentially removed the issues of time
and distance from business transactions

E-Readiness

Term used to describe and quantify

The extent to which a countrys business environment is conducive to
Internet-based commercial opportunities

Can also be used to describe and quantify

The extent to which an individual business or organisations
environment is ready to conduct electronically enabled business

E-Readiness

Connectivity
Business Environment
Ecommerce & Consumer adoption
Legal & Regulatory Environment
Supporting e-Services
Social & Cultural Infrastructure

Leaders - USA, HongKong, Western Europe, Australia, Singapore

Followers South Korea, Japan, Ireland, Southern Europe, China
Contenders Slovenia, United Arab Emirates, Malaysia, South
America, South Africa, Thailand
Laggards Some African nations, India, Russia, Indonesia, Philippines,
Iran

Need for education/training at all levels

Declining student numbers for all aspects of Agrianything in developed world

Particularly bad in USA, EU, Australia

Reason?

Image

Linus U. Opara, 2003, Image is everything: Undergraduate students contributions towards a

better understanding and improvement of public attitudes and perceptions of agricultural
engineering. World Transactions on Engineering and Technology Education, UICEE Vol.2, No.3,
2003

A MAJOR concern for ongoing health and success of

the Agri-food Industry in a highly competitive global
market

Particularly as it gets more technologically driven

MOTIVATION TO INTRODUCE AGRIBUSINESS IN RURAL MARKETING CLASS